AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1999
REGISTRATION NO. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________
BRAKES EXPRESS, INC.
(formerly Althouse, Inc.)
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3714 76-0499091
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
ELI BARTOV, PRESIDENT AND CEO
BRAKES EXPRESS, INC.
3650 N.W. 15TH STREET 3650 N.W. 15TH STREET
LAUDERHILL, FLORIDA 33311 LAUDERHILL, FLORIDA 33311
(954) 583-6610 (954) 583-6610
(Address, including zip code, and telephone number (Name, address, including zip code, and
including area code, of registrant's principal Executive offices) telephone number including area code, of agent for service)
</TABLE>
Copies to:
ROBERT L. SONFIELD, JR., ESQ.
SONFIELD & SONFIELD
770 S. POST OAK LANE
HOUSTON, TEXAS 77056
(713) 877-8333
FACSIMILE: (713) 877-1547
_______________
Approximate date of commencement of proposed sale to the public:
As soon as practicable on or after the Registration Statement becomes effective.
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [x]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
NUMBER OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES SHARES OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED BEING REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock(1) 700,000 $ .02 $ 14,000 $ 4.24
<FN>
(1) Estimated solely for purposes of calculating the amount of the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended.
(2) Issuable upon conversion of Series A Convertible Preferred Stock.
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
<PAGE>
<TABLE>
<CAPTION>
BRAKES EXPRESS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATIONS S-B
SHOWING LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
ITEMS AND CAPTION IN FORM SB-2 CAPTION IN PROSPECTUS
---------------------------------------------- ------------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus Front Cover Page of Registration
Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Front and Outside Back Cover Page of Prospectus
3. Summary Information and Risk Factors Summary; Risk Factors;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page
6. Dilution Dilution
7. Selling Security-Holders Cover Page; Selling Security Holders
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Description of
Securities; Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers
Promoters and Control Persons Management of the Company
11. Security Ownership of Certain
Beneficial Owners and Management Principal Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Experts; Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities See Management of the Company -
Indemnification of Officers and
Directors
15. Organization Within Last Five Years Management of the Company -
Certain Transactions
16. Description of Business Business
17. Management's Discussion and Analysis or Plan
of Operation Management's Discussion and
Analysis of Financial Condition and
Results of Operations
18. Description of Property Business - Properties; Consolidated
Financial Statements
19. Certain Relationships and Related
Transactions Management of the Company -
Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters Price Range of Common Stock
21. Executive Compensation Management of the Company
22. Financial Statements Consolidated Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure Not Applicable
</TABLE>
<PAGE>
1
<PAGE>
PROSPECTUS
BRAKES EXPRESS, INC.
700,000 SHARES OF COMMON STOCK
ISSUABLE IN CONVERSION OF PREFERRED STOCK
We are a wholesale supplier of brakes and brake related parts to automotive
repair shops and, since inception in January 1998, have established a customer
base of over 500 active customers in South Florida, including Sears, Goodyear
and Midas.
We are registering 700,000 shares of our common stock (the "Common Shares")
into which Convertible Preferred Shares of the Company ("Preferred Shares ") may
be converted. We will not receive any additional proceeds from the conversion
of the Preferred Shares. We are bearing all expenses incurred in registering
the Preferred Shares, but the holders of the Preferred Shares ("Preferred
Shareholders") will bear all selling and other expenses. See "Description of
Securities -- Preferred Shares."
We previously sold the Preferred Shares to the Preferred Shareholders in
private transactions and, as a result, the Preferred Shares are "restricted
securities" under the Securities Act of 1933, as amended (the "Securities Act").
One of the purposes of this Prospectus is to register the underlying Shares to
allow for future resales by the Preferred Shareholders to the public without
restriction. To our knowledge no Preferred Shareholder has made any arrangement
with any brokerage firm for the sale of his or her Preferred Shares.
We intend that our Common Shares will trade on the over the counter
electronic bulletin board ("OTCBB") under the symbol BRAX.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE ___, 1999
<PAGE>
31
AVAILABLE INFORMATION
When the registration statement which includes this Prospectus becomes
effective, we will be a "reporting company" under the Securities Exchange Act of
1934 (the "Exchange Act") and will file reports and other information with the
Securities and Exchange Commission ("SEC"). Our filings may be inspected and
copied without charge at the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following regional offices: Seven World
Trade Center, 13th Floor, New York, New York 10048, and Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of our
filings can be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. We will file registration statements (including this one) and
other documents and reports electronically through the Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR") which is publicly available
through the Commission's Internet World Wide Web site, http://www.sec.gov.
We have not included in this Prospectus all of the information in our
registration statement and the attached exhibits. Statements of the contents of
any document are not necessarily complete; and you should be aware that a copy
of these documents are contained as exhibits to the registration statement. We
will provide to you a copy of any of the information we file with the SEC if you
contact us at Brakes Express, Inc., 3650 N.W. 15th Street, Lauderhill, Florida
33311 [telephone: (954) 583-6610]. We intend to furnish our stockholders with
annual reports containing audited annual financial statements and quarterly
reports for the first three fiscal quarters of each fiscal year containing
unaudited interim financial information.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION 2
PROSPECTUS SUMMARY 4
RISK FACTORS 6
USE OF PROCEEDS 11
CAPITALIZATION 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
BUSINESS OF THE COMPANY 14
MANAGEMENT OF THE COMPANY 19
PRINCIPAL STOCKHOLDERS 23
DESCRIPTION OF CAPITAL STOCK 24
LEGAL PROCEEDINGS 31
LEGAL MATTERS 31
EXPERTS 31
INDEX TO FINANCIAL STATEMENTS F - 1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This section contains summaries of detailed information and financial
statements (including attached footnotes) which are part of this Prospectus.
Investment in the securities offered involves a high degree of risk. You should
carefully consider the information set forth under "Risk Factors". This
Prospectus contains forward-looking statements. Because of risks and
uncertainties, our actual results may differ materially from the results
discussed in these forward-looking statements. You are urged to read this
Prospectus in its entirety.
OVERVIEW
Located in South Florida, we are a wholesale supplier of brakes and brake
related parts to automotive repair shops. We have established, since inception
in January 1998, a customer base of over 500 active customers in Broward and
Palm Beach Counties, including Sears, Goodyear and Midas. Our success is based
on superior product knowledge, unmatched availability of parts, reliability and
speed of delivery to the customer.
We supply a full line of loaded calipers, which are complete brake
assemblies, as well as rotors and brake pads. The market for loaded calipers
and rotors has been growing rapidly since the recent introduction of lightweight
composite rotors and more complex calipers.
Our advantages over our competition include the following:
- - We carry our own brand of calipers and loaded calipers that are produced
for us by Pines Automotive Inc., an affiliated company.
- - We process customer orders through a centralized call center, and dispatch
orders from mini warehouses which are strategically located in close proximity
to the customers. Drivers can deliver parts to our customers generally within
30 minutes of the time of the order.
- - Because we specialize in brakes and related brake parts, we can assist
customers with selecting the right parts for their repair jobs. Also, through
our affiliated company, Pines Automotive, which is our main supplier, we have
access to the largest inventory of brakes and brake related parts in South
Florida.
As a result, our customers pay premium prices for the products and services
we provide, resulting in higher gross margins and net profits as compared to the
automotive aftermarket industry as a whole.
Our headquarters are located at 3650 N.W. 15th Street, Lauderhill, Florida
33311. Our telephone number is (954) 583-6610.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered by
the Company 700,000 Common Shares are being registered herein
to permit current Preferred Shareholders to convert
their Preferred Shares to Common Shares.
Common Stock Outstanding 4,000,041 Common Shares as of the date hereof,
4,700,000 Common Shares if all Preferred Shares are
converted to Common Shares. See "Description of
Securities."
OTCBB Symbol Common Stock BRAX
Use of Proceeds We will not receive any cash proceeds as a result of
the conversion of Preferred Shares into Common
Shares.
Risk Factors The securities offered hereby involve a high degree of
risk and immediate substantial dilution. See "Risk
Factors."
</TABLE>
<TABLE>
<CAPTION>
SUMMARY HISTORICAL FINANCIAL DATA OF THE COMPANY
ONE MONTH SIX MONTHS SEVEN
ENDED ENDED MONTHS
JANUARY JANUARY ENDED
1998 1999 JULY 31, 1998
(UNAUDITED) (UNAUDITED) (AUDITED)
------------ ------------ ---------------
Statement of
Operations Data:
- ----------------------
<S> <C> <C> <C>
Revenue $ 16,864 $ 905,118 $ 407,094
Operating Profit
(Loss) $ (1,500) $ 59,866 $ 0
Net Profit (Loss) $ (1,500) $ 53,285 $ (200,000)
Net Profit (Loss) Per
Share N/A $ 0.02 $ (0.49)
Weighted Average
Shares
Outstanding N/A 2,408,737 409,475
</TABLE>
<PAGE>
RISK FACTORS
Conversion of the Preferred Shares into Common Shares involves a high
degree of risk. You should carefully consider the following factors in
evaluating the Company and its business in addition to the other information
contained in this Prospectus.
WE DEPEND ON OUR PRESENT SUPPLIERS
There can be no assurance that our current or future suppliers will be able
to meet our requirements on commercially reasonable terms or within scheduled
delivery times. Any interruption of our arrangements with suppliers could cause
a delay in the acquisition of materials for our products, and consequently
affect the timely delivery of our products to our customer base.
RISKS ASSOCIATED WITH NEW TERRITORIES
We intend to expand our "hub and spoke" distribution system to new areas,
initially within Florida and then throughout the United States. We can give no
assurance that new areas will have suitable demographics for this distribution
system, that potential customers will abandon their traditional suppliers or
that they will pay premium prices for the added convenience and services which
we intend to provide.
RISKS ASSOCIATED WITH NEW PRODUCT LINES
We intend to introduce automotive air conditioning replacement parts into
our market in the near future and for the long term may introduce additional
automotive products. We can offer no assurance that our customers will purchase
these new products, that we can maintain existing profit margins or that we can
develop the expertise with our countermen and other personnel to master these
additional lines and provide flawless service to our customers.
COMPETITION
We distribute products which are of high quality but are standard in the
industry. Thus, any competitor could theoretically offer the same or similar
products to the ones which we market, could adopt the same distribution system
and solicit our customer base. Although we believe that it would be difficult
for any competitor to duplicate or exceed the level of service or the speed of
delivery, we cannot guarantee that others will not try to offer competitive
service in our existing marketing areas or will not try to enter new areas
before we establish our service.
NO PATENT PROTECTION FOR OUR PRODUCTS
We do not have, and do not intend to apply for, patents on our products.
Thus, there is no technological barrier to entry into our markets.
OUR OPERATING RESULTS MAY FLUCTUATE
Our operating results may fluctuate significantly from period to period as
a result of a variety of factors, including product returns, purchasing patterns
of consumers, the length of our sales cycle to key customers, distributors or
other strategic partners, the timing of the introduction of new products and
product enhancements by us and our competitors, technological factors,
variations and sales by product distribution channels and competitive pricing.
Consequently, our product revenues may vary significantly by quarter and our
operating results may experience significant fluctuations.
YOU ARE NOT LIKELY TO RECEIVE DIVIDENDS ON YOUR COMMON SHARES
We have no present intention of paying cash dividends on our Common Shares
in the foreseeable future, as we intend to follow a policy of retaining
earnings, if any, for use in our business. We have never paid cash dividends on
our Common Shares. See "Description of Securities" and "Price Range of Common
Stock and Dividend Policy".
THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON SHARES
No public market exists for our Common Shares and no assurance can be given
that one will develop subsequent to this Offering. We have applied for
inclusion of our Common Shares on the OTC Bulletin Board, although there can be
no assurance that an active trading market will develop, even if the Common
Shares are accepted for quotation. Furthermore, as compared with other markets,
an investor may find it more difficult to dispose of or obtain accurate
quotations for the price of the Common Shares on the OTC Bulletin Board.
Additionally, if our Common Shares are accepted for quotation and active trading
develops, we are required to timely file our periodic reports with the
Commission as required by the National Association of Securities Dealers
("NASD"), and there can be no assurance that we will be able to continue to
fulfill such requirement. Failure to timely file our periodic reports will
result in suspension from trading on the OTC Bulletin Board until such time as
we are current in our periodic filings. The loss or failure of market makers
for our Common Shares will have a material adverse effect on the market for our
securities.
THERE IS POTENTIAL ANTI-TAKEOVER EFFECT BECAUSE VOTING CONTROL IS HELD BY
MANAGEMENT
After giving effect to the conversion of the Preferred Shares into Common
Shares, our officers, directors and principal stockholders will beneficially own
approximately 79.2% of our Common Shares. (See "Principal Shareholders").
Accordingly, such persons may be able to approve major corporate transactions
including those involving amendments to our certificate of incorporation or the
sale of substantially all our assets and may be able to elect all our directors
and to control our affairs. This voting control may have the effect of delaying
or preventing a change in control of and may adversely affect the rights of the
holders of our Common Shares.
CONVERSION OF THE PREFERRED SHARES IS LIMITED BY THE REQUIREMENTS OF CURRENT
PROSPECTUS AND STATE BLUE SKY REGISTRATION
We will be able to issue the Common Shares upon the conversion of the
Preferred Shares only if:
(i) there is a current prospectus under an effective registration statement
filed with the Commission and
(ii) such Common Shares are then qualified for sale or exempt therefrom
under applicable state securities laws of the jurisdictions in which the various
holders of Preferred Shares reside.
There can be no assurance, however, that we will be successful in maintaining a
current registration statement. After a registration statement becomes
effective, it may require updating by the filing of a post-effective amendment.
A post-effective amendment is required under the Securities Act of 1933, as
amended:
- anytime after nine months subsequent to the effective date
thereof when any information contained in the prospectus is over 16 months old;
- when facts or events have occurred which represent a fundamental
change in the information contained in the registration statement; or
- when any material change occurs in the information relating to
the plan or distribution of the securities registered by such registration
statement.
The Prospectus forming a part of this Registration Statement will remain
current within the meaning of the Securities Act for not more than nine months
following the date of this Prospectus, or until ________, 2000, assuming we do
not file a post-effective amendment. We intend to qualify the conversion of the
Preferred Stock in a limited number of states, although certain exemptions under
certain state securities ("Blue Sky") laws may permit the Preferred Shares to be
transferred to purchasers in states other than those in which the Preferred
Shares was initially qualified. We will be prevented, however, from issuing
Common Shares upon conversion of the Preferred Shares in those states where
exemptions are unavailable and we have failed to qualify the Common Shares
issuable upon conversion of the Preferred Shares. We may decide not to seek, or
may not be able to obtain qualification of the issuance of Common Shares in all
of the states in which the ultimate purchasers of the Preferred Shares reside.
In such a case, the Preferred Shares of those purchasers will not be convertible
into Common Stock. Accordingly, the market for the Preferred Shares may be
limited because of our obligation to fulfill both of the foregoing requirements.
(See "Description of Securities".)
"PENNY STOCK" REGULATIONS MAY IMPOSE RESTRICTIONS ON MARKETABILITY OF OUR
SECURITIES
The Commission has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include an equity security registered or approved
for registration and traded on a national securities exchange or quoted in the
NASD Automated Quotation System ("Nasdaq") and an equity security issued by an
issuer that has:
- - net tangible assets of at least $2,000,000 if such an issuer has been in
continuous operation for three years;
- - net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years; or
- - average revenue of at least $6,000,000 for the preceding three years.
The Common Shares will probably become subject to Rules 15g-2 through 15g-9
under the Securities and Exchange Act of 1934. These rules impose additional
reporting, disclosure and sales practice requirements on brokers and dealers and
require them to make a special suitability determination of each purchaser and
receive the purchaser's written consent to the transaction prior to the sale.
In addition, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Securities and Exchange Commission relating to the
penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell our securities
and may affect the ability of purchasers in this Offering to sell our securities
in the secondary market.
In the event that we were not able to qualify our securities for listing on
the OTC Bulletin Board, we will attempt to have our securities traded in the
"pink sheets". In such event, holders of our securities may encounter
substantially greater difficulty in disposing of their securities and/or in
obtaining accurate quotations as to the prices of our securities.
THERE ARE ADDITIONAL AUTHORIZED SHARES AVAILABLE FOR ISSUANCE THAT MAY ADVERSELY
AFFECT THE MARKET
There are currently 4,000,000 Common Shares issued and outstanding and upon
conversion of the Preferred Shares to Common Shares, there will be a total of
4,700,000 Common Shares outstanding. The following securities have been
reserved for issuance: 700,000 shares upon conversion of the Preferred Shares.
After conversion of the Preferred Shares, we will have 4,700,000 Common Shares
outstanding and 25,300,000 authorized but unissued Common Shares available for
issuance without further stockholder .approval. As a result, issuance of
additional Common Shares may cause our current stockholders to suffer
significant dilution which may adversely affect the market. (See "Description
of Securities.")
THERE ARE SHARES ELIGIBLE FOR FUTURE SALE THAT MAY ADVERSELY AFFECT THE MARKET
The sale, or availability for sale, of a substantial number of Common
Shares in the public market subsequent to the offering pursuant to Rule 144
under the Securities Act or otherwise could materially or adversely affect the
market price of the securities and could impair our ability to raise additional
capital from the sale of our equity securities or debt financing. There are
currently _____________ Common Shares that are "restricted securities" which, in
the future, may be sold upon compliance with Rule 144 adopted under the
Securities Act. Rule 144, provides, in essence, that a person holding
"restricted securities", which trade on the OTC Bulletin Board for a period of
one year may sell every three months a number of shares equal to one percent of
the issued and outstanding shares. The amount of "restricted securities" which
a person who is not affiliated with us may sell is not so limited, since
non-affiliates may sell without volume limitation their shares held for at least
two years.
Prospective investors should be aware that the possibility of sales
pursuant to Rule 144 may, in the future, have a depressive effect on the price
of the Common Shares, in any market which exists or may develop and, therefore,
the ability of any investor to market his or her shares may be dependent
directly upon the number of shares that are offered and sold. Our affiliates
may sell their shares during a favorable movement in the market price of our
securities which may have a depressive effect on its price per share. (See
"Description of Securities.")
WE DEPEND ON KEY PERSONNEL
Our success will be largely dependent on the efforts of Eli Bartov, President,
Chief Executive Officer and Director, Steven M. Rothman, C.A., Vice President,
Finance and Chief Financial Officer, Irwin Taublib, Vice President, Sales and
Marketing and Director and Gary Caplan, Vice President of Operations and
Director. Although we have written employment agreements with various members
of our management, there can be no assurance that such persons will continue
their employment with us. The loss of the services of one or more of such key
personnel could have a material adverse effect on our operations and marketing
efforts.
THERE IS RISK ASSOCIATED WITH THE YEAR 2000
We have implemented a Year 2000 date conversion program to ensure that our
computer systems and applications will function properly beyond 1999. We
believe that we have allocated adequate resources for this purpose and expect
our Year 2000 date conversion program to be successfully completed on a timely
basis. There can, however, be no assurance that this will be the case. We do
not expect to incur significant expenditures to address this issue. The ability
of third parties with whom we transact business to adequately address their
respective Year 2000 issues is outside of our control. There can be no
assurance that our failure or the failure of such third parties to adequately
address our respective Year 2000 issues will not have a material adverse effect
on our business, financial condition, cash flows and results of operations.
WE NEED SUBSTANTIAL FINANCING FOR EXPANSION
We need substantial cash to expand our operations. Changes in the market
in which we operate our business, or changes in our business strategy could
increase our cash needs. If our cash flows are not sufficient to fund
expansion, we will have to raise additional capital through debt or equity
financing. We do not have any lines of credit or bank financing and we do not
anticipate having access to bank financing in the foreseeable future.
We may not be able to raise additional funds through debt or equity
financings on acceptable terms or at all. If we are successful in raising
additional funds through the issuance of equity or convertible debt securities,
your investment could be substantially diluted and securities issued to
subsequent investors could have preferences and privileges that your Common
Shares do not have. If we are not able to complete additional financings when
needed, we may not be able to proceed with our expansion plans.
WE MAY HAVE DIFFICULTY IN COMPLYING WITH GOVERNMENTAL REGULATION
Our business may be subject to a wide variety of federal, state and local
government laws and regulations. The nature of our business exposes us to the
risk of related claims. We may incur substantial costs in defending any claims,
if they are brought. We may not be able to comply technically or economically
with future governmental regulations. We intend to procure product liability
insurance and other necessary insurance against loss and environmental damage
while product is in storage or in transit. We can offer no assurance that all
liabilities can be covered by insurance or that premiums for relevant insurance
will be reasonable.
OUR STOCK DOES NOT TRADE
Our Common Shares do not trade publicly. Once trading begins, the market
price of our Common Shares could fluctuate substantially due to a variety of
factors. These factors include market perception of our ability to enter
successfully into new markets, our quarterly operating results, trading volume,
changes in general conditions in the economy, the financial markets or the
automotive repair industry, or other developments affecting our competitors. In
addition, the stock market is subject to extreme price and volume fluctuations.
This volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies.
UNDER DELAWARE LAW THE LIABILITY OF OUR OFFICERS AND DIRECTORS IS LIMITED
Our certificate of incorporation eliminates liability of our directors for
breach of fiduciary duty, except for the duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, for dividend payments or stock repurchases illegal under Delaware law or
for any transaction in which a director has derived an improper personal
benefit. In addition, our certificate of incorporation provides that we must
indemnify our officers and directors to the fullest extent permitted by Delaware
law for all expenses incurred in the settlement of any actions against them in
connection with their having served as our officers or director
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS
Our authorized capital consists of 30,000,000 Common Shares and 1,000,000
Preferred Shares. Our Board of Directors, without any shareholder action, is
authorized to designate and issue Preferred Shares in such classes or series as
it deems appropriate and to establish the rights, preferences and privileges of
such shares, including dividends, liquidation and voting rights. The rights of
Preferred Shareholders that may be issued may be superior to the rights granted
to existing Common Shareholders. Further, the ability of the Board of Directors
to designate and issue such undesignated shares could impede or deter an
unsolicited tender offer or takeover proposal and the issuance of additional
Preferred Shares having preferential rights could adversely affect the voting
power and other rights of Common Shareholder. Furthermore, as a Delaware
corporation, we are subject to various Delaware statutes which may hinder or
delay a change in control including:
(i) a control share acquisition statute;
(ii) a business combination statute;
(iii) a fair price statute;
(iv) a greenmail statute; and
(v) a non-monetary factors statute.
WE HAVE NO HISTORY OF PAYING DIVIDENDS
We have never paid dividends on our Common Shares and we do not anticipate
paying dividends on our stock in the foreseeable future. If our operations
become profitable, it is anticipated that, for the foreseeable future, any
income received therefrom would be devoted to our future operations and that
cash dividends on our Shares would not be paid to our shareholders. (See
"Proposed Business -- Dividend Policy.")
USE OF PROCEEDS
There are no proceeds to be raised from this offering.
