<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 8711 62-1647888
(State of Incorporation) (Primary Standard (IRS Employer
Industrial Classification Identification
Code Number) Number)
-----------------------------
6711 Tice Plaza
Knoxville, Tennessee 37918
(423) 925-4501
(Address and telephone number of
Registrant's principal executive offices)
William A. Tice, President
Tice Technology, Inc.
6711 Tice Plaza
Knoxville, Tennessee 37918
(423) 925-4501
(Name, address and telephone number of agent for service)
Copy to: Lynn H. Wangerin, Esq.
Ogden Newell & Welch
1200 One Riverfront Plaza
Louisville, Kentucky 40202
(502) 582-1601
(502) 581-9564 (facsimile)
-----------------------------
Approximate date of commencement of proposed distribution to public: As soon
as practicable after the registration statement becomes effective.
If any of the 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]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered registered per unit price registration fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares (1) 90,000 $ 3.00 $ 270,000 $ 94
Common Shares (2) 1,841,407 $ 0.02 $ 36,828 $ 11
Common Shares (3) 54,750 $ 1.00 $ 54,750 $ 19
Common Shares (4) 1,000,000 $ 8.00 $8,000,000 $2,759
Common Stock
Purchase Warrants 1,000,000 $ (4) $ (4) $ (4)
Total Fee $2,883
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain individuals who have loaned funds to Tice Engineering and Sales,
Inc., the Issuer's wholly owned subsidiary, are being offered the right to
convert some or all of such debt to Common Shares of the Issuer at the
rate of $3.00 per share.
(2) These securities include 300,000 shares which were issued to Monogenesis
Corporation at a price of $0.01 per share and which will be distributed to
holders of shares of Monogenesis Corporation as a dividend at a rate of
125 shares for each share held. The remaining shares are to be offered for
sale at market price from time to time and are currently held 1,302,937
shares by the former shareholder of Tice Engineering and Sales, Inc. and
238,470 shares by Joseph Walker & Sons, Inc. There is no current offering
price for these shares. The fee calculation is based upon the book value
of Tice Engineering and Sales, Inc., the wholly owned subsidiary of Tice
Technology, Inc., as of June 30, 1996.
(3) These are the Common Shares which will be issued in the event that
employees holding stock options exercise the options. The maximum offering
price is based upon the exercise price of the options.
(4) These are the Common Shares which will be issued in the event the Common
Stock Purchase Warrants are exercised. The maximum offering price is based
upon the exercise price of the warrants.
(5) The warrants were issued to Monogenesis Corporation at a price of
$0.01 each and will be distributed to holders of shares of Monogenesis
Corporation as a dividend at a rate of 400 warrants for each share held.
The warrants are registered in the same registration statement as the
Common Shares underlying the warrants and, therefore, no separate
registration fee is required pursuant to Rule 457(g).
<PAGE>
TICE TECHNOLOGY, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER - PART I, S-1 LOCATION NUMBER
- ------------------------- -------- ------
<S> <C> <C> <C>
1. Forepart of the Registration Same 1
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Same 2, 81
Cover Pages of Prospectus
3. Summary Information, Risk Factors Summary; Risk Factors 2, 7
and Ratio of Earnings to Fixed
Charges
4. Use of Proceeds Use of Proceeds 13
5. Determination of Offering Price Risk Factors - Absence 11
of Trading Market
6. Dilution Not applicable
7. Selling Security Holders Risk Factors - Shares 11, 12, 29
Available for Resale;
Plan of Distribution;
Principal and Selling
Shareholders
8. Plan of Distribution Plan of Distribution 12
9. Description of Securities to be Securities 30
Registered
10. Interests of Named Experts and Not applicable
Counsel
11. Information With Respect to the
Registrant
(a) Description of business Business 16
(b) Description of property Business - Property 22
(c) Legal proceedings Legal Proceedings 26
(d) Market price of and dividends Risk Factors - Absence 11, 30, 34
on the registrant's common of Trading Market;
stock and related stockholder Securities; Dividends
(e) Financial statements Financial Statements 38
(f) Selected financial data Summary - Selected 4
Financial Data
(g) Supplementary financial Not applicable
information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER - PART I, S-1 LOCATION NUMBER
- ------------------------- -------- ------
<S> <C> <C>
(h) Management's discussion and Management's Discussion 23
analysis of financial condition and Analysis of Financial
and results of operations Condition and Results
of Operations
(i) Changes in and disagreements Not applicable
with accountants on accounting
and financial disclosure
(j) Directors and executive officers Management 26
(k) Executive compensation Management - Executive 27
Compensation
(l) Security ownership of certain Principal and Selling 29
beneficial owners and Shareholders
management
(m) Certain relationships and Management - Certain 28
related transactions Transactions
12. Disclosure of Commission Position Liability and 34
on Indemnification for Securities Indemnification of
Act Liabilities Directors and Officers
</TABLE>
<PAGE>
PROSPECTUS
- ----------
TICE TECHNOLOGY, INC.