CAPITALIZATION
The following table sets forth our actual capitalization as of January 31,
1999., compared to the capitalization, as adjusted for the conversion of the
Preferred Shares. This table should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
January 31, 1999
------------------
Actual As Adjusted
---------- -------------
<S> <C> <C>
Shareholders' deficiency:
Common Stock, $.001 par value, 30,000,000 shares authorized,
4,000,000 shares issued and outstanding $ 4,000 $ 4,700
Preferred Stock, $.001 par value, 1,000,000 shares authorized,
70,000 shares issued and outstanding $ 70 $ 0
Additional paid-in capital $ 32,980 $ 32,350
Accumulated deficit $(146,715) $ (146,715)
Total shareholders' deficiency $(109,665) $ (109,665)
Total capitalization (deficiency) $(109,665) $ (109,665)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL.
The following should be read in conjunction with the Financial Statements
of Brakes and the Notes thereto as at July 31, 1998 and January 31, 1999, and
the other financial and other information included elsewhere in this Prospectus.
This Prospectus contains certain statements regarding future trends which are
subject to various risks and uncertainties. Such trends, and their anticipated
impact on us, could differ materially from those discussed in this Prospectus.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
For the six months ended January 31, 1999, the Company reported net income
of $53,285. Basic and diluted earnings per share were $0.02 per share. There
were no comparative figures. The Company in its present form commenced
operations in January, 1998.
We opened two mini warehouses in February and March, 1998. Commencing
August 1, 1998, we started to generate sales from our main hub warehouse in
Lauderhill, Florida and at the beginning of January, 1999, we opened our fourth
mini warehouse, in Boca Raton, Florida. This location contributed approximately
$7,800 in sales for the month. The costs associated with this new location
exceeded its revenue and caused a reduction in net income for the month. Our
experience tells us that it takes approximately 6 months until a mini warehouse
reaches its full revenue generating capability.
The Company also finalized its plans for expansion to the Tampa/St.
Petersburg area. However, these plans have been put on hold until the necessary
funds have been raised to purchase inventory, equipment and for working capital.
RESULTS OF OPERATIONS
Sales for the month of January 1999 were $160,824 compared to $16,864 for
the month of January 1998. The current month included the operations of four
mini warehouses and the main hub warehouse, whereas only one mini warehouse was
open in January 1998.
Operating income, for the month, as a percentage of net sales was 3.5%.
There was an operating loss of $1,500 for month of January 1998. For the six
months ended January 31, 1999, operating income, as a percentage of net sales
was 6.6%. There was no comparative figure.
Gross profit for the month, as a percentage of net sales was 48.6%. For
January 1998, gross profit, as a percentage of net sales was 41.7%. For the six
months, gross profit, as a percentage of net sales was 48.7%. No comparative
figures were available. Margins have remained relatively stable over the past
six months, as there have been no changes in either sales prices to our
customers or cost of goods purchased from our suppliers.
For the month of January 1999, selling, general and administrative expenses
increased in dollar terms and as a percentage of net sales, compared to the
month of January 1998, due to more locations, professional and consulting fees
and, the start up costs associated with the new mini warehouse.
FINANCIAL CONDITION
For the six months ended January 31, 1999, the overall cash position
increased by $60,966.
Operating activities generated $35,962 in cash flow mainly due to increases
in accounts receivable and inventory, which were offset by increases in accounts
payable and due to related parties.
Investing activities used $12,046 for the purchase of shelving and
equipment for the mini warehouses.
Cash flows from financing activities included $21,050 proceeds from stock
subscriptions receivable and $16,000 in proceeds from the issuance of common
stock.
Management believes that internally generated funds and its existing
sources of liquidity are sufficient to meet current and anticipated financing
requirements over the next 12 months.
YEAR 2000 ISSUE
The Year 2000 (Y2K) issue is the result of computer programs written using
two digits (rather than four) to define the applicable year. Absent corrective
actions, programs with date-sensitive logic may recognize "00" as the year
"1900", rather than the year "2000". This could result in miscalculations or
system failure, significantly impacting the ability to operate our business.
We have completed our assessment of all internal systems and is working
with its software support suppliers to develop remedial programs for all
business-critical information technology applications. Where necessary,
software programs will be upgraded to, or replaced with, Y2K compliant versions.
It is expected that this process will be complete by the middle of 1999.
We are investigating the Y2K compliance status of suppliers, customers and
other third parties. Most third parties have been contacted to determine their
status. We intend to contact all business-critical suppliers and third parties
by the end of April to obtain assurances with respect to their Y2K compliance
status.
We estimate that the cost to remedy the Y2K issue for our company will not
be significant. Therefore, we believe that internally generated funds and
existing sources of liquidity are sufficient to meet the expected funding
requirements.
Although our company is taking the appropriate steps to achieve Y2K
compliance, non compliant third party systems could cause disruptions to our
business activities and cause significant additional costs. Without a
reasonably complete assessment of all of the systems affected, we do not have a
reasonable basis to conclude that the impacts of the Year 2000 issue are not
likely to come to fruition. Also, we have no reasonable basis to conclude that
the Year 2000 issue will not materially affect future financial results, or
cause reported financial information not to be necessarily indicative of future
operating results or future financial condition.
FORWARD-LOOKING INFORMATION
Certain statements contained in this report, including estimated Y2K
compliance costs, are "forward-looking statements" within the meaning of Section
21E of the Securities and Exchange Act of 1934. Because forward-looking
statements are based on management's current views and assumptions and involve
risks and uncertainties that could significantly affect expected results,
operating results could be materially affected by external factors such as:
actions of competitors, customer relationships, Y2K preparedness of significant
external parties and fluctuations in the cost and availability of supply chain
resources.
BUSINESS OF THE COMPANY
We are a wholesale supplier of remanufactured calipers and loaded calipers,
rotors, brake pads and other after market brake parts to automotive repair shops
in South Florida. We have developed a unique distribution system through the
use of mini warehouses, each located within close proximity of our customers.
Customer orders are processed through a central dispatch call center and parts
are delivered by the closest warehouse to the customer. Our main focus is on
the availability and quality of our own brand of calipers and loaded calipers,
the supply of high quality Brembo rotors and BPI brake pads, and the efficient
distribution of these auto parts.
At present, we operate one large hub warehouse located in our head office
in Lauderhill, Florida and four mini warehouses located in Pembroke Pines,
Sunrise, Boca Raton and Pompano, Florida. The facility in which our affiliated
company, Pines Automotive, Inc. rebuilds and remanufactures calipers and loaded
calipers, is located at the head office.
We intend to use our unique distribution system as a vehicle to distribute
other automotive parts and products as well as our existing line. We commenced
our parts distribution by selling brake replacement parts, as these parts are
needed for the most common types of repairs in local garages and are part of the
services performed by tire shops. We intend to introduce another product line;
namely, automotive air conditioning parts and systems as these repairs are also
often performed by automotive repair shops. Our management believes that we
could achieve the same degree of market penetration with our proposed air
conditioning line as we have had with brake parts.
DEVELOPMENT OF THE BUSINESS
Eli Bartov, our President, formed Pines Automotive, Inc. ("Pines") in
1984. Pines was originally a distributor of a basic line of auto parts, on a
consignment basis, to garages and repair shops in Broward County, Florida. Over
the years, the product line has increased to over 5,000 inventory items and
expanded its customer base into Dade and Palm Beach . Counties. Pines expanded
its brakes business in June, 1993 to include a caliper
rebuilding/remanufacturing operation, so that they could distribute their own
brand of calipers and loaded calipers. They established Brakes Express, Inc.
originally as a marketing division of Pines Automotive. Pines currently
supplies nearly 95% of all parts to Brakes Express, including its own brand of
calipers and loaded calipers.
Mr. Bartov and the senior managers of Pines developed the concept of a
central hub warehouse and mini warehouses in January 1998 and have grown the
business into a hub warehouse and four mini warehouses.
We have developed a three-prong strategy to maximize profitability:
a) Increase customer satisfaction - by helping the customer select the right
parts, having the parts in stock and, being able to deliver these parts to the
customer quickly.
b) Maximize gross margins - the customer is willing to pay a premium for
expert advice and speedy delivery.
c) Increase inventory turnover - by restocking mini warehouses, on a daily
basis, from a central warehouse, slow moving inventory can be minimized at the
mini warehouses
Mini warehouses comprise approximately 1,000 sq.ft. and are stocked to
accommodate about 90% of all customer orders, well above industry standards, for
loaded calipers, rotors, brake pads and other brake related parts needed for
complete brake jobs. Mini warehouses are strategically located in areas with a
high concentration of repair shops.
Each mini warehouse requires an initial capital investment of about
$60,000, of which $40,000 is allocated for inventory. The balance of the
investment is for shelving, fixtures, communication equipment and working
capital. Usually, there are two (2) drivers assigned to each mini warehouse.
Management anticipates that average sales should reach a level of $50,000/month
after 5 to 6 months in a new territory, or $60,000/month once the automotive air
conditioning product line is offered.
A fully developed sales territory consists of between 4 and 8 mini
warehouses ("satellites") which surround one larger central warehouse ("hub").
The hub acts as a mini warehouse for customers in its catchment area, as well as
a supporting warehouse for its satellites. Each hub will comprise approximately
4,000 sq.ft. of warehouse space and, depending on the number of mini
warehouses, each new territory will cost about $500,000 to set up with inventory
of approximately $400,000, shelving, a department for the
rebuild/remanufacturing of calipers, and working capital. Introduction of air
conditioning parts will require an initial investment of approximately $100,000
at our main warehouse. A regional general manager will be hired for each new
territory.
Territories are targeted where there is a concentration of population of at
least 700 people per square mile. We are finalizing plans to expand into the
Tampa area with a hub and 5 mini warehouses, and have plans to expand into
Orlando during the third quarter of 1999 and into Jacksonville, during the
second quarter of 2000. Exact timing of the expansion plans will depend to a
large extent on the timing and availability of capital. Initial market studies
indicate that the Tampa area will support our current pricing for brakes and
brake related parts. There is no competing or similar service in the area.
Over the past few years, a new trend has developed in the automotive parts
industry, in general, and in the brake and brake related parts industry, in
particular. In the January, 1999 issue of Brakes & Front End, an article
entitled "Using Quality Brakes Service Parts Reduces Chance of Comebacks"
contains a survey of repair shop owners. The article states:
"This year's numbers show 35.8% of shops no longer carry a brake inventory.
This number has gradually risen since 1995 when only 26.6% of shops did not
stock needed parts."
The article also indicates that the number of shops that carry an inventory
of brake parts can only complete 60% of the jobs and must carry a larger
inventory than in previous years. In 1995, the average shop surveyed carried an
inventory of approximately $5,000. In 1996 this inventory figure had risen to
over $6,300. The article indicates that approximately 60% of brake parts are
purchased from a jobber and goes on to state:
"For those shops not stocking a brakes parts inventory, the delivery
response time from suppliers is critical in completing service jobs on time.
More than 50% of the respondents said the needed parts are delivered to them
within 30 minutes."
Thus, an increasing number of customers do not carry inventories of brake
parts and, those that do, carry larger inventories than in previous years.
These trends result from the increasing complexity of the brake parts inventory.
Our strategy is to offer comprehensive call-in services, customer education and
literature and speedy delivery to get the right part to the customer. Our
experience has been that customers will pay a price premium for these services.
Brake part suppliers often offer many different types of support including
technical information, customer literature, training and inventory control to
maintain their customer base. We offer all of these services.
The auto parts industry is a multi-billion dollar industry. One of the
largest companies in the industry, Echlin, Inc., reported sales of over $3.5
billion in 1997 of which 38% represents brake systems and parts. Industry
surveys indicate that gross profit margins to jobbers and distributors are in
the 35% range with net after tax profits in the 1% range. We have defined a
strategy that significantly results in higher gross margins and net after tax
profits by providing value added services to the customer.
PRODUCTS, SALES AND MARKETING
We supply a full line of calipers and loaded calipers, under our own brand
name, rotors (made by Brembo), and brake pads carrying the BPI brand. Our
loaded calipers carry a lifetime warranty and include all hardware needed for a
complete brake job. More and more repair shops are recognizing the advantages
of using loaded calipers, also known as a "brake job in a box", to perform brake
service more quickly and with increased profit margins. Loaded calipers are
manufactured for us by Pines Automotive, which meet or exceed original equipment
manufacturer ("OEM") specifications. Thus, the likelihood of customer
complaints about squealing brakes is minimized.
The market place for both loaded calipers and rotors has been undergoing a
rapid growth phase since introduction of lightweight composite rotors and more
complex calipers. We see no trends which would curtail this rapid growth in the
future.
Our main competitors are Tropical Auto Parts, Pep Boys, Bennett and Napa
Auto Parts. None of these companies make their own loaded calipers, preferring
to purchase them from other rebuilder/remanufacturers. These competitors
represent a combination of retail and wholesale sellers to the dealers, repair
shops and do-it-yourself customers. In the past, the industry was served by a
large number of local jobbers who represented an intermediate trade level. We
believe that pressure on gross profit margins has largely eliminated the jobber
trade level as large wholesalers have started to service the repair shops
directly. Competitors supply a full range of auto parts whereas we specialize
in brakes and brake-related parts and products. Our countermen/sales
representatives are very knowledgeable and can assist customers with practically
any problems which arise. Furthermore, practically every customer order can be
filled immediately since we have access, through Pines Automotive, to what
management considers to be the most extensive inventory of brake parts in the
State of Florida. Our competitors do not offer these specialized services.
Over the past several years, national auto parts companies have entered the
South Florida market and have had little or no impact on our business.
Based upon our management's experience, traditional auto part jobbers
cannot match our distribution system for speed, reliability, accuracy and
availability. Using the mini warehouse distribution system, average delivery
time, from the time the customer places the order until it is delivered to the
repair shop, is less than 30 minutes.
We intend to introduce air conditioning parts into our product line without
disruption to the existing distribution system. We estimate that adding air
conditioning parts will require an initial investment of approximately $100,000
worth of inventory at our main warehouse. These parts would be delivered from
the hub warehouse(s) to the customer as speed of delivery is not as critical a
factor for air conditioning as it is for brakes.
Customer calls come into a centralized call center located at the corporate
headquarters. The call center is staffed by a team of professional countermen
who dispatch drivers from the closest mini warehouse. This system ensures a
uniform sales policy and will be a mainstay of future expansion plans. All
invoicing is centralized at our head office to ensure control over credit and
collections.
The hub warehouse restocks its satellite warehouses on a daily basis in
order to maintain tight inventory control and to keep inventory levels as low as
possible.
Our sales are generated through direct mail, driver referrals and new
business development by field sales staff. For every new territory, field sales
staff will visit all repair shops in the catchment area at least 2 to 3 weeks
before the opening of the mini warehouse in their area. The advantages of using
Brakes Express will be promoted and special discounts will be offered.
We generate all advertising and promotional material from our corporate
head office. Direct mail flyers to a targeted automotive market are distributed
on a monthly basis. Newsletters, containing technical and informative articles
are sent to support our products on a quarterly basis. Every customer is
provided with displays, point of sale educational materials and incentives. The
call center countermen follow up with calls to customers informing them of our
service and special discounts. This procedure is repeated for each new mini
warehouse and has proven to be highly effective. We also offer cash incentives
to our drivers to share in the net profit generated by their particular mini
warehouse.
Internet Strategy: We have recently engaged a consulting firm to design a
comprehensive e-commerce solution for our business. This program is designed to
be a complete system for selling auto parts on the World Wide Web and will
include internet, intranet and extranet functions. When completed, customers
will be able to order parts over a secure network that will be totally
integrated into our accounting and information systems. In addition, we
contemplate that other parts manufacturers and distributors will be used for
regional fulfillment of parts which we do not offer. The information system,
when completed, will offer the customer a concordance of part numbers,
availability of hard-to-find parts, regional availability, expert and
do-it-yourself advice. However, there is no guarantee that we will be
successful in our Internet strategy, nor can we estimate with any degree of
certainty, the time necessary in order to implement such a strategy.
COMPANY STRATEGY
Management has defined a strategy that results in better than industry
gross margins and net after tax profits; that is, value added services to the
customer. Industry trends indicate that an increasing number of customers do
not carry inventories of brake parts and, those that do, carry larger
inventories than in previous years. Industry surveys also indicate that
existing inventories turn over only approximately once in every five months.
These trends are due to the increasing complexity of the brake parts inventory.
Our strategy is to offer comprehensive call-in services, customer education and
literature and speedy delivery to get the right part to the customer.
Management's experience is that customers will pay a price premium for these
services.
Our business strategy is a combination of premium pricing and low
distribution costs through small mini-warehouses situated close to the customer.
The customer is saved the cost of expensive low-turnover inventory and receives
the right part within 30 minutes of the call to the order desk. Where the
customer wishes to maintain an inventory or brake or brake related parts we will
supply, at no cost to the customer, a complete inventory control system. In
this way, we have control over the customer's inventory requirements whether
maintained on premises or fast ordered from the order desk.
The brake repair business is one of the few stable repair segments of the
auto parts industry. Extended new car warranties do not, ordinarily, extend to
brakes and brake parts. Dealer pricing for brake repairs do not, generally,
compare favorably with those charged by the local garage mechanic, Sears or the
local or national tire shops. Brake parts and repairs appear to be immune to
price competition by large retail establishments such as Price-Costco, although
we cannot warrant that price competition may arise in the future. We sell to
large chain operators such as Sears, Goodyear and Midas Mufflers which offer
brake repairs as part of their regular service packages but do not want to carry
an extensive inventory of brake parts.
Our method of distribution is capable of rapid expansion. Management's
survey of the Tampa-St. Petersburg area indicates that local jobbers do not
give the product information and speedy delivery service that we can provide.
The survey also indicates that pricing by local jobbers will permit us to
maintain present gross margins. A hub warehouse in the Tampa-St. Petersburg
area can be easily serviced from our main facility in Lauderhill, Florida on a
daily basis. Present communication systems allow all calls to come into the
service desk in Lauderhill, Florida and be transferred by fax to the hub
warehouse where the order will be faxed/paged to the local mini-warehouse. We
maintain a computerized perpetual inventory that indicates what parts are short
supply in the hub and mini warehouses and automatically restocks parts from the
Lauderhill, Florida main warehouse.
We have reserved the trading symbol "BRAX" and it is our intention to apply
for registration on the OTC - Electronic Bulletin Board, after fulfilling the
legal requirements to become a reporting entity. We are listed in Standard and
Poor's Corporate Index.
Our corporate headquarters is located at 3650 N.W. 15th Street,
Lauderhill, Florida. We lease a portion of a building comprising approximately
17,500 square feet of warehouse and office space at the Lauderhill building
which is shared with a related company, Pines Automotive Inc. The building is
partially owned by Eli Bartov, our President and majority shareholder. The
rental rate is competitive, compared to similar premises on the market.
<TABLE>
<CAPTION>
MANAGEMENT OF THE COMPANY
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
NAME POSITION
--------------------------------------------------- --------
<S> <C> <C>
Eli Bartov President, Chief Executive Officer and Director
Steven Rothman. Vice President, Finance and Chief Financial Officer
Irwin Taublib Vice President, Sales and Marketing and Director
Gary Caplan Vice President of Operations and Director
Bernard Shinder Director
</TABLE>
ELI BARTOV, age 53, is our President, Chief Executive Officer and a
DirectorMr. Bartov received his BA degree in 1972 and an MBA in marketing in
1976 from Hofstra University. He was VP Marketing for Patchogue Automotive from
1974-1976 and for NYC Auto Auction from 1976-1978. He served as President of
Ayalon International from 1978-1984, before he opened his own automotive parts
business, Pines Imports Inc. in 1984. Pines Imports changed its name to Pines
Automotive Inc. in 1989 and supplies a full line of automotive parts to auto
repair shops on a consignment basis. Mr. Bartov, established Brakes Express,
Inc. in October, 1992, as a marketing division of Pines. Mr. Bartov is
majority shareholder of Pines Automotive, Inc. and Brakes Express, Inc.
STEVEN ROTHMAN, age 47, is our Vice President, Finance and Chief Financial
Officer. Mr. Rothman received a Bachelor of Science degree from the University
of Toronto in 1973 and graduated as a Canadian Chartered Accountant and a member
of the Ontario Institute of Chartered Accountants in 1976. He qualified to be a
Certified Public Accountant by passing the IQEX examination in February, 1999.
Prior to joining us, Mr. Rothman was Director, Finance and Administration from
1992-1998 for Dynacare Laboratories, a major provider of medical laboratory
services in Canada. From 1980-1992, Mr. Rothman served in various executive
capacities with Greenwin Developments, a real estate management and development
company and Dynacare Inc., a major healthcare conglomerate. He has experience
in initial public offerings and international financing agreements. He is
responsible for all financial and treasury operations.
IRWIN TAUBLIB, age 39, is our Vice President, Sales & Marketing and a
Director. Mr. Taublib graduated in 1979 from St. John's University with a
degree in Business Administration. In 1980 he received an Automotive degree
from Delhanty Institute. From 1980-1986, he was Warehouse Manager for Essex
Automotive Distributors. He served as VP Sales for Weiss Tools from 1986-1990
and, from 1990 to the present, Mr. Taublib has served in various managerial
positions with Pines Automotive and Brakes Express. He has been instrumental in
developing excellent relationships with existing customers and implementation of
the mini warehouse distribution system concept.
GARY CAPLAN, age 39, is our Vice President, Operations and a Director. Mr.
Caplan has been involved in auto parts sales in both Britain and the U.S. He
graduated in 1980 from Granville College, Sheffield, England with a BA degree.
He worked as a sales rep for AJ Oster Co. from 1980-1981 and became VP Sales
for Marcel Foreman & Co. from 1981-1983. From 1983-1988, he managed a Goodyear
Tire store, which became the most successful in Broward county. He has been
with Pines Automotive since 1988 and, worked his way from salesman to
shareholder. His experience in auto repair shops has given him unique insight
in understanding our customer needs.
BERNARD SHINDER, age 63, is a Director. Mr. Shinder graduated in 1960 from
Carleton University and the University of Toronto where he obtained degrees in
accounting, economics and law. He practiced law as a Partner in his own firm
for 20 years in Ottawa, Canada, specializing in International Tax. He spent two
years, from 1982-1983, working for the Government of Canada as Senior Advisor to
the Deputy Minister of Finance. After retiring from the practice of law, in
1989, he became financial advisor to his clients in a broad range of financial
assignments with emerging companies in South Florida. Mr. Shinder will advise
us on raising capital funds and investor relations.
We expect that our Board of Directors will establish an Audit Committee and
a Compensation Committee. The members of each committee are expected to be
determined at the first meeting of the Board of Directors following the
Effective Date.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
We have entered into Employment Agreements with Eli Bartov, Irwin Taublib
and Gary Caplan, substantially on the following terms:
Basic Term: Five (5) years, commencing March 1, 1999
Compensation: Name Base Salary Bonuses
---- ------------ -------
Eli Bartov $75,000 8% (Note)
Irwin Taublib $60,000 2% (Note)
Gary Caplan $60,000 2% (Note)
Note: The Bonus is calculated on the amount of Net Income in excess of
$50,000.00 in the first fiscal period.
Lease of Automobile and Expenses: Ranges from $400 to $500 per month plus
expenses.
Vacation: Three (3) weeks per annum
Severance: If termination without cause, the employee will receive
severance pay of one (1) year's Base Salary, or the balance of his annual Base
Salary, if less than one (1) year remains in the Basic Term.
The Employment Agreements also contain Non-Competition, Confidentiality and
Copyright provisions which survive the termination of the agreements.
The Company has entered into a Consulting Agreement with BSCI Capital, L.P.
which provides for a payment of $3,000 per month, commencing October 1, 1998 and
ending on September 30, 1999, in respect of the provision of financial and
management consulting services by Mr. Steven Rothman and Mr. Bernard Shinder.
The agreement may be terminated by either party upon 60 days notice prior to the
expiry date, otherwise it will continue from year to year.
STOCK INCENTIVE PLAN
On the 20th day of October, 1998, our Board of Directors and Shareholders
adopted the Brakes Express, Inc. Stock Incentive Plan (the "Stock Incentive
Plan") to provide deferred stock incentive to certain of our key employees and
directors and subsidiaries, if any, who contribute significantly to our long
term performance and growthThe following description of the Stock Incentive Plan
is qualified in its entirety by reference to the Stock Incentive Plan itself.
General Provisions of the Stock Incentive Plan. The Stock Incentive Plan
is administered by the Board of Directors or a committee of the Board of
Directors duly authorized and given authority by the Board of Directors to
administer the Stock Incentive Plan (the Board of Directors or such designated
Committee as administrator of the Stock Incentive Plan shall be hereinafter
referred to as the "Board"). The Board has exclusive authority to administer
the Stock Incentive Plan including without limitation, to select the employees
to be granted awards under the Stock Incentive Plan, to determine the type, size
and terms of the awards to be made, to determine the time when awards will be
granted, and to prescribe the form of instruments evidencing awards made under
the Stock Incentive Plan. The Board will be authorized to establish, amend and
rescind any rules and regulations relating to the Stock Incentive Plan as may be
necessary for efficient administration of the Stock Incentive Plan. Any Board
action will require a majority vote of the members of the Board.
Three types of awards are available under the Stock Incentive Plan: (i)
non-qualified stock options or incentive stock options, (ii) stock appreciation
rights and (iii) restricted stock. An aggregate of 500,000 Common Shares may be
issued pursuant to the Stock Incentive Plan, subject to adjustment to prevent
dilution due to merger, consolidation, stock split or other recapitalization.
The Stock Incentive Plan will not affect our right or power to make or
authorize any major corporate transaction such as a merger, dissolution or sale
of assets. If we are dissolved, liquidated or merged out of existence, each
participant will be entitled to benefit as though he became fully vested in all
previous awards to him immediately prior to or concurrently with such
dissolution, liquidation or merger. The Board may provide that an option or
stock appreciation right will be fully exercisable, or that a share of
restricted stock will be free of such restriction upon a change in control.
The Stock Incentive Plan may be amended at any time and from time to time
by the Board of Directors, but no amendment which increases the aggregate number
of Common Shares that may be issued pursuant to the Stock Incentive Plan will be
effective unless it is approved by our stockholders. The Stock Incentive Plan
will terminate upon the earlier of the adoption of a resolution by the Board of
Directors terminating the Stock Incentive Plan, or ten years from the date of
the Stock Incentive Plan's approval.
Stock options are rights to purchase shares of common stock. Stock
appreciation rights are rights to receive, without payment, cash and/or Common
Shares in lieu of the purchase of shares of common stock under the stock option
to which the stock appreciation right is attached. The Board may grant stock
options in its discretion under the Stock Incentive Plan. The option price
shall be determined by the Board at the time the option is granted and shall not
be less than the par value of such shares.
The Board will determine the number of Shares to be subject to any option
awarded. The option will not be transferable by the recipient except by the
laws of descent and distribution. The option period and date of exercise will
be determined by the Board and may not exceed ten years. The option of any
person who dies may be exercised by his executors, administrators, heirs or
distributees if done so within one year after the date of that person's death
with respect to any Shares as to which the decedent could have exercised the
option at the time of this death. Upon exercise of an option, the participant
may pay for the Shares so acquired in cash, with common stock (the value of
which will be the fair market value at the date of exercise), in a combination
of both cash and common stock, or, in the discretion of the Board, by promissory
note. For purposes of determining the amount, if any, of the purchase price
satisfied by payment with common stock, fair market value is the mean between
the highest and best sales price per share of the common stock on a given day on
the principal exchange upon which the stock trades or some other quotation
source designated by the Board.
The Board may, in its discretion, attach a stock appreciation right to an
option awarded under the Stock Incentive Plan. A stock appreciation right is
exercisable only to the extent that the option to which it is attached is
exercisable. A stock appreciation right entitles the optionee to receive a
payment equal to the appreciated value of each Share under option in lieu of
exercising the option to which the right is attached. The appreciated value is
the amount by which the fair market value of a share of common stock exceeds the
option exercise price for that share. A holder of a stock appreciation right
may receive cash, common stock or a combination of both upon surrendering an
unexercised option to which the stock appreciation right is attached. We must
elect its method of payment within fifteen business days after the receipt of
written notice of an intention to exercise the stock appreciation right.
Any person granted an incentive stock option under the Stock Incentive Plan
who makes a disposition within the meaning of 5425(c) of the Internal Revenue
Code of 1986, as amended ("Code"), and the regulations promulgated thereunder,
of any shares of common stock issued to him pursuant to his exercise of an
option within two years from the date of the granting of such option or within
one year after the date any shares are transferred to him pursuant to the
exercise of the incentive stock option must within ten days of the disposition
notify us and immediately deliver to us any amount of federal income tax
withholding required by law.
A person to whom a stock option or stock appreciation right is awarded will
have no rights as a stockholder with respect to any shares of common stock
issuable pursuant to the stock option or stock appreciation rights until actual
issuance of a stock certificate for the Common Shares.
Restricted Stock. The Board may in its discretion award common stock that
is subject to certain restrictions on transferability. This restricted stock
issued pursuant to the Stock Incentive Plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by the laws
of descent and distribution, for a period of time as determined by the Board,
from the date on which the award is granted. We will have the option to
repurchase the shares of restricted common stock at such price as our Board
shall have fixed, in its sole discretion, when the award was made, which option
will be exercisable at such times and upon the occurrence of such events as the
Board shall establish when the restricted stock award is granted. We may also
exercise our option to repurchase the restricted common stock if prior to the
expiration of the restricted period, the participant has not paid to us amounts
required to be withheld pursuant to federal, state or local income tax laws.
Certificates for restricted stock will bear an appropriate legend referring to
the restrictions. A holder of restricted stock may exercise all rights of
ownership incident to such stock including the right to vote and receive
dividends, subject to any limitations the Board may impose.
Participation in Stock Incentive Plan. As of the date of this Prospectus
no options have been issued and no agreements are existing between us and any
person with respect to the issuance of options with any director, executive
officer or any other person.
CERTAIN TRANSACTIONS
We were incorporated in Oregon as Althouse Placers Inc. on February 13,
1981 and reincorporated as Althouse, Inc. in Delaware on September 5, 1995.
Althouse Inc. changed its name to Brakes Express, Inc. on August 5, 1998.
On July 31, 1998, through our wholly-owned subsidiary, BE Acquisition
Corp., we acquired substantially all of the assets of a Florida corporation,
also known as Brakes Express, Inc. based in Fort Lauderdale, Florida
("Brakes-Florida").
Prior to the acquisition, we reduced the number of shares outstanding
through a "reverse split," by exchanging one share of common stock for each
three shares of common stock outstanding, changed the name of our corporation
from "Althouse, Inc." to "Brakes Express, Inc.", and sold 2,000,000 newly issued
restricted shares of common stock to Eli Bartov, Gary Caplan, Irwin Taublib and
Oscar Villaverde for cash consideration of $.01 per share or an aggregate of
$20,000; sold 70,000 Series I convertible preferred shares for the cash
consideration of $.01 per share, and, entered into an agreement to acquire the
existing mini warehouse business, which commenced in January 1998, consisting of
inventory of $120,000, from Brakes-Florida.
The acquisition was characterized as a recapitalization whereby the
operations of the mini warehouses were accounted for since inception (January 1,
1998) with an initial capitalization of $20,000. Subsequent to the acquisition,
BE Acquisition Corp. changed its name to "Brakes Express, Inc." and the company
which sold the assets changed its name to "Old BE Corp."
On January 31, 1999, Eli Bartov and other management employees purchased an
additional 1,600,000 Common Shares for cash consideration of $.01 per share and
the commitment to devote their full time and attention to our business,
including the transfer of substantially all of the customer base of Pines
Automotive Inc. to us over time.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Restated Certificate of Incorporation and By-Laws provide for
indemnification of our officers and directors to the fullest extent permitted by
Delaware Law. In addition, the Restated Certificate of Incorporation provides,
pursuant to Delaware Law, that no director shall be personally liable to us or
our shareholders for monetary damages for any breach of fiduciary duty by such
director as a director. However, the directors shall be liable to the extent
provided by applicable law for (i) breach of the director's duty of loyalty to
us or our shareholders, or (ii) acts or missions not in good faith or which
involve intentional misconduct or willful violation of law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons, we have
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of February 28, 1999
, with respect to beneficial ownership of the Common Shares by (i) each person
known by us to own beneficially more than 5% of the presently outstanding Common
Stock; (ii) each of our Directors and (iii) all of our Directors and Officers as
a group, both before and after giving effect to the Conversion of Preferred
Shares.
<TABLE>
<CAPTION>
COMMON STOCK
-------------
PERCENT OF TOTAL
BEFORE AFTER
NAME OF NUMBER OF CONVERSION OF
BENEFICIAL OWNER SHARES OWNED(1) PREFERRED SHARES
- --------------------------- --------------- -----------------
<S> <C> <C> <C>
Eli Bartov 2,376,000 59.40% 50.55%
Gary Caplan 594,000 14.85% 12.64%
Irwin Taublib 594,000 14.85% 12.64%
Bernard Shinder 138,625 N/A 2.95%
ALL OFFICERS AND DIRECTORS
AS A GROUP (3/5 PERSONS) 3,721,875 89.10% 79.19%
<FN>
(1) Based upon the total number of Common Shares outstanding before
Preferred Share conversion (4,000,000) and after Preferred Share conversion
(4,700,000). Under the rules of the Commission, a person is deemed to be the
beneficial owner of a security if such person has or shares the power to vote or
direct the voting of such security or the power to dispose or direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities if that person has the right to acquire beneficial ownership
within 60 days. Accordingly, more than one person may be deemed to be a
beneficial owner of the same securities. Unless otherwise indicated by
footnote, the name entities or individuals have sole voting and investment power
with respect to the shares of Common Stock beneficially owned.
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The following statements do not purport to be complete and are qualified in
their entirety by reference to the detailed provisions of our certificate of
incorporation and by-laws, which are attached to the registration statement of
which this Prospectus is a part. We will furnish copies of our certificate of
incorporation and by-laws to investors upon their written request. Our
authorized capital consists of 30,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock, $.001 par value per share. See "Additional
Information."
COMMON STOCK
Our authorized Common Stock consists of 30,000,000 shares, $.001 par value,
of which 4,000,000 common shares were issued and outstanding as of the date of
this Prospectus. The holders of Common Stock are entitled to one vote per share
on the election of directors and on all other matters submitted to a vote of
stockholders. Common Shares do not have preemptive rights or cumulative voting
rights. Our Certificate of Incorporation, as amended, provides that the board
of directors shall be divided into three classes, as nearly equal in number as
possible, and that at each annual meeting of stockholders all of the directors
of one class shall be elected for a three-year term. The affirmative vote of
not less than 75% of the outstanding shares of Common Stock is required to
approve a merger or consolidation, a transfer of substantially all the assets,
certain issuances and transfers of our securities to other entities or our
dissolution unless our Board of Directors has approved the transaction.
Additionally, certain business combinations involving us and any holder of 15%
or more of our outstanding voting stock must be approved by at least 66.67% of
such voting stock, exclusive of the stock owned by the 15% stockholders, unless
approved by a majority of the directors not affiliated with such holder or
certain price and procedural requirements are met. These provisions, together
with the authorization to issue preferred stock on terms designated by the Board
of Directors, described above, could be used as anti-takeover devices.
Our Common Shareholders are entitled to receive dividends ratably when, as
and if declared by the Board of Directors, and upon liquidation are entitled to
share ratably in our net assets. Payment of dividends on the Common Shares may
be subject to restrictions contained in any future agreement in connection with
the issuance of Preferred Stock. See "Preferred Stock." The decision to pay
dividends is subject to any agreements with holders of preferred stock issued in
the future and such other financial considerations as our Board of Directors may
deem relevant. No assurance can be given as to the timing or amount of any
dividend that we may declare on the Common Shares.
Our By-Laws provide that, subject to certain limitations discussed below,
any stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors at a meeting. Our
By-Laws also provide that a stockholder must give written notice of such
stockholder's intent to make such nomination or nominations, either by personal
delivery or by United States mail, postage prepaid, to our Secretary not later
than (i) with respect to an election to be held at an Annual Meeting of
Stockholders, 90 days prior to the anniversary date of the date of the
immediately preceding Annual Meeting, and (ii) with respect to an election to be
held at a Special Meeting of Stockholders for the election of directors, the
close of business on the tenth day following the date on which a written
statement setting forth the date of such meeting is first mailed to stockholders
provided that such statement is mailed no earlier than 120 days prior to the
date of such meeting. Notwithstanding the foregoing, if an existing director is
not standing for re-election to a directorship which is the subject of an
election at such meeting or if a vacancy exists as to a directorship which is
the subject of an election, whether as a result of resignation, death, an
increase in the number of directors, or otherwise, then a stockholder may make a
nomination with respect to such directorship at any time not later than the
close of business on the tenth day following the date on which a written
statement setting forth the fact that such directorship is to be elected and the
name of the nominee proposed by the Board of Directors is first mailed to
stockholders. Each notice of a nomination from a stockholder shall set forth:
(a) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the Exchange Act and the rules
and regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations); and (e) the consent of each nominee to serve as a
director if so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
DEFENSES AGAINST HOSTILE TAKEOVERS
Introduction. While the following discussion summarizes the reasons for,
and the operation and effects of, certain provisions of our Certificate of
Incorporation which management has identified as potentially having an
anti-takeover effect, it is not intended to be a complete description of all
potential anti-takeover effects, and it is qualified in its entirety by
reference to the Certificate of Incorporation and By-Laws, copies of which are
available from us and which should be reviewed for more detailed information.
In general, the anti-takeover provisions in Delaware law and our
Certificate of Incorporation are designed to minimize our susceptibility to
sudden acquisitions of control which have not been negotiated with and approved
by our Board of Directors. As a result, these provisions may tend to make it
more difficult to remove the incumbent members of the Board of Directors. The
provisions would not prohibit an acquisition of control or a tender offer for
all of our capital stock. The provisions are designed to discourage any tender
offer or other attempt to gain control in a transaction that is not approved by
the Board of Directors, by making it more difficult for a person or group to
obtain control in a short time and then impose its will on the remaining
stockholders. However, to the extent these provisions successfully discourage
the acquisition of control or tender offers for all or part of our capital stock
without approval of the Board of Directors, they may have the effect of
preventing an acquisition or tender offer which might be viewed by stockholders
to be in their best interests.
Tender offers or other non-open market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control through
market purchases may cause the market price of the stock to reach levels which
are higher than would otherwise be the case. Anti-takeover provisions may
discourage such purchases, particularly those of less than all of the company's
stock, and may thereby deprive stockholders of an opportunity to sell their
stock at a temporarily higher price. These provisions may therefore decrease
the likelihood that a tender offer will be made, and, if made, will be
successful. As a result, the provisions may adversely affect those stockholders
who would desire to participate in a tender offer. These provisions may also
serve to insulate incumbent management from change and to discourage not only
sudden or hostile takeover attempts, but any attempts to acquire control which
are not approved by the Board of Directors, whether or not stockholders deem
such transactions to be in their best interests.
Authorized Shares of Capital Stock. Our Certificate of Incorporation
authorizes the issuance of up to 1,000,000 shares of serial preferred stock.
Preferred Shares with voting rights could be issued and would then represent an
additional class of stock required to approve any proposed acquisition. This
preferred stock, together with authorized but unissued Common Shares (the
Certificate of Incorporation authorizes the issuance of up to 30,000,000
shares), could represent additional capital stock required to be purchased by an
acquiror. Issuance of such additional shares may dilute the voting interest of
our stockholders. If our Board of Directors determined to issue an additional
class of voting preferred stock to a person opposed to a proposed acquisition,
such person might be able to prevent the acquisition single-handedly.
Stockholder Meetings. Delaware law provides that the annual stockholder
meeting may be called by a corporation's Board of Directors or by such person or
persons as may be authorized by a corporation's certificate of incorporation or
By-Laws. Our Certificate of Incorporation provides that annual stockholder
meetings may be called only by the Board of Directors or a duly designated
committee of the Board. Although we believe that this provision will discourage
stockholder attempts to disrupt our business between annual meetings, its effect
may be to deter hostile takeovers by making it more difficult for a person or
entity to obtain immediate control between one annual meeting as a forum to
address certain other matters and discourage takeovers which are desired by the
stockholders. Our Certificate of Incorporation also provides that stockholder
action may be taken only at a special or annual stockholder meeting and not by
written consent.
Classified Board of Directors and Removal of Directors. Our Certificate of
Incorporation provides that our Board of Directors is to be divided into three
classes which shall be as nearly equal in number as possible. The directors in
each class serve for terms of three years, with the terms of one class expiring
each year. Each class currently consists of approximately one-third of the
number of directors. Each director will serve until his successor is elected
and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of our outstanding stock, to
force an immediate change in the composition of a majority of the Board of
Directors. Since the terms of only one-third of the incumbent directors expire
each year, it requires at least two annual elections for the stockholders to
change a majority, whereas a majority of a non-classified Board may be changed
in one year. In the absence of the provisions of our Certificate of
Incorporation classifying the Board, all of the directors would be elected each
year. The provision for a staggered Board of Directors affects every election
of directors and is not triggered by the occurrence of a particular event such
as a hostile takeover. Thus a staggered Board of Directors makes it more
difficult for stockholders to change the majority of directors even when the
reason for the change would be unrelated to a takeover.
Our Certificate of Incorporation provides that a director may not be
removed except for cause by the affirmative vote of the holders of 75% of the
outstanding shares of capital stock entitled to vote at an election of
directors. This provision may, under certain circumstances, impede the removal
of a director and thus preclude the acquisition of control through the removal
of existing directors and the election of nominees to fill in the newly created
vacancies. The supermajority vote requirement would make it difficult for our
stockholders to remove directors, even if the stockholders believe such removal
would be beneficial.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Delaware law requires that the board of directors of a
corporation consist of one or more members and that the number of directors
shall be set by the By-Laws, unless it is set by the corporation's certificate
of incorporation. Our Certificate of Incorporation provides that the number of
directors (exclusive of directors, if any, to be elected by the holders of
preferred stock) shall not be less than five or more than 15, as shall be
provided from time to time in accordance with the By-Laws. The power to
determine the number of directors within these numerical limitations and the
power to fill vacancies, whether occurring by reason of an increase in the
number of directors or by resignation, is vested in the Board of Directors. The
overall effect of such provisions may be to prevent a person or entity from
quickly acquiring control through an increase in the number of the our directors
and election of nominees to fill the newly created vacancies and thus allow
existing management to continue in office.
Stockholder Vote Required to Approve Business Combinations with Related
Persons. Our Certificate of Incorporation generally requires the approval of
the holders of 75% of the our outstanding voting stock (and any class or series
entitled to vote separately), and a majority of the outstanding stock not
beneficially owned by a related person (as defined) (up to a maximum requirement
of 85% of the outstanding voting stock), to approve business combinations (as
defined) involving the related person, except in cases where the business
combination has been approved in advance by two-thirds of those members of our
Board of Directors who were directors prior to the time when the related person
became a related person. Under Delaware law, absent these provisions, business
combinations generally, including mergers, consolidations and sales of
substantially all of our assets must, subject to certain exceptions, be approved
by the vote of the holders of a majority of our outstanding voting stock. One
exception under Delaware law to the majority approval requirement applies to
business combinations (as defined) involving stockholders owning 15% of the
outstanding voting stock of a corporation for less than three years. In order
to obtain stockholder approval of a business combination with such a related
person, the holders of two-thirds of the outstanding voting stock, excluding the
stock owned by the 15% stockholder, must approve the transaction.
Alternatively, the 15% stockholder must satisfy other requirements under
Delaware law relating to (i) the percentage of stock acquired by such person in
the transaction which resulted in such person's ownership becoming subject to
the law, or (ii) approval of the board of directors of such person's acquisition
of the stock of the Delaware corporation. Delaware law does not contain price
criteria. The supermajority stockholder vote requirements under the Certificate
of Incorporation and Delaware law may have the effect of foreclosing mergers and
other business combinations which the holders of a majority of our stockholders
deem desirable and place the power to prevent such a transaction in the hands of
a minority of stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of the directors. The absence of cumulative voting rights effectively
means that the holders of a majority of the stock voted at a stockholder meeting
may, if they so choose, elect all our directors, thus precluding a small group
of stockholders from controlling the election of one or more representatives to
our Board of Directors.
Advance Notice Requirements for Nomination of Directors and Proposal of New
Business at Annual Stockholder Meetings. Our Certificate of Incorporation
generally provides that any stockholder desiring to make a nomination for the
election of directors or a proposal for new business at a stockholder meeting
must submit written notice not less than 30 or more than 60 days in advance of
the meeting. This advance notice requirement may give management time to
solicit its own proxies in an attempt to defeat any dissident slate of
nominations, should management determine that doing so is in the best interests
of stockholders generally. Similarly, adequate advance notice of stockholder
proposals will give management time to study such proposals and to determine
whether to recommend to the stockholders that such proposals be adopted. In
certain instances, such provisions could make it more difficult to oppose
management's nominees or proposals, even if the stockholders believe such
nominees or proposals are in their interests. Making the period for nomination
of directors and introducing new business a period not less than 10 days prior
to notice of a stockholder meeting may tend to discourage persons from bringing
up matters disclosed in the proxy materials furnished by us and could inhibit
the ability of stockholders to bring up new business in response to recent
developments.
Limitations on Acquisitions of Capital Stock. Our Certificate of
Incorporation generally provides that if any person were to acquire beneficial
ownership of more than 20% of any class of our outstanding Common Stock, each
vote in excess of 20% would be reduced to one-hundredth of a vote, with the
reduction allocated proportionately among the record holders of the stock
beneficially owned by the acquiring person. The limitation on voting rights of
shares beneficially owned in excess of 20% of our outstanding Common Stock,
would discourage stockholders from acquiring a substantial percentage our stock
in the open market, without disclosing their intentions, prior to approaching
management to negotiate an acquisition of our remaining stock. The effect of
these provisions is to require amendment of the Certificate of Incorporation,
which requires Board approval, before a stockholder can acquire a large block of
our Common Stock. As a result, these provisions may deter takeovers by
potential acquirors who would have acquired a large holding before making an
offer for the remaining stock, even though the eventual takeover offer might
have been on terms favorable to the remaining stockholders.