6711 Tice Plaza
Knoxville, Tennessee 37918
(423) 925-4501
2,986,157 Common Shares (the "Shares")
(par value, $0.01 per share)
1,000,000 Common Stock Purchase Warrants (the "Warrants")
Tice Technology, Inc. (the "Issuer") is registering 300,000 Shares and
1,000,000 Warrants in connection with a distribution by Monogenesis Corporation
("Monogenesis"), a closed-end investment company with approximately 1,200
institutional shareholders. Monogenesis will distribute 125 Shares and 400
Warrants for each share of Monogenesis stock held (the "Distribution"). See
"Plan of Distribution." After the Distribution, Monogenesis will own less than
1% of the outstanding Common Shares of the Issuer. The Issuer will not receive
any funds from the Distribution, but will receive funds if any Warrants are
exercised. In addition, 90,000 Shares are offered hereby to holders of certain
promissory notes of Tice Engineering and Sales, Inc. ("TES") who may convert
the debt to Shares at the rate of $3.00 per share.
Each Warrant entitles the holder to purchase one Common Share at $8.00 per
share for 24 months. There can be no assurance that the price of a Common
Share will equal or exceed the exercise price of the Warrants or that it will
be profitable for a holder to exercise any Warrant. See "Securities." The
Issuer is registering the Shares which may be issued upon exercise of the
Warrants. The Issuer is also registering 54,750 Shares which may be issued
upon exercise of options held by certain employees.
The purpose of the Distribution is to establish a public trading market to
facilitate acquisitions and access to equity capital and to provide liquidity
for employee stock incentive programs and existing shareholders. There is no
current public trading market and there can be no assurance that a market will
develop after the Distribution. See "Risk Factors - Absence of Trading Market."
Of the Shares, 1,541,407 Shares are owned by William A. Tice and Joseph Walker
& Sons, Inc. (collectively, the "Selling Shareholders"). See "Principal and
Selling Shareholders." The Issuer will not receive any proceeds from the sale
of these Shares. The Shares held by the Selling Shareholders may be sold from
time to time. Such sales may be made on an exchange, in the over-the-counter
market, or in negotiated transactions, at market price or on negotiated terms.
Upon any sale of the Shares held by Selling Shareholders, Selling Shareholders
and participating agents, brokers or dealers may be deemed to be underwriters
as defined in the 1933 Act and commissions, discounts or any profit realized on
the resale of the Shares may be deemed to be underwriting commissions or
discounts. See "Plan of Distribution." The Issuer will pay the expenses of
this registration (approximately $100,000) other than any brokerage commissions
or discounts in connection with the sale of a shareholder's Shares.
Holders of Common Shares of the Issuer may elect only 25% of the board of
directors. The holder of Class B Common Shares (William A. Tice) will elect
75% of the board of directors and thereby control the Issuer. In addition, as
the current holder of a majority of the Common Shares, Mr. Tice will elect the
remaining 25% of the directors. See "Risk Factors - Control by Holder of Class
B Common Shares."
THE SHARES AND WARRANTS INVOLVE A HIGH DEGREE OF RISK, ARE ILLIQUID AND
SHOULD ONLY BE PURCHASED BY INVESTORS THAT CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING AT PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
A MONOGENESIS INSTITUTIONAL DISTRIBUTION
The date of this Prospectus is ________________, 1996.
<PAGE>
ADDITIONAL INFORMATION
----------------------
The Issuer will furnish annual reports containing audited financial
statements to its shareholders. Additional unaudited reports may be
provided to shareholders at such time as the Issuer may determine or as
required by law. The Issuer is not currently required to file reports
under the Securities Exchange Act of 1934 (the "1934 Act"), but will
become subject to reporting requirements upon effectiveness of the
registration statement. See "Plan of Distribution."
The Issuer has filed a registration statement (which term shall
include all amendments, exhibits and schedules) on Form S-1 under the 1933
Act with the Securities and Exchange Commission (the "Commission") in
Washington, D.C. This Prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth
in the registration statement as filed including the exhibits thereto.
The registration statement may be reviewed without charge at the
Commission's principal place of business in Washington, D.C. Copies of
the registration statement may be obtained from the Public Reference
Section of the Commission located at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed prices. In addition, the Issuer is an electronic
filer. The Commission maintains a Web site which contains reports, proxy
and information statements and other information regarding registrants
that file electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov. Statements made in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and, where such contract or other document has been
filed as an exhibit to the registration statement, reference is hereby
made to such exhibit and each such statement is qualified in all respects
by such reference.
SUMMARY
-------
The following is a summary of certain information contained elsewhere
in the Prospectus. Reference is made to, and this summary is qualified by,
the more detailed information set forth in the Prospectus, which should be
read in its entirety.
<TABLE>
<CAPTION>
PLAN OF DISTRIBUTION
- --------------------
<S> <C>
Distributed Company ................... Tice Technology, Inc. (the "Issuer"),
a newly formed Delaware corporation,
acquired all of the issued and
outstanding stock of Tice Engineering
and Sales, Inc. ("TES") in exchange
for 5,211,750 Common Shares and
750,000 Class B Common Shares of the
Issuer. See "Business - General" and
"Securities."
Distributing Company .................. Monogenesis Corporation, a Delaware
corporation, pursuant to a resolution
of its board of directors is
distributing Common Shares and
Warrants which it purchased from the
Issuer as a dividend to its
shareholders of record on
___________, 1996. See "Plan of
Distribution" and "Management -
Certain Transactions."
</TABLE>
2
<PAGE>
Distribution Ratio ......... Each Monogenesis shareholder will receive
125 Common Shares, par value $0.01 per
share, and 400 Warrants of the Issuer for
each share of Monogenesis stock held by
it. See "Plan of Distribution." After the
Distribution, Monogenesis will own less
than 1% of the outstanding Common Shares
of the Issuer.
Distribution Agent.......... Mid-America Bank of Louisville and Trust
Company, Monogenesis' transfer agent,
will act as distribution agent, transfer
agent and warrant agent for the Issuer.
See "Securities - Transfer Agent and
Registrar."
Shares to be Distributed.... The Common Shares to be distributed will
constitute approximately 5% of the issued
and outstanding Common Shares, and
approximately 4% of the total issued and
outstanding stock of all classes of
common stock of the Issuer. The Issuer
will not receive any proceeds from the
distribution of these shares. However,
the Issuer will receive proceeds if any
Warrants are exercised. See "Plan of
Distribution" and "Securities."
Warrants to be Distributed.. The Warrants to be distributed will
constitute approximately 85% of the
issued and outstanding Warrants. Each
Warrant entitles the holder to purchase
one Common Share of the Issuer at an
exercise price of $8.00 per share and may
be exercised during the 24 month period
following issuance of the Warrant. The
Common Shares and the Warrants are
separately transferable. See
"Securities."
Distribution Date........... Certificates representing the Shares and
the Warrants will be mailed to
Monogenesis shareholders as soon as
practical after the date of this
Prospectus. See "Plan of Distribution."
Shares Offered.............. 90,000 Common Shares are offered to
holders of certain debt of TES who may
convert such debt at a rate of $3.00 of
debt for each Share. See "Use of
Proceeds."
Option Shares............... 54,750 Common Shares may be issued upon
the exercise of options held by certain
employees. See "Securities."
3
<PAGE>
Sales of Shares By Selling 1,541,407 Common Shares held by the
Shareholders............ shareholders of the Issuer will be
registered and available for resale by
such shareholders from time to time
subject to certain limitations. See
"Principal and Selling Shareholders."
These shares constitute approximately 26%
of the issued and outstanding Common
Shares, and approximately 23% of the
total issued and outstanding stock of all
classes of common stock of the Issuer.
The Issuer will not receive any proceeds
from the sale of Shares held by the
shareholders. See "Risk Factors - Shares
Available for Resale" and "Plan of
Distribution."