Supermajority Voting Requirement for Amendment of Certain Provisions of the
Certificate of Incorporation. Our Certificate of Incorporation provides that
specified provisions contained in the Certificate of Incorporation may not be
repealed or amended except upon the affirmative vote of the holders of not less
than seventy-five percent of the outstanding stock entitled to vote. This
requirement exceeds the majority vote that would otherwise be required by
Delaware law for the repeal or amendment of the Certificate of Incorporation.
Specific provisions subject to the supermajority vote requirement are (i)
Article X, governing the calling of stockholder meetings and the requirement
that stockholder action be taken only at annual or special meetings, (ii)
Article XI, requiring written notice of nominations for the election of
directors and new business proposals, (iii) Article XII, governing the number
and terms of directors, (iv) Article XIII, governing the removal of directors,
(v) Article XIV, limiting acquisitions of 20% or more of our stock, (vi) Article
XV, governing approval of business combinations involving related persons, (vii)
Article XVI, relating to the consideration of various factors in the evaluation
of business combinations, (viii) Article XVII, providing for indemnification of
directors, officers, employees and agents, (ix) Article XVIII, limiting
directors' liability, and (x) Articles XIX and XX, governing the required
stockholder vote for amending the By-Laws and Certificate of Incorporation,
respectively. Article XX is intended to prevent the holders of less than 75% of
our outstanding voting stock from circumventing any of the foregoing provisions
by amending the Certificate of Incorporation to delete or modify one of such
provisions. This provision would enable the holders of more than 25% of our
voting stock to prevent amendments to the Certificate of Incorporation or
By-Laws even if they were favored by the holders of a majority of the voting
stock.
SERIES A CONVERTIBLE PREFERRED STOCK
Our Board of Directors is authorized by our Certificate of Incorporation,
without any action on the part of stockholders, to issue preferred stock in one
or more series, with such voting powers, full or limited but not to exceed one
vote per share, or without voting powers, and with such designations,
preferences, limitations, descriptions and terms thereof, including the extent,
if any, to which the holders of the shares of any such series will be entitled
to vote as a class or otherwise with respect to the election of directors or
otherwise, all as shall, to the extent permitted under the laws of the State of
Delaware, be determined by our Board of Directors. Thus, the Board of
Directors, without stockholder approval, may authorize the issuance of preferred
stock which could make it more difficult for another company to effect certain
business combinations with us.
Designation and Amount. There shall be a series of Preferred Stock
------------------------
designated as "Series I Convertible Preferred Stock," and the number of shares
---
constituting such series shall be 70,000. Such series is referred to herein as
the "Convertible Preferred Stock" or "Preferred Shares.")
Rank. All shares of Convertible Preferred Stock all rank prior to all of
----
the Corporation's Common Stock, par value $.001 per share (the "Common Stock"),
now or hereafter issued, both as to payment of dividends and as to distributions
of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
Dividends. The holders of Convertible Preferred Stock shall be entitled to
---------
receive, when, as and if declared by the Board of Directors out of funds at the
time legally available therefor, dividends at the rate of $.01 per annum per
share, and no more, which shall be fully cumulative, shall accrue without
interest from the date of first issuance and shall be payable in cash quarterly
in arrears on March 15, June 15, September 15 and December 15 of each year
commencing December 15, 1998 (except that if any such date is a Saturday, Sunday
or legal holiday then such dividend shall be payable on the next day that is not
a Saturday, Sunday or legal holiday) to holders of record as they appear on the
stock books of the Corporation on such record dates, not more than 60 nor less
than 10 days preceding the payment dates for such dividends, as are fixed by the
Board of Directors.
No dividends or other distributions, other than dividends payable solely in
shares of Common Stock or other capital stock of the Corporation ranking junior
as to dividends and as to liquidation rights to the Convertible Preferred Stock,
shall be declared, paid or set apart for payment on, and no purchase, redemption
or other acquisition shall be made by the Corporation of, any shares of Common
Stock or other capital stock of the Corporation ranking junior as to dividends
to the Convertible Preferred Stock (the "Junior Dividend Stock") unless and
until all accrued and unpaid dividends on the Convertible Preferred Stock,
including the full dividend for the then current quarterly dividend period,
shall have been paid or declared and set apart for payment.
Any reference to "distribution" contained in this Section 4 shall not be
deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
Liquidation Preference. In the event of a liquidation, dissolution or
-----------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
Convertible Preferred Stock shall be entitled to receive out of the assets of
the Corporation, whether such assets are stated capital or surplus of any
nature, an amount equal to the dividends accrued and unpaid thereon to the date
of final distribution to such holders, whether or not declared, without
interest, and a sum equal to $.05 per share, and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Convertible Preferred Stock (the "Junior Liquidation
Stock") provided, however that such rights shall accrue to the holders of
--------- -------
Convertible Preferred Stock only in the event that the Corporation's payments
with respect to the liquidation preferences of the holders of capital stock of
the Corporation ranking senior as to liquidation rights to the Convertible
Preferred Stock (the "Senior Liquidation Stock") are fully met. The entire
assets of the Corporation available for distribution after the liquidation
preferences of the Senior Liquidation stock are fully met shall be distributed
ratably among the holders of the Convertible Preferred Stock and any other class
or series of the Corporation's capital stock which may hereafter be created
having parity as to liquidation rights with the Convertible Preferred Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). Neither a consolidation or
merger of the Corporation with another corporation nor a sale or transfer of all
or part of the Corporation's assets for cash, securities or other property will
be considered a liquidation, dissolution or winding up of the Corporation.
Redemption at Option of the Corporation. The Corporation may not redeem the
----------------------------------------
Convertible Preferred Stock.
The shares of Convertible Preferred Stock shall not be subject to the
operation of any purchase, retirement or sinking fund.
Redemption at Option of Holders. In the event (i) any person with the
-----------------------------------
defined meaning as used in Section 13(d) of the Securities Exchange Act of 1934,
as amended, or any successor provision becomes the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or any
successor provision) of more than 50% of the Common Stock (a "Share
Acquisition") or the Corporation is a party to a business combination, including
a merger or consolidation or the sale of all or substantially all of its assets
and (ii) either (a) as a result of such a Share Acquisition or business
combination, the Convertible Preferred Stock thereafter is not convertible into
common stock of the Corporation or of the ultimate parent of the Corporation
which common stock is traded on the New York Stock Exchange, the American Stock
Exchange or through the NASDAQ National Market System or (b) all or
substantially all of the consideration paid in such Share Acquisition or
business combination does not consist of common stock of the ultimate parent of
the Corporation which common stock is traded on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System, then each holder
of Convertible Preferred Stock, subject to the conditions of this Section 7,
shall have the option to require the Corporation to redeem all of the shares of
Convertible Preferred Stock owned by such holder at $10.00 per share plus
accrued and unpaid dividends to the redemption date.
Conversion Privilege. Each share of Convertible Preferred Stock shall be
---------------------
convertible at the option of the holder thereof, at any time prior to the close
of business on the date fixed for redemption of such share as herein provided,
into fully paid and nonassessable shares of Common Stock and such other
securities and property as hereinafter provided, initially at the rate of 10
shares of Common Stock for each full share of Convertible Preferred Stock.
For the purpose of this Certificate of Designations, the term "Common
Stock" shall initially mean the class designated as Common Stock, par value
$.001 per share, of the Corporation as of July 31, 1998, subject to adjustment
as hereinafter provided.
Voting Rights. The holders of Convertible Preferred Stock will not have
--------------
any voting rights except as set forth below or as otherwise from time to time
required by law. In connection with any right to vote, each holder of
Convertible Preferred Stock will have one vote for each share held.
Other Provisions. The shares of Series A Convertible Preferred, when
-----------------
issued, will be duly and validly issued, fully paid and non-assessable.
The holders of Series A Convertible Preferred Shares have no preemptive
rights with respect to any of our securities.
REGISTRAR AND TRANSFER AGENT
The transfer agent, conversion agent and registrar for the Convertible
Preferred Shares, and the transfer agent and registrar for the Common Shares
issuable upon conversion of the Preferred Shares will be Atlas Stock Transfer
Corporation, Salt Lake, City, Utah.
LEGAL PROCEEDINGS
We are subject to litigation from time to time in the ordinary course of
our business. However, we are not a party to any litigation as to which an
adverse decision would have a material adverse impact upon our operations or
financial condition.
LEGAL MATTERS
Sonfield & Sonfield, Houston, Texas has passed on certain legal matters
relating to the validity of our securities distributed pursuant to this
Prospectus, the legality of our Common Stock as well as other legal matters
relating to our organization. Sonfield & Sonfield also represents us and has
set out its opinion of certain federal income tax consequences in this
Prospectus under the heading "Certain Federal Income Tax Consequences.
EXPERTS
Our audited financial statement at July 31, 1998, appearing in this
Prospectus and elsewhere in the Registration Statement have been audited by
Durland & Company, CPAs, P.A., independent public accountants, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon the authority of such firm as experts in giving such report.
Our audited financial statement at December 31, 1997, appearing in this
Prospectus and elsewhere in the Registration Statement have been audited by
Harper & Pearson Company, P.C., independent public accountants, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon the authority of such firm as experts in giving such report.
<PAGE>
F - 10
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT F - 2
CONSOLIDATED BALANCE SHEETS F - 3
CONSOLIDATED STATEMENTS OF OPERATIONS F - 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F - 5
CONSOLIDATED STATEMENTS OF CASH FLOWS F - 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F - 7-10
<PAGE>
INDEPENDENT AUDITORS REPORT
The Board of Directors
Brakes Express, Inc.
Lauderhill, Florida
We have audited the accompanying consolidated balance sheet of Brakes Express,
Inc., as of July 31, 1998 and the related consolidated statements of operations,
stockholders= equity and cash flows for the seven months then ended These
financial statements are the responsibility of the Company=s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Brakes Express, Inc.
as of July 31, 1998 and the results of their operations and cash flows for the
seven months then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which assume that the Company will
continue as a going concern. As discussed in Note 6 to the financial
statements, the Company has experienced a $0 net income from inception to July
31, 1998. The Company=s financial position and operating results raise
substantial doubt about its ability to continue as a going concern.
Management=s plans in regard to these matters are also described in Note 6. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
May 7, 1999
<PAGE>
<TABLE>
<CAPTION>
BRAKES EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
January 31, 1999
ASSETS (Unaudited) July 31, 1998
- ---------------------------------------------------------------------------------------------- ------------------ --------------
<S> <C> <C>
Current Assets
Cash $ 60,966 0
------------------ --------------
Accounts receivables, less allowance for doubtfull accounts of $4,526 173,536 0
- ----------------------------------------------------------------------------------------------
Inventory 140,113 120,000
- ----------------------------------------------------------------------------------------------
Stock subscription receivable 0 21,050
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Total current assets 374,615 141,050
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Property and Equipment
- ----------------------------------------------------------------------------------------------
Furniture and fixtures 12,046 0
------------------ --------------
Less: accumulated depreciation (659) 0
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Net property and equipment 11,387 0
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Other assets 3,382 0
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Total Assets $ 389,384 $ 141,050
- ---------------------------------------------------------------------------------------------- ================== ==============
LIABILITIES AND STOCKHOLDERS= EQUITY
Current liabilities
Accounts payable and accrued expenses $ 80,617 $ 0
------------------ --------------
Accounts payable - related party 92,510 0
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Income taxes payable 9,501 0
------------------ --------------
Note and accrued interest payable - related party 125,922 120,000
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Total current liabilities 308,550 120,000
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Stockholders= equity
- ----------------------------------------------------------------------------------------------
Series A convertible Preferred stock $.001 par value, 1,000,000 shares
authorized, 70,000 shares issued and outstanding (liquidation
preference of $3,500) 70 70
------------------ --------------
Common stock, $.001 par value, 30,000,000 shares authorized,
4,000,041 and 2,400,041 shares issued and outstanding at January 31,
1999 and July 31, 1998, respectively 4,000 2,400
------------------ --------------
Additional paid-in capital 32,980 18,580
------------------ --------------
Retained earnings 43,784 0
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Total stockholders= equity 80,834 21,050
- ---------------------------------------------------------------------------------------------- ------------------ --------------
Total Liabilities and Stockholders= Equity $ 389,384 $ 141,050
- ---------------------------------------------------------------------------------------------- ================== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRAKES EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six
months ended For the seven
January 31, 1999 months ended
(Unaudited) July 31, 1998
------------ --------------
<S> <C> <C>
Net sales $ 905,118 $ 407,094
------------ --------------
Cost of sales - related party 463,894 237,139
- ------------------------------------------------------ ------------ --------------
Gross profit 441,224 169,955
- ------------------------------------------------------ ------------ --------------
Operating expenses
- ------------------------------------------------------
Sales and delivery expenses 221,340 80,986
- ------------------------------------------------------
General and administrative expenses 160,018 19,940
- ------------------------------------------------------
General and administrative expenses - related party 0 56,247
Management fee - related party 0 12,782
Depreciation 659 0
- ------------------------------------------------------ ------------ --------------
Total operating expenses 382,017 169,955
- ------------------------------------------------------ ------------ --------------
Income from operations 59,207 0
- ------------------------------------------------------ ------------ --------------
Other expenses
- ------------------------------------------------------
Interest expense - related party 5,922 0
- ------------------------------------------------------ ------------ --------------
Total other expenses 5,922 0
- ------------------------------------------------------ ------------ --------------
Income before income tax 53,285 0
- ------------------------------------------------------
Income tax (9,501) 0
- ------------------------------------------------------ ------------ --------------
Net income $ 43,784 $ 0
- ------------------------------------------------------ ============ ==============
Basic earnings per common share $ 0.02 $ 0.00
- ------------------------------------------------------ ============ ==============
Weighted average common shares outstanding 2,408,737 409,475
- ------------------------------------------------------ ============ ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRAKES EXPRESS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Preferred stock Common stock APIC
---------------- ----------------
Par
Number of shares Value Number of shares Par Value
---------------- ------ ---------------- ----------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE, January 1, 1998 0 $ 0 0 $ 0 $ 0
---------------- ------ ---------------- ---------- --------
Seven months ended July 31, 1998:
Reverse merger 0 0 400,041 400 (400)
---------------- ------ ---------------- ---------- --------
Issuance of shares for stock subscriptions receivable 0 0 2,000,000 2,000 18,000
---------------- ------ ---------------- ---------- --------
Issuance of preferred shares for stock
subscriptions receivable 70,000 70 0 0 630
---------------- ------ ---------------- ---------- --------
Issuance of warrants for warrant subscriptions
receivable 0 0 0 0 350
---------------- ------ ---------------- ---------- --------
Net loss 0 0 0 0 0
- ------------------------------------------------------ ---------------- ------ ---------------- ---------- --------
BALANCE, July 31, 1998 70,000 70 2,400,041 2,400 18,580
---------------- ------ ---------------- ---------- --------
Six months ended January 31, 1999 (Unaudited):
- ------------------------------------------------------
Issuance of shares for cash 0 0 1,600,000 1,600 14,400
- ------------------------------------------------------
Net income 0 0 0 0 0
- ------------------------------------------------------
BALANCE, January 31, 1999 (Unaudited) 70,000 $ 70 4,000,041 $ 4,000 $32,980
- ------------------------------------------------------ ================ ====== ================ ========== ========
Total
Retained Earnings Stockholders= Equity
<S> <C> <C>
BEGINNING BALANCE, January 1, 1998 $ 0 $ 0
------------------ ---------------------
Seven months ended July 31, 1998:
Reverse merger 0 0
------------------ ---------------------
Issuance of shares for stock subscriptions receivable 0 20,000
------------------ ---------------------
Issuance of preferred shares for stock
subscriptions receivable 0 700
------------------ ---------------------
Issuance of warrants for warrant subscriptions
receivable 0 350
------------------ ---------------------
Net loss 0 0
- ------------------------------------------------------ ------------------ ---------------------
BALANCE, July 31, 1998 0 21,050
------------------ ---------------------
Six months ended January 31, 1999 (Unaudited):
- ------------------------------------------------------
Issuance of shares for cash 0 16,000
- ------------------------------------------------------
Net income 43,784 43,784
- ------------------------------------------------------
BALANCE, January 31, 1999 (Unaudited) $ 43,784 $ 80,834
- ------------------------------------------------------ ================== =====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRAKES EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six
months ended For the seven
January 31, 1999 months ended
(Unaudited) July 31, 1998
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 43,784 $ 0
------------ --------------
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation 659 0
------------ --------------
Provision for doubtful accounts 4,526 0
------------ --------------
Changes in operating assets and liabilities:
Increase in accounts receivables (178,062) 0
------------ --------------
Increase in inventory (20,113) 0
------------ --------------
Increase in security deposits (3,382) 0
- ------------------------------------------------------------------------------------------
Increase in accounts payable and accrued expenses 80,617 0
- ------------------------------------------------------------------------------------------
Increase in accounts payable - related party 92,510 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Increase in income taxes payable 9,501 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Increase in accrued interest payable - related party 5,922 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Net cash flows provided by operating activities 35,962 0
- ------------------------------------------------------------------------------------------ ------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------
Purchase of furniture and fixtures (12,046) 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Net cash flows used by investing activities (12,046) 0
- ------------------------------------------------------------------------------------------ ------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------------------
Proceeds from stock subscription receivable 21,050 0
------------ --------------
Proceeds from issuance of common stock 16,000 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Net cash flows provided by financing activities 37,050 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Net increase in cash 60,966 0
------------ --------------
Cash - beginning of period 0 0
- ------------------------------------------------------------------------------------------ ------------ --------------
Cash - end of period $ 60,966 $ 0
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activities:
Stock issued for stock subscription receivable $ 0 $ 21,050
- ------------------------------------------------------------------------------------------
Acquisition of inventory by issuance of notes to related party $ 0 $ 120,000
- ------------------------------------------------------------------------------------------ ============ ==============
</TABLE>
<PAGE>
BRAKES EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE PERIOD ENDED JANUARY 31, 1999 IS UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION Brakes Express, Inc., a Delaware Corporation (the "Company"),
was incorporated in Oregon as Althouse Placers, Inc. on February 12, 1981, and
reincorporated as Althouse, Inc. in Delaware on September 5, 1995. Althouse,
Inc. changed its name to Brakes Express, Inc. ("brakes") on August 5, 1998.
On July 31, 1998, the Company, through its wholly owned subsidiary, BE
Acquisition Corp., acquired substantially all of the assets of a Florida
corporation, Brakes Express, Inc. based in Lauderhill, Florida
("Brakes-Florida"). Brakes-Florida's primary business is a wholesale supplier of
brakes and other after-market brake parts to automotive repair shops. The
acquisition was accounted for as a reorganization, whereby the mini warehouse
component of the business, which was acquired, was accounted for since its
inception (January 1, 1998) with an initial capitalization of $20,000,
representing funding contributed by Eli Bartov and others. Subsequent to the
acquisition, Brakes - Florida, which sold the assets, changed its name to Old
BE Corp.
BASIS OF PRESENTATION The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.
EARNINGS PER SHARE The Company has adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (FAS 128), which establishes new
standards for computing and presenting earnings per share, (EPS), effective for
the periods ending after December 15, 1997. Basic earnings per share is
computed by dividing net earnings by the weighted average number of shares of
common stock outstanding during each period.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK Financial instruments
which potentially subject the Company to concentrations of credit risk are
primarily cash. The Company primarily transacts its business with one financial
institution. At times, the amount on deposit in that one institution may exceed
the $100,000 federally insured limit. The risk is managed by maintaining all
deposits in high quality financial institutions.
USE OF ESTIMATES The financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the statements of financial condition
and revenues and expenses for the period then ended. Actual results may differ
significantly from those estimates.
REVENUE RECOGNITION Revenue from product sales is recognized at the time of
shipment.
INVENTORY Inventory consists of brakes and other after market brake parts.
Inventory is stated at the lower of cost or market (determined on a first-in,
first-out basis).
PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Maintenance and repair costs are charged to expense as incurred. Gains and
losses on disposition of property and equipment are reflected in income.
Depreciation is computed on the straight-line method for financial reporting
purposes, based on the estimated useful lives of the assets.
INCOME TAXES In accordance with FAS 109, deferred income taxes (benefits) are
provided for certain income and expenses which are recognized in different
periods for tax and financial reporting purposes.
RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
established standards for reporting and disclosure of financial information by
segment. This statement will be adopted by the Company for the 1999 fiscal
year. The Company has not yet determined the impact of adopting this
pronouncement on its financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and for Hedging Activities," which establishes standards for
reporting and disclosure of derivative and hedging instruments. SFAS No. 133 is
effective for annual reports beginning after June 15, 1999. The Company will
not be affected by this new standard because the Company has no derivative or
hedging financial instruments.
(2) INCOME TAXES Income expense consisted of the following at January 31,
1999:
Income taxes currently payable:
Federal income tax $ 6,845
State income tax 2,656
----------
Income tax expense $ 9,501
===========
(3) STOCKHOLDERS' EQUITY The Company has authorized 30,000,000 shares of
$0.001 par value common stock and 1,000,000 shares of $0.001 par value preferred
stock.
Common stock - On July 31, 1998, the Company completed a reverse stock split
by issuing one share for three shares then outstanding. This reduced the number
of shares outstanding from 1,200,139 to 400,041. On July 31, 1998, the
Company issued 2,000,000 shares, $.001 par value, of common stock to Eli Bartov
and others for $20,000 cash. In January, 1999, the Company issued 1,600,000
shares, $.001 par value, of common stock to Eli Bartov and others for $16,000
cash.
Preferred stock - On July 31, 1998, 70,000 of the Company's 1,000,000
authorized shares of preferred stock, $.001 par value per share, designated as
Series A convertible preferred stock, were issued for $700 cash. The preferred
shares are convertible into 700,000 shares of common stock. The preferred
shares have a liquidation preference of $.05 per share.
Warrants - On July 31, 1998, the Company issued warrants to purchase 350,000
shares of common stock. The Company received $350 in cash for these warrants.
The Company subsequently canceled the warrants and treated the cash received as
contributed capital.
At July 31, 1998, common stock subscriptions receivable in the amount of $21,050
were recorded reflecting amounts due from the sale of common stock, preferred
stock and warrants. These amounts were received by the Company in August, 1998.
(4) RELATED PARTY TRANSACTIONS The Company entered into a financing agreement
with a related party, Pines Automotive, Inc. This agreement consists of a term
loan with a principal balance of $120,000 at July 31, 1998. Interest shall
accrue at a rate equal to prime plus one half of one percent (.5%) per annum.
The total unpaid balance of principal and accrued interest shall be due and
payable on July 31, 1999. Interest expense incurred during the six month period
ended January 31, 1999 amounted to $5,922. Unpaid principal and any accrued
interest amounts were $125,922 and $120,000 at January 31, 1999 and July 31,
1998, respectively, and are presented in Note and accrued interest payable -
related party.
The Company purchases substantially all of its supplies at fair market
value from Pines Automotive, Inc. ("Pines"), a company under common control.
Total purchases for the periods ended January 31, 1999 and July 31, 1998 were
(4) RELATED PARTIES (CONTINUED) $463,894 and $237,139, respectively, and are
presented in Cost of sales - related party. Amounts owed to Pines at January
31, 1999 were $92,510 and are presented in Accounts payable - related party.
During the seven months ended July 31, 1998, the Company received personnel
services from and shared certain office expenses with Pines. The Company shares
office space with Pines, in a building partially owned by the Company's
president and majority shareholder. The Company reimbursed for these costs and
recorded the reimbursements as general and administrative expenses.
Reimbursements for the period amounted to $56,247.
During the seven months ended July 31, 1998, the Company paid management fees
amounting to $12,782 to Pines, under an unwritten agreement which is no longer
in effect.
(5) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES The Company has operating leases for four locations expiring
from 1998 to 1999. All leases have durations of one year with annual renewal
options. The lease agreements require the Company to pay real estate taxes,
maintenance and other operating expenses associated with the space leased. Rent
expense for the periods ended January 31, 1999 and July 31, 1998 was $26,605 and
$9,993, respectively.
Future minimum rental commitments as of July 31, 1998 are as follows:
August 1, 1998 - July 31, 1999 $ 11,156
Thereafter -
----------------
$ 11,156
============
EMPLOYMENT AGREEMENTS On March 1, 1999, the Company entered into employment
agreements with three of its officers providing for annual base salaries,
ranging from $60,000 to $75,000, together with bonuses ranging from 2% to 8% of
net income in excess of $50,000 for the current fiscal year.
RELATED PARTIES The Company is obligated under an agreement dated July 31, 1998
to (a) pay certain acquisition costs and consulting fees, totaling $200,000,
related to the acquisition of Brakes-Florida, and (b) enter into a consulting
agreement with two of the Company's preferred stock shareholders. These
obligations are subject to the Company raising debt or equity gross proceeds
aggregating $1,500,000. Consideration for the consulting services shall be
$36,000 per year, commencing October 1, 1998. These services shall continue
from year to year unless terminated on sixty days notice by either party to the
agreement.
(6) GOING CONCERN The Company is in the early stages of its operations and has
a stockholders' equity of $90,335 and $21,050 as of January 31, 1999 and July
31, 1998, respectively. The Company is presently attempting to raise funds
through equity financing or borrowing to expand operations and to open new
locations. The Company expects to be able to meet its working capital needs for
its existing operations. However, there is no assurance that any such
financing or borrowings will be successful on commercially reasonable terms if
at all.
<PAGE>
II - 4
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under Delaware Law. Section 145 of the General
Corporation Law of Delaware provides that:
(a) A corporation may indemnify any person, including officers and
directors, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of another corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Article Five of the Restated Certificate of Incorporation of the
Registrant, provides, in effect, that subject to certain limited circumstances,
the Registrant will indemnify the officers and directors of the Registrant or
its subsidiaries to the extent permitted by Delaware Law. The Registrant is not
insured for liabilities it may incur pursuant to Article Five of its Restated
Certificate of Incorporation relating to the indemnification of officers and
directors of the Registrant and its subsidiaries.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering described in this Registration Statement:
Securities and Exchange Commission Filing Fee $ 2,000
Legal Fees and Expenses 40,000
Printing and Engraving Expenses 7,500
Accountants' Fees 10,000
Fees of Transfer Agent and Exchange Agent 5,000
Miscellaneous expenses 10,000
------
Total $ 74,500
========
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On the 31st day of July, 1998, in reliance on the exemption in Section 4(2)
of the Securities Act of 1933, the Company issued a total of 2,000,000 common
shares for the purchase price of $.01/share to accredited investors in
consideration of services rendered to the Company in connection with the
acquisition of Brakes Express, Inc.
On the 31st day of July, 1998, in reliance on the exemption in Section 4(2)
of the Securities Act of 1933, the Company issued a total of 70,000 preferred
shares for the purchase price of $.01/share to accredited investors in
consideration of services rendered to the Company in connection with the
acquisition of Brakes Express, Inc.
On the 31st day of January, 1999, in reliance on the exemption in Section
4(2) of the Securities Act of 1933, the Company issued a total of 1,600,000
common shares for the purchase price of $.01/share to accredited investors in
consideration of services rendered to the Company in connection with the
acquisition of Brakes Express, Inc.
The sales of the aforementioned securities were made in reliance afforded
by Section 4(2) thereof and/or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering.
<PAGE>
ITEM 27. EXHIBITS
3.1 Certificate of Incorporation of Althouse, Inc.
3.2 - Certificate of Amendment of the Certificate of Incorporation of
the Company.
3.3 - Certificate of Amendment of the Certificate of Incorporation of
the Company.
3.4 - By-Laws of the Company.
4.1 - Form of Common Stock Certificate.
5.1 - Opinion of Sonfield & Sonfield with respect to legality of the
Securities. (included in Part II of the Registration Statement)
8.1 - Opinion of Sonfield & Sonfield with respect to tax matters
(included in Exhibit 5.1)
10.13 - Indemnification Agreement between the Company and Eli Bartov.
10.14 - Indemnification Agreement between the Company and Steven.
Rothman.
10.15 - Indemnification Agreement between the Company and Irwin
Taublib.
10.16 - Indemnification Agreement between the Company and Gary Caplan.
10.17 - Indemnification Agreement between the Company and Bernard
Shinder.
10.18 - Brakes Express, Inc. Stock Incentive Plan
24.1 - Consent of Sonfield & Sonfield (included in Exhibit 5.1).
24.2 - Consent of Durland & Company, CPAs, P.A. (included in Part II of
the Registration Statement)**
24.3 - Consent of Harper & Pearson Company, P.A. (included in Part II
of the Registration Statement)**
25.1 - Power of Attorney (included on page II-5).
__________________
** To Be Filed By Amendment.
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement:
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer hereby undertakes that:
For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon rule 430A and contained in a form of
prospectus filed by the small business issuer pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities at the time as the initial bona fide
offering of those securities.
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF LAUDERHILL AND STATE OF FLORIDA, ON THE _____
DAY OF JUNE, 1999.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov
--------------
Eli Bartov, President
POWER OF ATTORNEY
Each of the undersigned hereby authorizes Eli Bartov as his
attorney-in-fact to execute in the name of each such person and to file such
amendments (including post-effective amendments) to this Registration Statement
as the Registrant deems appropriate and appoints such person as attorney-in-fact
to sign on his behalf individually and in each capacity stated below and to file
all amendments, exhibits, supplements, post-effective amendments and
acceleration requests to this Registration Statement.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/Eli Bartov President, Chief
- --------------
Eli Bartov Executive Officer and
Director June ___, 1999
/s/Steven N. Rothman Vice President, Finance
- ----------------------
Steven N. Rothman Chief Financial Officer June ___, 1999
/s/Irwin Taublib Vice President, Sales
- -----------------
Irwin Taublib and Marketing and Director June ___, 1999
/s/Gary Caplan Vice President of Operations
- ---------------
Gary Caplan and Director June ___, 1999
/s/Bernard Shinder Director June ____, 1999
- -------------------
Bernard Shinder
<PAGE>
Exhibit 3.1 - Page 15
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ALTHOUSE, INC.
ARTICLE I
NAME
The name of the Corporation is Althouse, Inc.
ARTICLE II
DURATION
The Corporation is to have perpetual existence.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is The
Corporation Trust Center at 1209 Orange Street, in the City of Wilmington,
County of Newcastle, State of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is to transact all
lawful business for which corporations may be incorporated pursuant to the laws
of the State of Delaware. The Corporation shall have all the powers of a
corporation organized under the General Corporation Law of the State of
Delaware.
ARTICLE V
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 4,100,000 of which 4,000,000 are to be
shares of common stock, $.001 par value per share, and of which 100,000 are to
be shares of serial preferred stock, $.001 par value per share. The shares may
be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except as
otherwise provided in this Article V or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration shall be conclusive. Upon payment of such consideration such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, the part of the surplus of the Corporation which is transferred
to stated capital upon the issuance of shares as a stock dividend shall be
deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Certificate, the holders
-------------
of the common stock shall exclusively posses all voting power. Subject to the
provisions of this Certificate, each holder of shares of common stock shall be
entitled to one vote for each share held by such holders.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class or series of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and sinking fund or retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock, and on any class
or series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when and as
declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any such event, the full preferential amounts to which
they are respectively entitled, the holders of the common stock and of any class
or series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation.
B. Serial Preferred Stock. Except as provided in this Certificate, the
----------------------
board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series, and the qualifications, limitation or restrictions
thereof, including, but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment or date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of
such series;
(4) whether the shares of such series shall be redeemable and, if
so, the price or prices at which, and the terms and conditions upon which such
shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(8) the subscription or purchase price and form of consideration
for which the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares of the same or
any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except the times from which dividends on shares which may be issued from time to
time of any such series may begin to accrue.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right to purchase
stock may be issued pursuant to resolution of the board of directors of the
Corporation to such persons, firms, corporations or associations, whether or not
holders thereof, and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences or indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of stockholders
may be effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the board of directors of the Corporation.
B. Special meeting of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the board of directors of the
Corporation, or by a committee of the board of directors which as been duly
designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings but such
special meetings may not be called by another person or persons.
C. There shall be no cumulative voting by stockholders of any class or
series in the election of directors of the Corporation.
D. Meetings of stockholders may be held at such place as the bylaws may
provide.
ARTICLE IX
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of stockholders may be
made by the board of directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of directors. In order
for a stockholder of the Corporation to make any such nominations and/or
proposals at an annual meeting or such proposals at a special meeting, he or she
shall give notice thereof in writing, delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of the Corporation of less than
thirty days nor more than sixty days prior to any such meeting; provided,
however, that if less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Corporation not later than the close of the tenth day
following the day on which notice of the meeting was mailed to stockholders.
Each such notice given by a stockholder with respect to nominations for the
election of directors shall set forth (1) the name, age, business address and,
if known, residence address of each nominee proposed in such notice, (2) the
principal occupation or employment of each such nominee, and (3) the number of
shares of stock of the Corporation which are beneficially owned by each such
nominee. In addition, the stockholder making such nomination shall promptly
provide any other information reasonably requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with
respect to business proposals to bring before a meeting shall set forth in
writing as to each matter: (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (2) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business; (3) the class and number of shares of
the Corporation which are beneficially owned by the stockholder; and (4) any
material interest of the stockholder in such business. Notwithstanding anything
in this Certificate to the contrary, no business shall be conducted at the
meeting except in accordance with the procedures set forth in this Article.
C. The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding adjourned, special or annual meeting of the stockholders taking place
thirty days or more thereafter. This provision shall not require the holding of
any adjourned or special meeting of stockholders for the purpose of considering
such defective nomination or proposal.
ARTICLE X
DIRECTORS
A. Number; Vacancies. The number of directors of the Corporation shall
-----------------
be such number, not less than three nor more than 15 (exclusive of directors, if
any, to be elected by holders of preferred stock of the Corporation), as shall
be provided from time to time in a resolution adopted by the board of directors,
provided that no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director, and provided further that no
action shall be taken to decrease or increase the number of directors from time
to time unless at least two-thirds of the directors then in office shall concur
in said action. Exclusive of directors, if any, elected by holders of preferred
stock, vacancies in the board of directors of the Corporation, however caused,
and newly created directorships shall be filled by a vote of two-thirds of the
directors then in office, whether or not a quorum, and any director so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of the class to which the director has been chosen expires and
when the director's successor is elected and qualified.
B. Classified Board. Other than directors which may be elected by the
-----------------
holders of preferred stock, the board of directors of the Corporation shall be
divided in to three classes of directors which shall be designated Class I,
Class II and Class III. The members of each class shall be elected for a term
of three years and until their successors are elected and qualified. Such
classes shall be as nearly equal in number as the then total number of directors
constituting the entire board of directors shall permit, exclusive of directors,
if any, elected by holders of preferred stock, with the terms of office of all
members of one class expiring each year. Should the number of directors not be
equally divisible by three, the excess director or directors shall be assigned
to Classes I or II as follows: (1) if there shall be an excess of one
directorship over the number equally divisible by three, such extra directorship
shall be classified in Class I; and (2) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class I and the other in Class II. At the first annual meeting of
stockholders, directors of Class I shall be elected to hold office for a term
expiring at the third succeeding annual meeting of stockholders, directors of
Class I shall be elected to hold office for a term expiring at the third annual
meeting of stockholders, directors of Class III shall be elected to hold office
for a term expiring at the third succeeding annual meeting thereafter.
Thereafter, at each succeeding annual meeting, directors of each class shall be
elected for three year terms. Notwithstanding the foregoing, the director whose
term shall expire at any annual meeting shall continue to serve until such time
as his successor shall have been duly elected and shall have qualified unless
his position on the board of directors shall have been abolished by action taken
to reduce the size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s) to
be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased, other
than for directors which may be elected by the holders of preferred stock, the
additional directorships shall be allocated among classes as appropriate so that
the number of directors in each class is as specified in the immediately
preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall consist of said
directors so elected in addition to the number of directors fixed as provided in
this Article X. Notwithstanding the foregoing, and except as otherwise may be
required by law, whenever the holders of any one or more series of preferred
stock of the Corporation, the terms of the director or directors elected by such
holders shall expire at the next succeeding annual meeting of stockholders.
ARTICLE XI
REMOVAL OF DIRECTORS
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or the entire board of directors of the
Corporation may be removed, at any time, but only for cause and only by the
affirmative vote of the holders of at least 75% of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, whenever the holders of any one or more series of
preferred stock of the Corporation shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the preceding
provisions of this Article XI shall not apply with respect to the director or
directors elected by such holders of preferred stock.
ARTICLE XII
ACQUISITION OF CAPITAL STOCK
A. For the purpose of this Article:
(1) The term "Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor statute.
(2) The term "acting in concert" shall mean (i) knowing
participation in a joint activity or conscious parallel action towards a common
goal whether or not pursuant to an express agreement, and (ii) a combination or
pooling of voting or other interest in the Corporation's outstanding shares of
capitol stock for a common purpose, pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
(3) The term "acquire," "acquisition" or "acquiring" with respect
to the acquisition of any security of the Corporation shall refer to the
acquisition of such security by any means whatsoever, including without
limitation, an acquisition of such security by gift, by operation of law, by
will or by intestacy, whether voluntarily or involuntarily.
(4) The term "Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute.
(5) The term "Common Stock" means all Common Stock of the
Corporation and any other securities issued by the Corporation (other than the
Warrants) which are treated as stock for purposes of Section 382 of the Code.
(6) The term "Fair Market Value" of the Common Stock shall mean
the average of the daily closing prices of the Common Stock for 15 consecutive
trading days commencing 20 trading days before the date of such computation The
closing price is the last reported sale price on the principal securities
exchange on which the Common Stock is listed or, if the Common Stock is not
listed on any national securities exchange, the NASDAQ National Marked System,
or, if the Common Stock is not designated for trading on the NASDAQ National
Market System, the average of the closing bid and asked prices as reported on
NASDAQ or, if not so reported, as furnished by the National Quotation Bureau
Incorporated. In the absence of such a quotation, the Corporation shall
determine the current market rice on a reasonable and appropriate basis of the
average of the daily closing prices for 15 consecutive trading days commencing
20 trading days before the date of such computation.
(7) The term "own," "owing," "ownership" or "owning" refer to the
ownership of securities within the meaning of Section 382 of the Code after
taking into account the attribution rules of Section 382(l)(3) of the Code and
the regulations promulgated hereunder (except insofar as such attribution would
be inconsistent with provisions of this Article XII relating to Warrants).
(8) The term "Person" shall mean any individual, firm,
corporation, partnership, joint venture or other entity and shall include any
group composed of such person and any other person with whom such person or any
Affiliate or Associate (as those terms are defined in Rule 12b-2 of the General
Rules and Regulations under the Act) of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purposes of
acquiring, holding, voting or disposing of Common Stock or Warrants, and any
other person who is a member of such group.
(9) The term "Transfer Agent" shall mean the transfer agent with
respect to the Common Stock nominated and appointed by the Board of Directors
from time to time.
(10) The term "Warrant" shall mean any securities issued or
assumed by the Corporation, or any securities issuable by the Corporation in
respect to issued securities which are convertible into, or which include the
right to acquire, shares of Common Stock, whether or not the right to make such
conversion or acquisition is subject to any contingencies, including, without
limitation, warrants, options, calls, contracts to acquire securities,
convertible debt instruments or any other interests treated as an option
pursuant to Section 382(l)(3) of the Code.
(11) The term "Warrant Agent" shall mean any warrant agent for any
Warrants nominated and appointed by the Board of Directors from time to time.
B. (1) If, at any time during the ten years from the effective date
of this Certificate, any Person shall acquire the beneficial ownership (as
determined pursuant to Rules 13d-3 and 13d-5 under the Act) of more than 20% of
any class of Common Stock, then the record holders of Common stock beneficially
owned by such acquiring Person shall have only the voting rights set forth in
this paragraph B on any matter requiring their vote or consent. With respect to
each vote in excess of 20% of the voting power of the outstanding shares of
Common Stock which such record holders would otherwise be entitled to cast
without giving effect to this paragraph B, the record holders in the aggregate
shall be entitled to cast only one-hundredth of a vote. A Person who is a
record owner of shares of Common Stock that are beneficially owned
simultaneously by more than one person shall have, with respect to such shares,
the right to cast the least number of votes that such person would be entitled
to cast under this paragraph B by virtue of such shares being so beneficially
owned by any of such acquiring Persons. The effect of the reduction in voting
power required by this paragraph B shall be given effect in determination the
presence of a quorum for purposes of convening a meeting of the stockholders of
the Corporation
(2) The limitation on voting rights prescribed by this paragraph B
shall terminate and be of no force and effect as of the earliest to occur of:
(i) the date that any person becomes the beneficial owner of
shares of stock representing at least 75% of the total number of votes entitled
to be cast in respect of all outstanding shares of stock, before giving effect
to the reduction in votes prescribed by this paragraph B; or
(ii) the date (the "Reference Date") one day prior to the
date on which, as a result of such limitation of voting rights, the Common Stock
will be delisted from (including by ceasing to be temporarily or provisionally
authorized for listing with) the New York Stock Exchange (the "NYSE") or the
American Stock Exchange (the "AMEX"), or be no longer authorized for inclusion
(including by ceasing to be provisionally or temporarily authorized for
inclusion) on the National Association of Securities Dealers, Inc. Automated
Quotation System/National Market System ("NASDAQ/NMS"); provided, however, that
(a) such termination shall not occur until the earlier of (x) the 90th day after
the Reference Date or (y) the first day on or after a Reference Date that there
is not pending a proceeding under the rules of the NYSE, the AMEX or the
NASDAQ/NMS or any other administrative or judicial proceeding challenging such
delisting or removal of authorization of the Common Stock, an application for
listing of the Common stock with the NYSE or the AMEX or for authorization for
the Common Stock to be including on the NASDAQ/NMS, or an appeal with respect to
any such application, and (b) such termination shall not occur by virtue of such
delisting or lack of authorization if on or prior to the earlier of the 90th day
after the Reference Date or the day on which no proceeding, application or
appeal of the type described in (y) above is pending, the Common Stock is
approved for listing or continued listing on the NYSE or the AMEX or authorized
for inclusion or continued inclusion on the NASDAQ/NMS (including any such
approval or authorization which is temporary or provisional). Nothing contained
herein shall be construed so as to prevent the Common Stock from continuing to
be listed with the NYSE or AMEX or continuing to be authorized for inclusion on
the NASDAQ/NMS in the event that the NYSE, AMEX or NASDAQ/NMS, as the case may
be, adopts a rule or is governed by an order, decree, ruling or regulation of
the Securities and Exchange Commission which provides in whole or in part that
companies having common stock with differential voting rights listed on the NYSE
or the Amex or authorized for inclusion on the NASDAQ/NMS may continue to be so
listed or included.
C. The restrictions contained in this Article XII shall not apply to
(1) any underwriter or member of an underwriting or selling group involving a
public sale or resale of securities of the Corporation or a subsidiary thereof;
provided, however, that upon completion of the sale or resale of such
securities, no such underwriter or member of such selling group is a beneficial
owner of more than 4.9% of any class of equity security of the Corporation, (2)
any revocable proxy granted pursuant to a proxy solicitation in compliance with
section 14 of the Act by a stockholder of the Corporation or (3) any employee
benefit plans of the Corporation. In addition, the Continuing Directors of the
Corporation, the officers and employees of the Corporation and its subsidiaries,
the directors of subsidiaries of the Corporation, the employee benefit plans of
the Corporation and its subsidiaries, entities organized or established by the
Corporation or any subsidiary thereof pursuant to the terms of such plans and
trustees and fiduciaries with respect to such plans acting in such capacity
shall not be deemed to be a group with respect to their beneficial ownership of
voting stock of the Corporation solely by virtue of their being directors,
officers or employees of the Corporation or a subsidiary thereof or by virtue of
the Continuing Directors of the Corporation, the officers and employees of the
Corporation and its subsidiaries and the directors of subsidiaries of the
Corporation being fiduciaries or beneficiaries of an employee benefit plan of
the Corporation or a subsidiary of the Corporation. Notwithstanding the
foregoing, no director, officer or employee of the Corporation or any of its
subsidiaries or group of any of them shall be exempt from the provisions of this
Article XII should any such person or group become a beneficial owner of more
than 20% of any class of equity security of the Corporation.
D. A majority of the Continuing Directors, as defined in Article XIII,
shall have the power to construe and apply the provisions of paragraphs B, C and
D of this Article XII and to make all determinations necessary or desirable to
implement such provisions, including but not limited to matters with respect to
(1) the number of shares beneficially owned by any person, (2) whether a person
has an agreement, arrangement or understanding with another as to the matters
referred to in the definition of beneficial ownership, (3) the application of
any other definition or operative provision of this Article XII to the given
facts or (4) any other matter relating to the applicability or effect of
paragraphs B, C and D of this Article XII. Any constructions, applications, or
determinations made by the Continuing Directors pursuant to paragraphs B, C and
D of this Article XII in good faith and on the basis of such information and
assistance as was then reasonably available for such purpose shall be conclusive
and binding upon the Corporation and its stockholders.
E. All certificates evidencing ownership of Common Stock or ownership
of Warrants of the Corporation shall bear a conspicuous legend in compliance
with the General Corporation Law of Delaware describing the restrictions on
transfers set forth in this Article XII.
F. If any provision of this Article XII or any application of any such
provision is determined to be invalid by any federal or state court having
jurisdiction over the issues, the validity of the remaining provisions shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court.