Trading Market.......... There will be no immediate trading market
for the Shares or the Warrants. See "Risk
Factors - Absence of Trading Market." The
Issuer is registering the Shares and
Warrants to attempt to establish a public
trading market in the Shares. See "Plan
of Distribution." There can be no
assurance that one will develop.
THE ISSUER
- ----------
Tice Technology, Inc. (the "Issuer"), a Delaware corporation, was formed to
acquire and hold all of the issued and outstanding shares of stock of Tice
Engineering and Sales, Inc. ("TES"). Management of TES and the Issuer anticipate
that at some point in the future it may be advantageous to acquire additional
businesses and that the Issuer's stock, especially if a trading market has
developed in the stock, might be used as some or all of the consideration for an
acquisition. Currently, the Issuer owns only the TES stock and has no other
operations. The Issuer acquired all of the issued and outstanding stock of TES,
a Tennessee corporation, in exchange for stock of the Issuer. See "Business -
General."
The Issuer's wholly owned subsidiary, TES, is an engineering firm which
provides engineering and technical solutions for the apparel industry. TES
researches, designs, develops and tests specialized high technology, garment
production line stitching machines and related equipment, which, when patented,
it licenses to other manufacturers to produce or contract manufactures for its
own customers. TES currently holds eight patents over which it retains rights.
It currently sells fourteen basic products and is in the process of exploring
the applications of the technology covered by its latest patent. This patent
covered an electronically geared sewing machine which, among other things,
reduced by 90% all moving parts of the sewing machine. See "Business."
The Issuer was incorporated on June 21, 1996. It's principal office is
located at 6711 Tice Plaza, Knoxville, Tennessee 37918. The telephone number is
(423) 925-4501. TES was incorporated on March 16, 1973 and has the same
principal office as the Issuer. See "Business - History."
SELECTED FINANCIAL DATA
- -----------------------
The selected financial data is that of TES. The pro forma figures of net
income per share and stockholders' equity per share reflect the capitalization
of the Issuer.
4
<PAGE>
- --------------------------------------------------------------------------------
Statement of Earnings Data (1):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended March 31,
(Amounts in thousands except
per share amounts)
-----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $1,770 $1,694 $1,309 $1,390 $1,393
Cost of Sales (681) (843) (599) (498) (451)
Gross Profit 1,089 851 710 892 942
General and Administrative Expenses (1,104) (1,039) (845) (678) (712)
Research and Development Costs (28) (34) (29) (192) (257)
Income (Loss) From Operations (43) (222) (164) 22 (27)
Total Other Income (Expense) 31 44 (57) (57) 52
Income (Loss) Before Taxes (12) (178) (221) (35) 25
Income Tax Benefit (Expense) --- --- --- 5 (11)
Net Income (Loss) Before Change in
Accounting Principles --- --- --- (30) ---
Change in Accounting Principles --- --- --- 184 ---
Net Income (Loss) $ (12) $ (178) $ (221) $ 154 $ 14
Net Income per Pro Forma Common
Share (2) $(0.00) $(0.03) $(0.03) $ 0.02 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
(Amounts in thousands except
per share amounts)
-----------------------------------------------
1995 1996
---- ----
<S> <C> <C>
Revenues $ 499 $ 166
Cost of Sales 161 59
Gross Profit 338 107
General and Administrative Expenses 240 205
Research and Development Costs 2 1
Income (Loss) From Operations 96 (99)
Total Other Income (Expense) (9) (15)
Income (Loss) Before Taxes 87 (114)
Income Tax Benefit 0 20
Net Income (Loss) $ 87 $ (94)
Net Income per Pro Forma Common Share (2) $ 0.01 $(0.01)
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
Balance Sheet Data (1):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
(Amounts in thousands except
per share amounts)
------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $ 1,666 $ 1,528 $ 1,292 $ 1,650 $ 1,498
Total Long-Term Liabilities (3) $ 453 $ 385 $ 346 $ 302 $ 661
Total Stockholders' Equity $ 439 $ 261 $ 40 $ 194 $ 208
Stockholders' Equity Per Pro Forma $ 0.07 $ 0.04 $ 0.01 $ 0.03 $ 0.03
Common Share (2)
</TABLE>
<TABLE>
<CAPTION>
June 30,
(Amounts in thousands except
per share amounts)
------------------------------------------------------
1995 1996
---- ----
<S> <C> <C>
Total Assets $ 1,736 $ 1,559
Total Long-Term Liabilities $ 292 $ 651
Total Stockholders' Equity $ 281 $ 114
Stockholders' Equity Per Pro Forma $ 0.04 $ 0.02
Common Share (2)
</TABLE>
- --------------------------------------------------------------------------------
(1) The statement of earnings data and the balance sheet data for 1994, 1995
and 1996 were derived from the audited financial statements of TES which
are included in their entirety elsewhere in this Prospectus. See "Financial
Statements."