ARTICLE XIII
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this Article XIII,
and in addition to any other vote required by law, the affirmative vote required
by law, the affirmative vote of the holders of (i) at least 75% of the voting
power of the outstanding shares entitled to vote thereon (and, if any class or
series of shares is entitled to vote thereon separately the affirmative vote of
the holders of at least 75% of the outstanding shares of each such class or
series), and (ii) at least a majority of the outstanding shares entitled to vote
thereon, not including shares deemed beneficially owned by a Related Person (as
hereinafter defined), shall be required in order to authorize any of the
following:
(a) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into a Related person (as hereinafter
defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or pledge, of all or any Substantial
Part (as hereinafter defined) of the assets of the Corporation (including
without limitation any voting securities of a subsidiary) or of a subsidiary, to
a Related Person;
(c) any merger or consolidation of a Related Person with or
into the Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition
of all or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person other than on a pro rata basis
to all holders of capital stock of the Corporation of the same class or classes
held by the Related person, pursuant to a stock split, stock dividend or
distribution or warrants or rights, and other than in connection with the
exercise or conversion of securities exercisable for or convertible into
securities of the Corporation or any of its subsidiaries which securities have
been distributed pro rata to all holders of capital stock of the Corporation;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the
Corporation, or any recapitalization involving the common stock of the
Corporation or any similar transaction (whether or not with or into or otherwise
involving a Related Person) that has the effect directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity or convertible securities of the Corporation or any
subsidiary that are directly or indirectly owned by any Related Person; and
(h) any agreement, contract or other arrangement providing
for any of the transactions described in this Article XIII.
(2) Such affirmative vote shall be required notwithstanding any
other provision of this Certificate, any provision of law, or any agreement with
any regulatory agency or national securities exchange which might otherwise
permit a lesser vote or no vote; provided, however, that in no instance shall
the provisions of this Article XIII require the vote of greater than 85% of the
voting power of the outstanding shares entitled to vote thereon for the approval
of a Business Combination.
(3) The term "Business Combination" as used in this Article XIII
shall mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
Certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved in advance by a two-thirds vote of the Continuing Directors (as
hereinafter defined; provided, however, that such approval shall only be
effective if obtained at a meeting at which a continuing Director Quorum (as
hereinafter defined) is present.
C. For the purposes of this Article XIII the following definitions
apply:
(1) The term "Related Person" shall mean and include (i) any
individual, corporation, partnership or other person or entity which together
with its "affiliates" or "associates" (as those terms are defined in the Act)
"beneficially owns" (as that there is defined in the Act) in the aggregate 10%
or more of the outstanding shares of the common stock of the Corporation; and
(ii) any "affiliate" or "associate" (as those terms are defined in the Act) of
any such individual, Corporation, partnership or other person or entity;
provided, however, that the term "Related Person" shall not include the
Corporation, any subsidiary of the Corporation, any employee benefit plan,
employee stock plan of the Corporation or of any subsidiary of the Corporation,
or any trust established by the Corporation in connection with the foregoing, or
any person or entity organized, appointed, established or holding shares of
capital stock of the Corporation for or pursuant to the terms of any such plan,
nor shall such term encompass shares of capital stock of the Corporation held by
any of the foregoing (whether or not held in a fiduciary capacity or otherwise).
Without limitation, any shares of the common stock of the Corporation which any
Related Person has the right to acquire pursuant to any agreement, or upon
exercise or conversion rights, warrants or options, or otherwise, shall be
deemed "beneficially owned" by such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the
total assets of the entity at issue, as of the end of its most recent fiscal
year ending prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any member of the
board of directors of the Corporation who is unaffiliated with and who is not
the Related Person and was a member of the board prior to the time that the
Related Person became a Related Person, and any successor of a Continuing
Director who is unaffiliated with and who is not the Related Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the board.
(4) The term "Continuing Director Quorum" shall mean two-thirds of
the Continuing Directors capable of exercising the powers conferred on them.
ARTICLE XIV
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the stockholders, when evaluating a
Business Combination (as defined in Article XIII) or a tender or exchange offer,
the board of directors of the Corporation shall, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant; (A) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees and customers, creditors and other
elements of the communities in which the Corporation and its subsidiaries
operate or are located; (B) the business and financial condition and earnings
prospects of the acquiring person or entity, including, but not limited to, debt
service and other existing financial obligations, financial obligations to be
incurred in connection with the acquisition and other likely financial
obligations of the acquiring person or entity and the possible effect of such
conditions upon the Corporation and obligations of the acquiring person or
entity and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (C) the competence, experience,
and integrity of the acquiring person or entity and its or their management.
ARTICLE XV
INDEMNIFICATION
A. Persons. The Corporation shall indemnify, to the extent provided in
-------
paragraphs B, D or F:
(1) any person who is or was a director, officer, employee, or
agent of the Corporation; and
(2) any person who serves or served at the Corporation's written
request as a director, officer, employee, agent, partner or trustee of another
corporation, partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
-----------------------------
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify him if he satisfies the standard in paragraph C,
for expenses (including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
------------------------------
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject
of the suit or action, and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, including, but not limited
to, the taking of any and all actions in connection with the Corporation's
response to any tender offer or any offer or proposal of another party to engage
in a Business Combination (as defined in Article XIII) not approved by the board
of directors. However, he shall not be indemnified in respect of any claim,
issue or matter as to which he has been adjudged liable to the Corporation
unless (and only to the extent that) the court in which the suit was brought
shall determine, upon application, that despite the adjudication but in view of
all the circumstances, he is fairly and reasonably entitled to indemnity for
such expenses as the court shall deemed proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
------------------------------
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a "nonderivative suit," against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (1)
expenses (including attorneys' fees), (2) amounts paid in settlement, (3)
judgments, and (4) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
-------------------------------
person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject
of the nonderivative suit and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of another
party to engage in a Business Combination (as defined in Article XIII) not
approved by the board of directors and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. The
termination of a nonderivative suit by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent shall not, in itself, create
a presumption that the person failed to satisfy the standard of this paragraph
E(2).
F. Determination That Standard Has Been Met. A determination that the
standard of paragraph C or E has been satisfied may be made by a court. Or,
except as stated in paragraph C(2) (second sentence), the determination may be
made by:
(1) the board of directors by a majority vote of a quorum
consisting of directors of the Corporation who were not parties to the action,
suit or proceeding; or
(2) independent legal counsel (appointed by a majority of the
disinterested directors of the Corporation, whether or not a quorum) in a
written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
---------
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation may, but shall not be obligated
----------------
to, pay in advance any expenses (including attorneys' fees) which may become
subject to indemnification under paragraphs A through G if:
(1) the board of directors authorizes the specific payment; and
(2) the person receiving the payment undertakes in writing to
repay the same if it is ultimately determined that he is not entitled to
Indemnification by the Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance payment of expenses
------------
provided by paragraphs A through H shall not be exclusive of any other rights to
which a person may be entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XV shall
------------
be deemed to be a contract between the Corporation and the persons entitled to
indemnification thereunder, and any repeal or modification of this Article XV
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts. The indemnification and advance payment provided by paragraphs A
through H shall continue as to a person who has ceased to hold a position named
in paragraph A and shall inure to his heirs, executors and administrators.
K. Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who holds or who has held any position named in paragraph
A, against any liability incurred by him in any such position, or arising out of
his status as such, whether or not the Corporation would have power to indemnify
him against such liability under paragraphs A through H.
L. Savings Clause. If this Article XV or any portion hereof shall be
---------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XV that shall
not have been invalidated and to the full extent permitted by applicable law.
ARTICLE XVI
LIMITATIONS ON DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (a) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (B) for acts or omissions that are not
in good faith or that involve intentional misconduct or a knowing violation of
law, (C) under Section 174 of the General Corporation Law of the State of
Delaware, or (D) for any transaction from which the director derived any
improper personal benefit. If the General Corporation law of the State of
Delaware is amended after the date of filing of this Certificate to further
eliminate or limit the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE XVII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of
two-thirds of the board of directors. Notwithstanding any other provision of
this Certificate or the bylaws of the Corporation, and in addition to any
affirmative vote required by law (and notwithstanding the fact that some lesser
percentage may be specified by law), the bylaws shall be adopted, repealed,
altered, amended or rescinded by the stockholders of the Corporation only by the
vote of the holders of not less than 75% of the voting power of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided that notice of
such proposed adoption, repeal, alteration, amendment or rescission is included
in the notice of such meeting), or, as set forth above, by the board of
directors.
ARTICLE XVIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions hereof, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate in
the manner now or hereafter prescribed by law, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing at any time and from time to time, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII and this Article XVIII
may be repealed, altered, amended or rescinded in any respect only if the same
is approved by the affirmative vote of the holders of not less than 75% of the
voting power of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as a single class) cast at a meeting of the stockholders called for that
purpose (provided that notice of such proposed adoption, repeal, alteration,
amendment or rescission is included in the notice of such meeting).
ARTICLE XIX
The name and address of the incorporator is:
Danyel Owens
770 South Post Oak Lane
Suite 435
Houston, Texas 77056
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make and
file this Certificate of Incorporation, hereby declaring and certifying that the
facts herein stated are true, and accordingly have hereunto set my hand this 5th
day of September, 1995.
/s/Danyel Owens
- ----------------
Danyel Owens
<PAGE>
Exhibit 3.2 - Page 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALTHOUSE, INC.
FIRST: That Article I of the Certificate of Incorporation be and it hereby
is amended to read as follows:
RESOLVED, that the Certificate of Incorporation of Althouse, Inc. be
amended by changing the First Article thereof so that, as amended, said Article
shall be and read as follows:
The name of the Corporation is Brakes Express, Inc.
SECOND: That the amendment was duly adopted in accordance with the
provisions of section 242 of the General Corporation Law of the State of
Delaware.
EXECUTED this 4th day of August, 1998.
/s/A.W. Dugan
- --------------
A.W. Dugan, President and Majority Shareholder
/s/Jacque N. York
- -------------------
Jacque N. York, Secretary
<PAGE>
Exhibit 3.3 - Page 2
EXHIBIT 3.3
BYLAWS
OF
BRAKES EXPRESS, INC.
ARTICLE I
PRINCIPAL EXECUTIVE OFFICE
The principal executive office of Brakes Express, Inc. (the
"Corporation") shall be at 3650 N.W. 15th Street, Lauderhill, Florida 33311.
The Corporation may also have offices at such other places within or without the
State of Texas as the board of directors shall from time to time determine.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings. All annual and special meetings of
-------------------
stockholders shall be held at the principal executive office of the Corporation
or at such other place within or without the State of Delaware as the board of
directors may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders of the
---------------
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
SECTION 3. Special Meetings. Special meeting of the stockholders for
-----------------
any purpose or purposes may be called at any time by the board of directors or
by a committee of the board of directors in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
--------------------
conducted in accordance with these Bylaws or as otherwise prescribed by the
board of directorsThe chairman or the chief executive officer of the Corporation
shall preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day
-------------------
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be mailed by the secretary or the officer performing his duties,
not less than ten days nor more than fifty days before the meeting to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books or records of the Corporation as of the record date prescribed in Section
6, with postage thereon prepaid. If a stockholder be present at a meeting, or
in writing waive notice thereof before or after the meeting, notice of the
meeting to such stockholder shall be unnecessary. When any stockholders'
meeting, either annual or special, is adjourned for thirty days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
It shall not be necessary to give any notice of the time and place of any
meeting adjourned for less than thirty days or of the business to be transacted
at such adjourned meeting, other than an announcement at the meeting at which
such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of determining
------------------------
stockholders entitled to notice of or to vote at any meeting of stockholders, or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than sixty days, and in case of a meeting of stockholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the
------------
stock transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. The record, for a period of ten days
before such meeting, shall be kept on file at the principal office of the
Corporation, whether within or outside the State of Texas, and shall be subject
to inspection by any stockholder for any purpose germane to the meeting at any
time during usual business hours. Such record shall also be produced and dept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder for any purpose germane to the meeting during the whole time
of the meeting. The original stock transfer books shall be prima facie evidence
as to who are the stockholders entitled to examine such record or transfer books
or to vote at any meeting of stockholders.
SECTION 8. Quorum. One-third of the outstanding shares of the
------
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than one-third of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder may
-------
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after eleven months from the date of its execution unless otherwise provided in
the proxy.
SECTION 10. Voting. At each election for directors every stockholder
------
entitled to vote at such election shall be entitled to one vote for each share
of stock held. Unless otherwise provided by the Certificate of Incorporation,
by statute, or by these Bylaws, a majority of those votes cast by stockholders
at a lawful meeting shall be sufficient to pass on a transaction or matter,
except in the election of directors, which election shall be determined by a
plurality of the votes of the shares present in person or by proxy at the
meeting and entitled to vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More Persons. When
---------------------------------------------------
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast or such stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in
-------------------------------------
the name of another corporation may be voted by any officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an administrator, executor, guardian or conservator may be voted by him,
either in person or by proxy, without a transfer of such shares into his name.
Shares standing in the name of a trustee may be voted by him, either in person
or by proxy, but no trustee shall be entitled to vote shares held by him without
a transfer of such shares into his name. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority to do so is contained in an appropriate order of the court
or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledge shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of
------------------------
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board may make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment in
advance of the meeting or at the meeting by the chairman of the board or the
president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; at such acts as may be
proper to conduct the election or vote with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors or a
---------------------
committee appointed by the board of directors shall act as nominating committee
for selecting the management nominees for election as directors. Except in the
case of a nominee substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written nominations
to the secretary at least twenty days prior to the date of the annual meeting.
Provided such committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the secretary of the Corporation in accordance with the provisions
of the Corporation's Certificate of Incorporation.
SECTION 15. New Business. Any new business to be taken up at the
-------------
annual meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors
and committees, but in connection with such reports no new business shall be
acted upon at such annual meeting unless stated and filed as provided in the
Corporation's Certificate of Incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
--------------
shall be under the direction of its board of directors. The chairman shall
preside at all meetings of the board of directors.
SECTION 2. Number, Term and Election. The board of directors shall
----------------------------
consist of three members and shall be divided into three classes as nearly equal
in number as possible. The members of each class shall be elected for a term of
three years and until their successors are elected or qualified. The board of
directors shall be classified in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 3. Regular Meetings. A regular meeting of the board of
-----------------
directors shall be held at such time and place as shall be determined by
resolution of the board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of
-----------------
directors may be called by or at the request of the chairman, the chief
executive officer or one-third of the directors. The person calling the special
meetings of the board of directors may fix any place as the place for holding
any special meeting of the board of directors called by such persons.
Members of the board of the directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting shall be
------
given to each director at least two days previous thereto delivered personally
or by telegram or at least seven days previous thereto delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid if mailed or when delivered to the telegraph
company if sent by telegram. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed by
------
Section 2 shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time. Notice of any adjourned meeting shall be given in the same manner as
prescribed by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these Bylaws, the
Certificate of Incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 8. Action Without a Meeting. Any action required or permitted
------------------------
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
SECTION 9. Resignation. Any director may resign at any time by sending
-----------
a written notice of such resignation to the home office of the Corporation
addressed to the chairman. Unless otherwise specified therein such resignation
shall take effect upon receipt thereof by the chairman.
SECTION 10. Vacancies. Any vacancy occurring in the board of directors
---------
shall be filled in accordance with the provisions of the Corporation's
Certificate of Incorporation. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the affirmative vote of
two-thirds of the directors then in office or by election at an annual meeting
or at a special meeting of the stockholders held for that purpose. The term of
such director shall be in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 11. Removal of Directors. Any director or the entire board of
--------------------
directors may be removed only in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 12. Compensation. Directors, as such, may receive compensation
------------
for service on the board of directors. Members of either standing or special
committees may be allowed such compensation as the board of directors may
determine.
SECTION 13. Age Limitation. No person 70 years of age shall be
---------------
eligible for election, reelection, appointment or reappointment to the board of
the Corporation. No director shall serve as such beyond the annual meeting of
the Corporation immediately following the director becoming 70 year of age.
This age limitation does not apply to an advisory director.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, as they may determine to be necessary
or appropriate for the conduct of the business of the Corporation, and may
prescribe the duties, constitution and procedures thereof. Each committee shall
consist of one or more directors of the Corporation appointed by the chairman.
The chairman may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
The chairman shall have power at any time to change the members of, to fill
vacancies in, and to discharge any committee of the board. Any member of any
such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any such committee may be removed
at any time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called for
that purpose.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation shall be a
---------
chairman, a president, one or more vice presidents, a secretary and a treasurer,
each of whom shall be elected by the board of directors. The board of directors
may designate one or more vice presidents as executive vice president or senior
vice president. The board of directors may also elect or authorize the
appointment of such other officers as the business of the Corporation may
require. The officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine. In the absence
of action by the board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of the
-------------------------------
Corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as possible. Each officer shall hold
office until his successor shall have been duly elected and qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Election or appointment of an officer, employee or agent
shall not of itself create contract rights. The board of directors may
authorize the Corporation to enter into an employment contract with any officer
in accordance with state law; but no such contract shall impair the right of the
board of directors to remove any officer at any time in accordance with Section
3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds
-------
of the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be
------------
fixed from time to time by the board of directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
SECTION 6. Age Limitation. No person 70 years of age shall be eligible
--------------
for election, reelection, appointment or reappointment as an officer of the
Corporation. No officer shall serve beyond the annual meeting of the
Corporation immediately following the officer becoming 70 years of age.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. To the extent permitted by applicable law, and
---------
except as otherwise prescribed by the Corporation's Certificate of Incorporation
or these Bylaws with respect to certificates for shares, the board of directors
or the executive committee may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers, employees or
agents of the Corporation in such manner, including in facsimile form, as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the board of directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the Corporation
-------------------------
shall be represented by certificates signed by the chairman of the board of
directors or the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
If any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before the certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates representing
---------------------------
shares issued by the Corporation shall set forth upon the face or back that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined, and the authority of the board
of directors to fix and determine the relative rights and preferences of
subsequent series.
Each certificate representing shares shall state upon the face thereof:
That the Corporation is organized under the laws of the State of Delaware; the
name of the person to whom issued; the number and class of shares the
designation of the series, if any, which such certificate represents; the par
value of each share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the form of the
certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for any
------------------
share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the
------------------------------
issuance of shares shall be paid in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of
------------------
the Corporation shall be made only on its stock transfer books. Authority for
such transfer shall be given only to the holder of record thereof or by his
legal representative, who shall furnish proper evidence of such authority, or by
his attorney thereunto authorized by power of attorney duly executed and filed
with the Corporation. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the last day of December of
each year. The Corporation shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the board of directors.
ARTICLE IX
DIVIDENDS
Dividends upon the stock of the Corporation, subject to the provisions of
the Certificate of Incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property or in the Corporation's own stock.
ARTICLE X
CORPORATION SEAL
The corporate seal of the Corporation shall be in such form as the board of
directors shall prescribe.
ARTICLE XI
AMENDMENTS
In accordance with the Corporation's Certificate of Incorporation, these
Bylaws may be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 75% of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, the board of directors
may repeal, alter, amend or rescind these Bylaws by vote of two-thirds of the
board of directors at a legal meeting held in accordance with the provisions of
these Bylaws.
<PAGE>
Exhibit 4.1 - Page 2
EXHIBIT 4.1
FORM OF COMMON STOCK CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR SOLD
UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION
FROM REGISTRATION.
Number ____ __________ Shares
BRAKES EXPRESS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
<PAGE>
This Certifies that
SPECIMEN
is the owner of
<PAGE>
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
Brakes Express, Inc. transferable on the books of the Company by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
Witness the manual signatures of the Company's duly authorized officers.
Dated: ________________
__________________, Secretary _________________, President
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
Exhibit 10.13 - Page 6
EXHIBIT 10.13
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of August 11, 1998, between Brakes Express, Inc., a
Delaware corporation (the "Company"), and Eli Bartov ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service to
the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies, regardless of any future change in the Certificate
of Incorporation, By-Laws, composition of the Board of Directors, or structure
of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, including to its subsidiaries or
affiliates and intending to be legally bound hereby, the parties hereto agree as
follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out of)
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to
the full extent permitted by law (the determination of which shall be made by
the Reviewing Party referred to below) as soon as practicable but in any event
no later than thirty days after written demand is presented to the Company,
against any and all expenses (including attorneys' fees and all other costs,
expenses, and obligations paid or incurred in connection with investigating,
preparing for and defending or participating in the defense of (including on
appeal) any Claim relating to any Indemnifiable Event) (collectively
"Expenses"), judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such judgments, fines, penalties or amounts
paid in settlement) of such Claim and, if so requested by Indemnitee, the
Company shall advance (within two business days of such request) any and all
such Expenses to Indemnitee; provided, however, that (i) the foregoing
obligation of the Company shall not apply to a Claim that was commenced by the
Indemnitee without the prior approval of the Board of Directors of the Company
unless the Claim was commenced after a Change in Control (as defined in Section
5 herein); (ii) the foregoing obligation of the Company shall be subject to the
condition that an appropriate person or body (the "Reviewing Party") shall not
have determined (in a written opinion in any case in which the special,
independent counsel referred to in Section 4 hereof is involved) that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law;
and (iii) if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be indemnified for such Expenses under
applicable law, the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid (unless Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, in which event Indemnitee shall not be required to so
reimburse the Company until a final judicial determination requiring such
reimbursement is made with respect thereto as to which all rights of appeal
therefrom have been exhausted or lapsed) and the Company shall not be obligated
to indemnify or advance any additional amounts to Indemnitee under this
Agreement (unless there has been a determination by a court of competent
jurisdiction that the Indemnitee would be permitted to be so indemnified or
entitled to such expense advances under applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter
defined), the Reviewing Party shall be (1) quorum of the Board of Directors
consisting of directors who are not parties to the action, suit or proceeding
acting by majority vote, or, (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, independent legal
counsel by the use of a written opinion or (3) the stockholders. If there has
been a Change in Control of the Company, the Reviewing Party shall be the
special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing
thirty-day period or received expense advances or if the Reviewing Party
determines that Indemnitee would not be permitted to be indemnified or be
entitled to receive expense advances within two days of the request therefor in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation seeking from the court a finding that Indemnitee is entitled
to indemnification and expense advances or enforcement of Indemnitee's
entitlement to indemnification and expense advances or challenging any
determination by the Reviewing Party or any aspect thereof that Indemnitee is
not entitled to be indemnified or receive expense advances and the burden of
proving that indemnification or advancement of expenses is not appropriate shall
be on the Company; any determination by the Reviewing Party in favor of
Indemnitee shall be conclusive and binding on the Company, unless facts supplied
by Indemnitee which form the basis for the determination are subsequently
determined to have been materially incorrect at the time supplied. Indemnitee
agrees to bring any such litigation in any court in the States of Delaware
having subject matter jurisdiction thereof and in which venue is proper, and the
Company hereby consents to service of process and to appear in any such
proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from special, independent counsel selected by Indemnitee who a
majority of the disinterested Directors approves (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorney's
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto except for willful misconduct or
gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company of such surviving entity outstanding immediately after
such merger or consolidation, or if the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim asserted
or action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
By-laws now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance payment of
Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of any Claim but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in the defense of any
Claim relating in whole or in part to any Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that Indemnitee is not
entitled to indemnification or expense advance or that indemnification or
expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance presently
in force and effect, providing, in all respects, coverage at least comparable to
that presently provided; provided, however, if, in the business judgment of the
then Board, either (a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (b) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance, then and in that event the Company shall not be required to
maintain such insurance but shall and hereby agrees to the full extent permitted
by law to hold harmless and indemnify Indemnitee to the fullest extent of the
coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in
any applicable law, statute, or rule which expands the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
change shall be within the purview of Indemnitee's rights, and the Company's
obligations, under this Agreement. In the event of any changes in any
applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company's
Certificate of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested directors, laws and regulations in effect now or
in the future, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not
be paid to Indemnitee because such indemnification is not permitted by law, then
in respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the full
extent permitted by law, to the amount of expenses, judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee otherwise
than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be entitled
to participate therein at its own expense, and, except as otherwise provided
hereinbelow, to the extent that it may wish, the Company shall be entitled to
assume the defense thereof. After notice from the Company to Indemnitee of its
election to assume the defense of any Claim, the Company shall not be obligated
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, travel, and lodging expenses arising out of
Indemnitee's participation in such Claim. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Claim, but the fees and expenses of such
counsel incurred after notice from the Company to Indemnitee of its assumption
of the defense thereof shall be at the expense of Indemnitee unless (i)
otherwise authorized by the Company, (ii) Indemnitee shall have reasonably
concluded, and so notified the Company, that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of such Claim, in which cases the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Claim brought by or on behalf of the
Company or its stockholders or as to which Indemnitee shall have made the
conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, but excluding any conflicts-of-law rule or principle which might
refer such governance, construction or enforcement to the laws of another state
or country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov
--------------
Eli Bartov, President
INDEMNITEE
/s/Eli Bartov
- --------------
Eli Bartov
<PAGE>
Exhibit 10.14 - Page 6
EXHIBIT 10.14
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of December 3, 1998, between Brakes Express, Inc.,
a Delaware corporation (the "Company"), and Steven M. Rothman ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service to
the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies, regardless of any future change in the Certificate
of Incorporation, By-Laws, composition of the Board of Directors, or structure
of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, including to its subsidiaries or
affiliates and intending to be legally bound hereby, the parties hereto agree as
follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out of)
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to
the full extent permitted by law (the determination of which shall be made by
the Reviewing Party referred to below) as soon as practicable but in any event
no later than thirty days after written demand is presented to the Company,
against any and all expenses (including attorneys' fees and all other costs,
expenses, and obligations paid or incurred in connection with investigating,
preparing for and defending or participating in the defense of (including on
appeal) any Claim relating to any Indemnifiable Event) (collectively
"Expenses"), judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such judgments, fines, penalties or amounts
paid in settlement) of such Claim and, if so requested by Indemnitee, the
Company shall advance (within two business days of such request) any and all
such Expenses to Indemnitee; provided, however, that (i) the foregoing
obligation of the Company shall not apply to a Claim that was commenced by the
Indemnitee without the prior approval of the Board of Directors of the Company
unless the Claim was commenced after a Change in Control (as defined in Section
5 herein); (ii) the foregoing obligation of the Company shall be subject to the
condition that an appropriate person or body (the "Reviewing Party") shall not
have determined (in a written opinion in any case in which the special,
independent counsel referred to in Section 4 hereof is involved) that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law;
and (iii) if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be indemnified for such Expenses under
applicable law, the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid (unless Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, in which event Indemnitee shall not be required to so
reimburse the Company until a final judicial determination requiring such
reimbursement is made with respect thereto as to which all rights of appeal
therefrom have been exhausted or lapsed) and the Company shall not be obligated
to indemnify or advance any additional amounts to Indemnitee under this
Agreement (unless there has been a determination by a court of competent
jurisdiction that the Indemnitee would be permitted to be so indemnified or
entitled to such expense advances under applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter
defined), the Reviewing Party shall be (1) quorum of the Board of Directors
consisting of directors who are not parties to the action, suit or proceeding
acting by majority vote, or, (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, independent legal
counsel by the use of a written opinion or (3) the stockholders. If there has
been a Change in Control of the Company, the Reviewing Party shall be the
special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing
thirty-day period or received expense advances or if the Reviewing Party
determines that Indemnitee would not be permitted to be indemnified or be
entitled to receive expense advances within two days of the request therefor in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation seeking from the court a finding that Indemnitee is entitled
to indemnification and expense advances or enforcement of Indemnitee's
entitlement to indemnification and expense advances or challenging any
determination by the Reviewing Party or any aspect thereof that Indemnitee is
not entitled to be indemnified or receive expense advances and the burden of
proving that indemnification or advancement of expenses is not appropriate shall
be on the Company; any determination by the Reviewing Party in favor of
Indemnitee shall be conclusive and binding on the Company, unless facts supplied
by Indemnitee which form the basis for the determination are subsequently
determined to have been materially incorrect at the time supplied. Indemnitee
agrees to bring any such litigation in any court in the States of Delaware
having subject matter jurisdiction thereof and in which venue is proper, and the
Company hereby consents to service of process and to appear in any such
proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from special, independent counsel selected by Indemnitee who a
majority of the disinterested Directors approves (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorney's
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto except for willful misconduct or
gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company of such surviving entity outstanding immediately after
such merger or consolidation, or if the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim asserted
or action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
By-laws now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance payment of
Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of any Claim but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in the defense of any
Claim relating in whole or in part to any Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that Indemnitee is not
entitled to indemnification or expense advance or that indemnification or
expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance presently
in force and effect, providing, in all respects, coverage at least comparable to
that presently provided; provided, however, if, in the business judgment of the
then Board, either (a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (b) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance, then and in that event the Company shall not be required to
maintain such insurance but shall and hereby agrees to the full extent permitted
by law to hold harmless and indemnify Indemnitee to the fullest extent of the
coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in
any applicable law, statute, or rule which expands the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
change shall be within the purview of Indemnitee's rights, and the Company's
obligations, under this Agreement. In the event of any changes in any
applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company's
Certificate of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested directors, laws and regulations in effect now or
in the future, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not
be paid to Indemnitee because such indemnification is not permitted by law, then
in respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the full
extent permitted by law, to the amount of expenses, judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee otherwise
than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be entitled
to participate therein at its own expense, and, except as otherwise provided
hereinbelow, to the extent that it may wish, the Company shall be entitled to
assume the defense thereof. After notice from the Company to Indemnitee of its
election to assume the defense of any Claim, the Company shall not be obligated
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, travel, and lodging expenses arising out of
Indemnitee's participation in such Claim. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Claim, but the fees and expenses of such
counsel incurred after notice from the Company to Indemnitee of its assumption
of the defense thereof shall be at the expense of Indemnitee unless (i)
otherwise authorized by the Company, (ii) Indemnitee shall have reasonably
concluded, and so notified the Company, that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of such Claim, in which cases the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Claim brought by or on behalf of the
Company or its stockholders or as to which Indemnitee shall have made the
conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, but excluding any conflicts-of-law rule or principle which might
refer such governance, construction or enforcement to the laws of another state
or country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov
--------------
Eli Bartov, President
INDEMNITEE
/s/Steven M. Rothman
- ----------------------
Steven M. Rothman
<PAGE>
Exhibit 10.15- Page 6
EXHIBIT 10.15
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of August 11, 1998, between Brakes Express, Inc., a
Delaware corporation (the "Company"), and Irwin Taublib ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service to
the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies, regardless of any future change in the Certificate
of Incorporation, By-Laws, composition of the Board of Directors, or structure
of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, including to its subsidiaries or
affiliates and intending to be legally bound hereby, the parties hereto agree as
follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out of)
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to
the full extent permitted by law (the determination of which shall be made by
the Reviewing Party referred to below) as soon as practicable but in any event
no later than thirty days after written demand is presented to the Company,
against any and all expenses (including attorneys' fees and all other costs,
expenses, and obligations paid or incurred in connection with investigating,
preparing for and defending or participating in the defense of (including on
appeal) any Claim relating to any Indemnifiable Event) (collectively
"Expenses"), judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such judgments, fines, penalties or amounts
paid in settlement) of such Claim and, if so requested by Indemnitee, the
Company shall advance (within two business days of such request) any and all
such Expenses to Indemnitee; provided, however, that (i) the foregoing
obligation of the Company shall not apply to a Claim that was commenced by the
Indemnitee without the prior approval of the Board of Directors of the Company
unless the Claim was commenced after a Change in Control (as defined in Section
5 herein); (ii) the foregoing obligation of the Company shall be subject to the
condition that an appropriate person or body (the "Reviewing Party") shall not
have determined (in a written opinion in any case in which the special,
independent counsel referred to in Section 4 hereof is involved) that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law;
and (iii) if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be indemnified for such Expenses under
applicable law, the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid (unless Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, in which event Indemnitee shall not be required to so
reimburse the Company until a final judicial determination requiring such
reimbursement is made with respect thereto as to which all rights of appeal
therefrom have been exhausted or lapsed) and the Company shall not be obligated
to indemnify or advance any additional amounts to Indemnitee under this
Agreement (unless there has been a determination by a court of competent
jurisdiction that the Indemnitee would be permitted to be so indemnified or
entitled to such expense advances under applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter
defined), the Reviewing Party shall be (1) quorum of the Board of Directors
consisting of directors who are not parties to the action, suit or proceeding
acting by majority vote, or, (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, independent legal
counsel by the use of a written opinion or (3) the stockholders. If there has
been a Change in Control of the Company, the Reviewing Party shall be the
special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing
thirty-day period or received expense advances or if the Reviewing Party
determines that Indemnitee would not be permitted to be indemnified or be
entitled to receive expense advances within two days of the request therefor in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation seeking from the court a finding that Indemnitee is entitled
to indemnification and expense advances or enforcement of Indemnitee's
entitlement to indemnification and expense advances or challenging any
determination by the Reviewing Party or any aspect thereof that Indemnitee is
not entitled to be indemnified or receive expense advances and the burden of
proving that indemnification or advancement of expenses is not appropriate shall
be on the Company; any determination by the Reviewing Party in favor of
Indemnitee shall be conclusive and binding on the Company, unless facts supplied
by Indemnitee which form the basis for the determination are subsequently
determined to have been materially incorrect at the time supplied. Indemnitee
agrees to bring any such litigation in any court in the States of Delaware
having subject matter jurisdiction thereof and in which venue is proper, and the
Company hereby consents to service of process and to appear in any such
proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from special, independent counsel selected by Indemnitee who a
majority of the disinterested Directors approves (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorney's
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto except for willful misconduct or
gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company of such surviving entity outstanding immediately after
such merger or consolidation, or if the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim asserted
or action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
By-laws now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance payment of
Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of any Claim but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in the defense of any
Claim relating in whole or in part to any Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that Indemnitee is not
entitled to indemnification or expense advance or that indemnification or
expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance presently
in force and effect, providing, in all respects, coverage at least comparable to
that presently provided; provided, however, if, in the business judgment of the
then Board, either (a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (b) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance, then and in that event the Company shall not be required to
maintain such insurance but shall and hereby agrees to the full extent permitted
by law to hold harmless and indemnify Indemnitee to the fullest extent of the
coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in
any applicable law, statute, or rule which expands the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
change shall be within the purview of Indemnitee's rights, and the Company's
obligations, under this Agreement. In the event of any changes in any
applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company's
Certificate of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested directors, laws and regulations in effect now or
in the future, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not
be paid to Indemnitee because such indemnification is not permitted by law, then
in respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the full
extent permitted by law, to the amount of expenses, judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee otherwise
than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be entitled
to participate therein at its own expense, and, except as otherwise provided
hereinbelow, to the extent that it may wish, the Company shall be entitled to
assume the defense thereof. After notice from the Company to Indemnitee of its
election to assume the defense of any Claim, the Company shall not be obligated
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, travel, and lodging expenses arising out of
Indemnitee's participation in such Claim. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Claim, but the fees and expenses of such
counsel incurred after notice from the Company to Indemnitee of its assumption
of the defense thereof shall be at the expense of Indemnitee unless (i)
otherwise authorized by the Company, (ii) Indemnitee shall have reasonably
concluded, and so notified the Company, that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of such Claim, in which cases the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Claim brought by or on behalf of the
Company or its stockholders or as to which Indemnitee shall have made the
conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, but excluding any conflicts-of-law rule or principle which might
refer such governance, construction or enforcement to the laws of another state
or country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov
--------------
Eli Bartov, President
INDEMNITEE
/s/Irwin Taublib
- -----------------
Irwin Taublib
<PAGE>
Exhibit 10.16- Page 6
EXHIBIT 10.16
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of October 12, 1998, between Brakes Express, Inc.,
a Delaware corporation (the "Company"), and Gary Caplan ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service to
the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies, regardless of any future change in the Certificate
of Incorporation, By-Laws, composition of the Board of Directors, or structure
of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, including to its subsidiaries or
affiliates and intending to be legally bound hereby, the parties hereto agree as
follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out of)
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to
the full extent permitted by law (the determination of which shall be made by
the Reviewing Party referred to below) as soon as practicable but in any event
no later than thirty days after written demand is presented to the Company,
against any and all expenses (including attorneys' fees and all other costs,
expenses, and obligations paid or incurred in connection with investigating,
preparing for and defending or participating in the defense of (including on
appeal) any Claim relating to any Indemnifiable Event) (collectively
"Expenses"), judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such judgments, fines, penalties or amounts
paid in settlement) of such Claim and, if so requested by Indemnitee, the
Company shall advance (within two business days of such request) any and all
such Expenses to Indemnitee; provided, however, that (i) the foregoing
obligation of the Company shall not apply to a Claim that was commenced by the
Indemnitee without the prior approval of the Board of Directors of the Company
unless the Claim was commenced after a Change in Control (as defined in Section
5 herein); (ii) the foregoing obligation of the Company shall be subject to the
condition that an appropriate person or body (the "Reviewing Party") shall not
have determined (in a written opinion in any case in which the special,
independent counsel referred to in Section 4 hereof is involved) that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law;
and (iii) if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be indemnified for such Expenses under
applicable law, the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid (unless Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, in which event Indemnitee shall not be required to so
reimburse the Company until a final judicial determination requiring such
reimbursement is made with respect thereto as to which all rights of appeal
therefrom have been exhausted or lapsed) and the Company shall not be obligated
to indemnify or advance any additional amounts to Indemnitee under this
Agreement (unless there has been a determination by a court of competent
jurisdiction that the Indemnitee would be permitted to be so indemnified or
entitled to such expense advances under applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter
defined), the Reviewing Party shall be (1) quorum of the Board of Directors
consisting of directors who are not parties to the action, suit or proceeding
acting by majority vote, or, (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, independent legal
counsel by the use of a written opinion or (3) the stockholders. If there has
been a Change in Control of the Company, the Reviewing Party shall be the
special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing
thirty-day period or received expense advances or if the Reviewing Party
determines that Indemnitee would not be permitted to be indemnified or be
entitled to receive expense advances within two days of the request therefor in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation seeking from the court a finding that Indemnitee is entitled
to indemnification and expense advances or enforcement of Indemnitee's
entitlement to indemnification and expense advances or challenging any
determination by the Reviewing Party or any aspect thereof that Indemnitee is
not entitled to be indemnified or receive expense advances and the burden of
proving that indemnification or advancement of expenses is not appropriate shall
be on the Company; any determination by the Reviewing Party in favor of
Indemnitee shall be conclusive and binding on the Company, unless facts supplied
by Indemnitee which form the basis for the determination are subsequently
determined to have been materially incorrect at the time supplied. Indemnitee
agrees to bring any such litigation in any court in the States of Delaware
having subject matter jurisdiction thereof and in which venue is proper, and the
Company hereby consents to service of process and to appear in any such
proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from special, independent counsel selected by Indemnitee who a
majority of the disinterested Directors approves (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorney's
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto except for willful misconduct or
gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company of such surviving entity outstanding immediately after
such merger or consolidation, or if the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim asserted
or action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
By-laws now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance payment of
Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of any Claim but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in the defense of any
Claim relating in whole or in part to any Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that Indemnitee is not
entitled to indemnification or expense advance or that indemnification or
expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance presently
in force and effect, providing, in all respects, coverage at least comparable to
that presently provided; provided, however, if, in the business judgment of the
then Board, either (a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (b) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance, then and in that event the Company shall not be required to
maintain such insurance but shall and hereby agrees to the full extent permitted
by law to hold harmless and indemnify Indemnitee to the fullest extent of the
coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in
any applicable law, statute, or rule which expands the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
change shall be within the purview of Indemnitee's rights, and the Company's
obligations, under this Agreement. In the event of any changes in any
applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company's
Certificate of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested directors, laws and regulations in effect now or
in the future, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not
be paid to Indemnitee because such indemnification is not permitted by law, then
in respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the full
extent permitted by law, to the amount of expenses, judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee otherwise
than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be entitled
to participate therein at its own expense, and, except as otherwise provided
hereinbelow, to the extent that it may wish, the Company shall be entitled to
assume the defense thereof. After notice from the Company to Indemnitee of its
election to assume the defense of any Claim, the Company shall not be obligated
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, travel, and lodging expenses arising out of
Indemnitee's participation in such Claim. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Claim, but the fees and expenses of such
counsel incurred after notice from the Company to Indemnitee of its assumption
of the defense thereof shall be at the expense of Indemnitee unless (i)
otherwise authorized by the Company, (ii) Indemnitee shall have reasonably
concluded, and so notified the Company, that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of such Claim, in which cases the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Claim brought by or on behalf of the
Company or its stockholders or as to which Indemnitee shall have made the
conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, but excluding any conflicts-of-law rule or principle which might
refer such governance, construction or enforcement to the laws of another state
or country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov
--------------
Eli Bartov, President
INDEMNITEE
/s/Gary Caplan
- ---------------
Gary Caplan
<PAGE>
Exhibit 10.17- Page 6
EXHIBIT 10.17
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of August 11, 1998, between Brakes Express, Inc., a
Delaware corporation (the "Company"), and Bernard Shinder ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service to
the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies, regardless of any future change in the Certificate
of Incorporation, By-Laws, composition of the Board of Directors, or structure
of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, including to its subsidiaries or
affiliates and intending to be legally bound hereby, the parties hereto agree as
follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out of)
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to
the full extent permitted by law (the determination of which shall be made by
the Reviewing Party referred to below) as soon as practicable but in any event
no later than thirty days after written demand is presented to the Company,
against any and all expenses (including attorneys' fees and all other costs,
expenses, and obligations paid or incurred in connection with investigating,
preparing for and defending or participating in the defense of (including on
appeal) any Claim relating to any Indemnifiable Event) (collectively
"Expenses"), judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such judgments, fines, penalties or amounts
paid in settlement) of such Claim and, if so requested by Indemnitee, the
Company shall advance (within two business days of such request) any and all
such Expenses to Indemnitee; provided, however, that (i) the foregoing
obligation of the Company shall not apply to a Claim that was commenced by the
Indemnitee without the prior approval of the Board of Directors of the Company
unless the Claim was commenced after a Change in Control (as defined in Section
5 herein); (ii) the foregoing obligation of the Company shall be subject to the
condition that an appropriate person or body (the "Reviewing Party") shall not
have determined (in a written opinion in any case in which the special,
independent counsel referred to in Section 4 hereof is involved) that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law;
and (iii) if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be indemnified for such Expenses under
applicable law, the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid (unless Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, in which event Indemnitee shall not be required to so
reimburse the Company until a final judicial determination requiring such
reimbursement is made with respect thereto as to which all rights of appeal
therefrom have been exhausted or lapsed) and the Company shall not be obligated
to indemnify or advance any additional amounts to Indemnitee under this
Agreement (unless there has been a determination by a court of competent
jurisdiction that the Indemnitee would be permitted to be so indemnified or
entitled to such expense advances under applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter
defined), the Reviewing Party shall be (1) quorum of the Board of Directors
consisting of directors who are not parties to the action, suit or proceeding
acting by majority vote, or, (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, independent legal
counsel by the use of a written opinion or (3) the stockholders. If there has
been a Change in Control of the Company, the Reviewing Party shall be the
special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing
thirty-day period or received expense advances or if the Reviewing Party
determines that Indemnitee would not be permitted to be indemnified or be
entitled to receive expense advances within two days of the request therefor in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation seeking from the court a finding that Indemnitee is entitled
to indemnification and expense advances or enforcement of Indemnitee's
entitlement to indemnification and expense advances or challenging any
determination by the Reviewing Party or any aspect thereof that Indemnitee is
not entitled to be indemnified or receive expense advances and the burden of
proving that indemnification or advancement of expenses is not appropriate shall
be on the Company; any determination by the Reviewing Party in favor of
Indemnitee shall be conclusive and binding on the Company, unless facts supplied
by Indemnitee which form the basis for the determination are subsequently
determined to have been materially incorrect at the time supplied. Indemnitee
agrees to bring any such litigation in any court in the States of Delaware
having subject matter jurisdiction thereof and in which venue is proper, and the
Company hereby consents to service of process and to appear in any such
proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from special, independent counsel selected by Indemnitee who a
majority of the disinterested Directors approves (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorney's
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto except for willful misconduct or
gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company of such surviving entity outstanding immediately after
such merger or consolidation, or if the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim asserted
or action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
By-laws now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance payment of
Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of any Claim but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in the defense of any
Claim relating in whole or in part to any Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that Indemnitee is not
entitled to indemnification or expense advance or that indemnification or
expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance presently
in force and effect, providing, in all respects, coverage at least comparable to
that presently provided; provided, however, if, in the business judgment of the
then Board, either (a) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (b) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance, then and in that event the Company shall not be required to
maintain such insurance but shall and hereby agrees to the full extent permitted
by law to hold harmless and indemnify Indemnitee to the fullest extent of the
coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in
any applicable law, statute, or rule which expands the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
change shall be within the purview of Indemnitee's rights, and the Company's
obligations, under this Agreement. In the event of any changes in any
applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company's
Certificate of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested directors, laws and regulations in effect now or
in the future, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not
be paid to Indemnitee because such indemnification is not permitted by law, then
in respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the full
extent permitted by law, to the amount of expenses, judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee otherwise
than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be entitled
to participate therein at its own expense, and, except as otherwise provided
hereinbelow, to the extent that it may wish, the Company shall be entitled to
assume the defense thereof. After notice from the Company to Indemnitee of its
election to assume the defense of any Claim, the Company shall not be obligated
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, travel, and lodging expenses arising out of
Indemnitee's participation in such Claim. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Claim, but the fees and expenses of such
counsel incurred after notice from the Company to Indemnitee of its assumption
of the defense thereof shall be at the expense of Indemnitee unless (i)
otherwise authorized by the Company, (ii) Indemnitee shall have reasonably
concluded, and so notified the Company, that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of such Claim, in which cases the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Claim brought by or on behalf of the
Company or its stockholders or as to which Indemnitee shall have made the
conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-law or
otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, but excluding any conflicts-of-law rule or principle which might
refer such governance, construction or enforcement to the laws of another state
or country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BRAKES EXPRESS, INC.
By:/s/Eli Bartov_________
--------------
Eli Bartov, President
INDEMNITEE
/s/Bernard Shinder
- -------------------
Bernard Shinder
<PAGE>
Exhibit 10.18- Page 10
EXHIBIT 10.18
BRAKES EXPRESS, INC.
(formerly Althouse, Inc.)
STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of Brakes Express, Inc. (the "Company") and its stockholders by
providing deferred stock incentives in addition to current compensation to
certain key executives and certain directors of the Company and of its
subsidiaries who contribute significantly to the long-term performance and
growth of the Company and such subsidiaries. As used in this Plan, subsidiary
includes parent of the Company and any subsidiary of the Company within the
meaning of Sections 425(e) and (f) of the Internal Revenue Code of 1986, as
amended ("Code"), respectively.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company (the
"Board of Directors") or a committee of the Board of Directors duly authorized
and given authority by the Board of Directors to administer the Plan (the Board
of Directors or such duly authorized committee hereinafter referred to as the
"Board"), as such is from time to time constituted.
The Board shall have all the powers vested in it by the terms of the Plan, such
powers to include exclusive authority (within the limitation described herein)
to select the employees to be granted Awards under the Plan, to determine the
type, size and terms of the Awards to be made to each employee selected, to
determine the time when Awards will be granted, and to prescribe the form of the
instruments evidencing Awards made under the Plan. The Board shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and
to make any other determinations which it believes necessary or advisable for
the administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Award in the
Manner and to the extent the Board deems desirable to carry it into effect. Any
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number of any officer of the Company to execute and deliver documents
on behalf of the Board. No member of the Board shall be able for anything done
or omitted to be done by him or by any other member of the Board in connection
with the Plan, except for his own willful misconduct or as expressly provided by
statute.
3. PARTICIPATION
Subject to the provisions of the Plan, the Board shall have exclusive power to
select the directors and officers and other key employees of the Company and its
subsidiaries participating in the Plan to be granted Awards under the Plan.
4. AWARDS UNDER THE PLAN
(a) TYPE OF AWARDS. Awards under the Plan may be of three types: (i)
"Non-qualified Stock Options" or "Incentive Stock Options," (ii) "Stock
Appreciation Rights" attached to Stock Options, or (iii) "Restricted Stock."
Stock Options are rights to purchase shares of Common Stock of the Company
having a par value of $.001 per share (the "Common Stock"). Stock Appreciation
Rights are rights to receive, without payment to the Company, cash and/or shares
of Common Stock in lieu of the purchase of shares of Common Stock under the
Stock Option to which the Stock Appreciation Rights are subject to the terms,
conditions and restrictions specified in Paragraph 5. Restricted Stock is a
share of Common Stock which is subject to the repurchase option and the other
terms, conditions and restrictions described in Paragraph 6.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. There may be issued
under the Plan (as Restricted Stock or pursuant to the exercise of Stock Options
or Stock Appreciation Rights) an aggregate of not more than 500,000 shares of
Common Stock, subject to adjustment as provided in Paragraph 7. In addition to
Common Stock actually so issued, there shall be deemed to have been issued
pursuant to the Plan (and therefore no longer available in connection with
Awards) a number of shares equal to the aggregate of the number of shares of
Common Stock under option in respect of which Stock Appreciation Rights granted
pursuant to subparagraph 5(f) shall have been exercised minus the number of
shares of Common Stock, if any, issued upon exercise of such Stock Appreciation
Rights. Common Stock issued pursuant to the Plan may be either authorized but
unissued shares or reacquired shares, or both. If any Common Stock issued as
Restricted Stock shall be repurchased pursuant to the option described in
Paragraph 6 below, or if any Common Stock issued under the Plan shall be
reacquired pursuant to restrictions imposed at the time of issuance, such shares
may again be issued under the Plan.
(c) RIGHTS WITH RESPECT TO COMMON STOCK
(i) An employee to whom an Award of Restricted Stock has been made
shall have, after issuance to him of a certificate for the number of shares of
Common Stock awarded and prior to the expiration of the Restricted Period or the
earlier repurchase of such shares of Common Stock as herein provided, ownership
of such shares of Common Stock, including the right to vote the same and to
receive dividends thereon, subject however, to the options, restrictions and
limitations imposed thereon pursuant to the Plan.
(ii) An employee to whom an Award of Stock Option or Stock
Appreciation Rights is made (and any person succeeding to such an employee's
rights pursuant to the Plan) shall have no rights as a stockholder with respect
to any shares of Common Stock issuable pursuant to any such Stock Option or
Stock Appreciation Rights until the date of the issuance of a stock certificate
to him for such shares. Except as provided in Paragraph 8, no adjustment shall
be made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
(d) EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS: EXPIRATION OF
RESTRICTIONS APPLICABLE TO RESTRICTED STOCK. Options and Stock Appreciation
Rights shall be subject to such terms and conditions upon exercisability as the
Board may determine consistent with the provisions of this Plan. Repurchase and
other restrictions applicable to Restricted Stock shall be such as are
determined in the discretion of the Board consistent with the provisions of the
Plan. The Board may determine to permit any Option granted hereunder to be
exercisable immediately upon the date of grant or any time thereafter. The
Board may determine to permit any Stock Appreciation Right granted hereunder to
be exercisable not less than six months after the initial award of the Option
containing, or the amendment or supplementation of any existing Option Agreement
adding the Stock Appreciation Right; provided, however, that this limitation
shall not apply in the event of death or disability. The Board may determine
that there shall be no restrictions applicable to Restricted Stock awarded under
the Plan.
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Board may grant Stock Options (to which may but need not be attached Stock
Appreciation Rights as specified in subparagraph 5(f). Each Stock Option
(referred to herein as an "Option") granted under the Plan shall be evidenced by
an instrument in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions, including but not limited
to restrictions upon the Option or the shares of Common Stock issuable upon
exercise thereof, as the Board, in its discretion, shall establish):
(a) The Option price shall be determined by the Board at the time the
Option is granted and shag not be less than the par value of such shares of
Common stock.
(b) The Board will determine the number of shares of Common Stock to be
subject to each Option. The number of shares of Common Stock subject to an
outstanding Option will be reduced on a share for share basis to the extent that
shares of Common Stock under such Option are used to calculate the cash and/or
shares of Common Stock received pursuant to exercise of a Stock Appreciation
Right attached to such Option.
(c) The Option shall not be transferable by the optionee otherwise than
will or the laws of descent and distribution, and shall be exercisable during
his lifetime only to him.
(d) The Board will determine the conditions and terms governing the
exercise of granted Options; provided, however that no Option shall be
exercisable:
(i) after the expiration of ten years from the date it is granted
and may be exercised during the period prior to its expiration only at such time
or times as the Board may establish;
(ii) unless payment in United States dollars by cash or check is
made for the shares being acquired thereby in frill at the time of exercise, or
at the option of the holder of such Option, in Common Stock theretofore owned by
such holder (or any combination of cash and Common Stock).
For purposes of determining the amount, if any, of the purchase price
satisfied by payment of Common Stock under clause (ii) above, such Common Stock
shall be valued at its fair market value on the date of exercise. Fair market
value means the fair market value of one share of Common Stock on the date in
question, which is deemed to be the mean between the highest and lowest sales
prices per share of Common Stock on any national stock exchange upon which
Common Stock is listed, or if Common Stock is not listed on any national stock
exchange, the mean between the highest closing bid and lowest closing asked
prices for Common Stock as reported by the National Association of Securities
Dealers NASDAQ System, or if not reported by such system, the mean between the
closing bid and asked prices as quoted by such quotation source as shall be
designated by the Board on that date. If there shall have been no sale on the
date in question, fair market value shall be determined by reference the last
preceding date on which such a sale or sales were so reported. Any Common Stock
delivered in satisfaction of all or a portion of the purchase price shall be
appropriately endorsed for transfer and assigned to the Company. The Board may,
in its discretion and to the extent permitted by the laws of the State of
Delaware determine to permit the holder of an Option to satisfy the purchase
price of the shares as to which an Option is exercised by delivery of the Option
holder's promissory note, such note to be subject to such terms and conditions
as the Board may determine. The Board may, in its discretion and to the extent
permitted by the laws of the State of Delaware, determine to cause the Company
to lend to be holder of an Option, funds on such terms and conditions as the
Board may determine to be appropriate, sufficient for the holder of an Option to
pay the purchase price of the shares as to which an Option is to be exercised.
(e) If any person to whom an Option has been granted shall die holding
an Option which has not been fully exercised, his executors, administrators,
heirs or distributees, as the case may be, may, at any time within one year
after the date of such death (but in no event after the Option has expired under
the provisions of subparagraph 5(d)(i) hereon, exercise the Option with respect
to any shares as to which the decedent could have exercised the Option at the
time of his death.
(f) If the Board, in its discretion, so determines, there may be attached to
the Option a Stock Appreciation Right which shall be subject to such terms and
conditions, not inconsistent with the Plan, as the Board shall impose, including
the following.
(i) A Stock Appreciation Right may be exercised only to the extent
that the option to which it is attached is at the time exercisable. However, if
the option to which the Stock Appreciation Right is attached is exercisable and
if the optionee is at the relevant time an officer or director of the Company
who is required to file reports pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act") ("Covered Participant") the
Stock Appreciation Right may, subject to the approval of the Board, be exercised
under such terms and conditions as may be specified by the Board;
(ii) A Stock Appreciation Right shall entitle the optionee (or any
person entitled to act under the provisions of subparagraph 5(e) hereon to
surrender unexercised the Option to which the Stock Appreciation Right is
attached (or any portion of such Option) to the Company and to receive from the
Company in exchange therefor that number of shares of Common Stock having an
aggregate value equal to (or, in the discretion of the Board, less than) the
excess of the value of one share over the option price per share times the
number of shares subject to the option, or portion thereof, which is so
surrendered. The Company shall be entitled to elect to settle its obligation
arising out of the exercise of a Stock Appreciation Right, by the payment of
cash equal to the aggregate value of the shares it would otherwise be obligated
to deliver or partly by the payment of cash and partly by the delivery of shares
of Common Stock. Any such election shall be made within 15 business days after
the receipt by the Board of written notice of the exercise of the Stock
Appreciation Right. The value of a share of Common Stock for this purpose shall
be the fair market value thereon on the last business day next preceding the
date of the election to exercise the Stock Appreciation Right;
(iii) No fractional shares shall be delivered under this
subparagraph 5(f) but in lieu thereof a cash adjustment shall be made.
(g) The Option agreement evidencing any incentive stock option granted
under this Plan shall provide that if the optionee makes a disposition, within
the meaning of Section 425(c) of the code and the regulations promulgated
thereunder, of any share or shares of Common Stock issued to him pursuant to his
exercise of an Option granted under this Plan within the two-year period
commencing on the day after the date of the granting of such Option or within a
one-year period commencing on the day after the date of transfer of the share or
shares to him pursuant to the exercise of such Option, he shall, within ten days
of such disposition, notify the Company thereof and immediately deliver to the
Company any amount of federal income tax withholding required by law.
6. RESTRICTED STOCK
Each Award of Restricted Stock under the Plan shall be evidenced by an
instrument in such form as the Board shall prescribe form time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions as the Board, in its
discretion, shall establish):
(a) The Board shall determine the number of shares of Common Stock to
be issued to a participant pursuant to the Award.
(b) Shares of Common Stock issued to a participant in accordance with
the Award may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and distribution,
for such period as the Board shall determine, from the date on which the Award
is granted (the "Restricted Period"). The Company will have the option to
repurchase the shares subject to the Award at such price as the Board shall have
fixed, in its sole discretion, when the Award was made, which option will be
exercisable at such times and upon the occurrence of such events as the Board
shall establish when the Award is granted or if, on or prior to the expiration
of the Restricted Period or the earlier lapse of the Option, the participant has
not paid to the Company an amount equal to any Federal, State or local income or
other taxes which the Company determines is required to be withheld in respect
of such shares. Such option shall be exercisable on such terms, in such manner
and during such period as shall be determined by the Board when the Award is
made. Certificates for shares of Common Stock issued pursuant to Restricted
Stock Awards shall bear an appropriate legend referring to the foregoing Option
and other restrictions and to the fact that the shares are partly paid. Any
attempt to dispose of any such shares of Common Stock in contravention of the
foregoing Option and other restrictions shall be null and void and without
effect. If shares of Common Stock issued pursuant to a Restricted Stock Award
shall be repurchased pursuant to the Option described above, the participant, or
in the event of his death, his personal representative, shall forthwith deliver
to the Secretary of the Company the certificates for the shares of Common Stock
awarded to the participant, accompanied by such instruments of transfer, if any,
as may reasonably be required by the Secretary of the Company. If the Option
described above is not exercised by the company during such period as is
specified by the Board when the Award is made, such Option and the restrictions
imposed pursuant to the first sentence of this subparagraph 6(b) shall terminate
and be of no further force and effect.
7. STOCK DIVIDENDS, STOCK SPLITS, REORGANIZATIONS AND CERTAIN OTHER
CORPORATION TRANSACTIONS
(a) EXERCISE OR CORPORATE POWERS. The existence of outstanding awards
of Options, Stock Appreciation Rights or Restricted Stock shall not effect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures preferred or
prior preference stocks ahead of or affecting the Company's shares of Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding whether of a similar character or otherwise.
(b) RECAPITALIZATION OF THE COMPANY. If, while there are Options, Stock
Appreciation Rights or Restricted Stock outstanding, the Company shall effect
any subdivision or consolidation of shares of Common Stock or other capital
readjustment, the payment of a stock dividend, stock split, combination of
shares or recapitalization or other increase or reduction in the number of
shares of Common Stock outstanding, without receiving compensation therefor in
money, services or property, then the number of shares of Common Stock available
under the Plan and the number of Options, Stock Appreciation Rights or
Restricted Stock which may thereafter be exercised shall (i) in the event of an
increase in the number of shares outstanding, be proportionately increased and
the fair market value of the Options, Stock Appreciation Rights or Restricted
Stock awarded as of the date of the award shall be proportionately reduced; and
(ii) in the event of a reduction in the number of shares outstanding, be
proportionately reduced, and the fair market value of the Options, Stock
Appreciation Rights or Restricted Stock awarded as of the date of the Award
shall be proportionately increased.
(c) REORGANIZATION OF THE COMPANY. If the Company is reorganized, or
merged or consolidated or a party to a plan of exchange with another corporation
pursuant to which reorganization, member, consolidation or plan of exchange
stockholders of the Company receive any shares of Common Stock or other
securities, or if the Company shall distribute securities of another corporation
to its stockholders, each Participant shall be entitled to receive in lieu of
the number of unexercised Options, Stock Appreciation Rights at the date of
award, to which such holder would have been entitled pursuant to the terms of
the agreement of merger of consolidation, if immediately prior to such merger or
consolidation such holder had been the holder of record of a number of shares of
Common Stock equal to the number of the unexercised Options or Stock
Appreciation Rights previously awarded to him, and Restricted Stock shall be
treated the same as unrestricted outstanding shares of Common Stock; provided,
that, anything herein contained to the contrary notwithstanding, upon the
dissolution or liquidation of the Company or upon any merger or consolidation of
the Company where it is not the surviving corporation, each Participant shall be
entitled to a benefit as though he had become fully vested in all Options, Stock
Appreciation Rights and Restricted Stock previously awarded to him and then
outstanding under this Plan, and had terminated employment with the Company
immediately prior to or concurrently with such dissolution or liquidation or
merger or consolidation.
(d) ISSUE OF COMMON STOCK BY THE COMPANY. Except as hereinabove
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon any conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number of, or fair market value of, any Options or Stock Appreciation
Rights then outstanding under previous awards but holders of Restricted Stock
shall be treated the same as the holders of outstanding unrestricted shares of
Common Stock
(e) CHANGE IN CONTROL. The Board may, in its sole discretion, provide that
an Option or Stock Appreciation Right shall become fully exercisable or that a
share of Restricted Stock shall be free of any restrictions upon a Change in
Control of the Company (as defined in the next sentence). "Change in Control"
of the Company shall be conclusively deemed to have occurred if (and only if)
any of the following shall have taken place: (i) a change in control is reported
by the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the
Exchange Act; (ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent or more of the combined voting power of
the company's then outstanding securities; or (iii) following the election or
removal of directors, a majority of the Board of Directors consists of
individuals who were not members of the Board of Directors two years before such
election or removal, unless the election of each director who was not a director
at the beginning of such two-year period has been approved in advance by
directors representing at least a majority of the directors then in office who
were directors at the beginning of the two-year period.
8. DESIGNATION OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he may be
entitled in respect of Awards under the Plan in the event of his death, on a
form to be provided by the Board. A participant may change his beneficiary from
time to time in the same manner. If no designated beneficiary is living on the
date on which any amount becomes payable to a participant's beneficiary, such
payment will be made to the participant's executors or administrators, and the
term "beneficiary" as used in the Plan shall include such person or persons.
9. TAXES
(a) The Company may make such provisions as it may deem appropriate for
the withholding of any taxes which it determines is required in connection with
any Options or Stock Appreciation Rights or Restricted Stock granted under this
Plan.
(b) Notwithstanding the terms of subparagraph 9(a), any participant may
pay all or any portion of the taxes required or allowed to be withheld by the
Company if paid to him in connection with the exercise of an Option, Stock
Appreciation Right or vesting of any Award of Restricted Stock by electing to
have the Company withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a fair market value, determined in
accordance with subparagraph 5(d), equal to the amount required to be withheld
or paid. A Participant must take the foregoing election on or before the date
(bat the amount of tax to be withheld is determined ("Tax Date"). Such
elections are irrevocable and subject to disapproval by the Board. Elections by
Covered Participants are subject to the following additional restrictions: (i)
such election may not be made within six months of the grant of the Award,
provided that this limitation shall not apply in the event of death or
disability, and (ii) such election must be made either six months or more prior
to the Tax Date or in a Window Period (as defined herein). Where the Tax Date
in respect of an Award is deferred until after exercise or expiration of
restrictions and the Covered Participant elects share withholding, the full
amount of shares of Common Stock will be issued or transferred to him upon
exercise of the Option or exercise of the Stock Appreciation Right or expiration
of restrictions of the Restricted Stock, as the case may be, but the Covered
Participant shall be unconditionally obligated to tender back to the Company the
number of shares necessary to discharge the Company's withholding obligation or
his estimated tax obligation on the Tax Date. As used herein, Window Period
means the period commencing on the third business day following the Company's
release of a quarterly or annual summary statement of sales and earnings and
ending on the twelfth business day following such release.
10. MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company or any subsidiary.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of a participant's death), including but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner and not such right or interest of any participant in the
Plan shall be subject to any obligation or liability of such participant.
(c) No shares of Common Stock shall be issued hereunder unless counsel
for the Company shall be satisfied that such issuance will be in compliance with
applicable federal and state securities laws.
(d) The expenses of the Plan shall be home by the Company.
(e) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund to make any other segregation of assets
to assure the payment of any Award under the Plan and payment of Awards shall be
subordinate to the claims of the Company's general creditors.
By accepting any Award or other benefit under the Plan, each participant and
each person claiming under or through him shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, any action taken
under the Plan by the Company, the Board or the Board.
11. AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board of
Directors but no amendment which increases the aggregate number of shares of
Common Stock which may be issued pursuant to the Plan shall be effective unless
and until the same is approved by the stockholders of the, Company. No
amendment of the Plan shall adversely affect any right of any participant with
respect to any Award theretofore granted without such participant's written
consent.
12. TERMINATION
This Plan shall terminate upon the earlier of the following dates or events to
occur:
(a) upon the adoption of a resolution of the Board of Directors
terminating the Plan; or
(b) ten years from the date hereof
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan.
13. STOCKHOLDER ADOPTION
The Plan shall be submitted to the stockholders of the Company for their
approval and adoption on or before October 20, 1998. The Plan shall not be
effective and any Award made hereunder shall be void and of no effect if the
Plan is not so approved. The stockholders shall be deemed to have approved the
Plan only if it is approved at a meeting of the stockholders duly held on or
before that date by vote or by written consent in the manner required by the
laws of the State of Delaware.
<PAGE>
S O N F I E L D & S O N F I E L D
A PROFESSIONAL CORPORATION
LEON SONFIELD (1865-1934) ATTORNEYS AT LAW
GEORGE M. SONFIELD (1899-1967)
ROBERT L. SONFIELD (1893-1972) 770 SOUTH POST OAK LANE
____________________ HOUSTON, TEXAS 77056-1913
[email protected]
FRANKLIN D. ROOSEVELT, JR. (1914-1988)
TELECOPIER (713) 877-1547 NEW YORK
____ LOS ANGELES
ROBERT L. SONFIELD, JR. TELEPHONE (713) 877-8333 WASHINGTON, D.C.
MANAGING DIRECTOR
<PAGE>
SONFIELD & SONFIELD
Brakes Express, Inc.
June ____, 1999
June ___, 1999
Board of Directors
Brakes Express, Inc.
3650 N.W. 15th Street
Lauderhill, Florida 33311
Dear Gentlemen:
In our capacity as counsel for Brakes Express, Inc. (the "Company"), we
have participated in the corporate proceedings relative to the authorization and
issuance by the Company of a maximum of 700,000 shares of common stock in
conversion of Series A Convertible Preferred Stock all as set out and described
in the Company's Registration Statement on Form SB-2 (File No. ______) under the
Securities Act of 1933 (the "Registration Statement"). We have also
participated in the preparation and filing of the Registration Statement
including the federal income tax information set out therein under the caption
"Certain Federal Income Tax Considerations" and elsewhere in the Prospectus
constituting a part of the Registration Statement.
Based upon the foregoing and upon our examination of originals (or copies
certified to our satisfaction) of such corporate records of the Company and
other documents as we have deemed necessary as a basis for the opinions
hereinafter expressed, and assuming the accuracy and completeness of all
information supplied us by the Company, having regard for the legal
considerations which we deem relevant, we are of the opinion that:
(1) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware;
(2) The Company has taken all requisite corporate action and all action
required by the laws of the State of Delaware with respect to the authorization,
issuance and sale of common stock to be issued pursuant to the Registration
Statement;
(3) The maximum of 700,000 shares of common stock, when issued and
distributed pursuant to the Registration Statement, will be validly issued,
fully paid and nonassessable;
(4) Based upon the current provisions of Federal income tax laws and
regulations, and on current authoritative interpretations thereof, we believe
the discussion in the Registration Statement under the caption "Certain Federal
Income Tax Considerations" of the Federal income tax laws relevant to the
prospective investors, although necessarily general, considers each material
Federal income tax issue of significance to shareholders and the result which,
more likely than not, would obtain under the laws and regulations in effect as
of the date hereof.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the Registration
Statement.
Yours very truly,
SONFIELD & SONFIELD