(2) Pro forma net income and stockholders' equity per share reflect the number
of shares of the Issuer's common stock (including Class B Common Stock)
which are issued and outstanding as of the date hereof (6,590,220 shares)
for all years rather than the number of shares of TES actually outstanding
on the applicable dates and have been rounded to the nearest cent. These
figures do not include Common Shares which may be issued upon exercise of
the Warrants or the options held by TES employees. See "Capitalization."
(3) The total long-term liabilities amounts exclude the current portion of
such obligations.
6
<PAGE>
RISK FACTORS
------------
The securities described in this Prospectus involve a high degree of risk.
Prior to purchasing, Shares or Warrants investors should consider the following
factors inherent in, and affecting the business of, the Issuer and its
subsidiary, TES.
ABSENCE OF PROFITABILITY. For three of the last five fiscal years, TES has
had a loss: $221,000 for 1994, $178,000 for 1993 and $12,000 for 1992. In 1996,
it had a small profit of $12,000 and in 1995, although it had a loss of $30,000,
it ultimately booked net income of $154,000 due to a change in accounting
principles. See "Selected Financial Data," "Management's Discussion and Analysis
of Financial Conditions and Results of Operations" and "Financial Statements."
It also had a loss of $93,774 for the first quarter of fiscal year 1997 and has
a capital deficiency. This deficiency together with uncertainties relating to
the company's ability to obtain additional financing or capital create
uncertainty about its ability to continue as a going concern. See "Financial
Statements." The Issuer's and TES's ability to achieve profitability depends
upon the ability to exploit existing patents and develop new patents. There can
be no assurance that TES or the Issuer will achieve profitability in the future.
CAPITAL REQUIREMENTS. The Issuer and TES need substantial additional
funding in the near future to continue as a going concern and to develop and
apply the technology inherent in its latest patent for the electronically geared
sewing machine and to be able to produce orders it is currently receiving. The
Issuer and TES expect to need at least $5,000,000 in the next two years and hope
to obtain those funds through license fees received on the new technology and
sale of stock of the Issuer. See "Capitalization" and "Financial Statements."
There can be no assurance that the Issuer and TES will receive any license fees
or will be able to raise such funds. Without the fees or other additional funds,
TES may be required to delay development of applications of new technology.
CONTROL BY HOLDER OF CLASS B COMMON SHARES. The Issuer has two classes of
voting stock issued and outstanding: Common Shares and Class B Common Shares.
Although each holder of Common Shares and Class B Common Shares is entitled to
one vote for each share of stock held, the current holder of Class B Common
Shares (William A. Tice) is entitled to elect 75% of the members of the board of
directors of the Issuer (presently three members). Holders of Common Shares
(together with holders of Class D Common Shares and any voting Preferred Shares)
are only entitled to elect 25% of the members of the board of directors
(presently two members). (If the number of issued and outstanding Common Shares,
Class D Common Shares and voting Preferred Shares is less than 10% of the
aggregate number of issued and outstanding Common Shares and Class B Common
Shares, all directors will be elected by the holders of all shares voting
together.) Thus, the holder of Class B Common Shares will control the board of
directors and therefore, the Issuer. Except with respect to matters which
require voting by class, shareholders of all classes will vote together on all
other matters properly brought before the shareholders. Currently, William A.
Tice controls the Issuer and, as sole holder of Class B Common Shares, elects
all directors elected by holders of Class B Common Shares. In addition, as
majority holder of Common Shares, he can also elect all directors elected by
holders of Common Shares and control all other votes. See "Principal and Selling
Shareholders" and "Securities."
7
<PAGE>
LIMITED NUMBER OF CUSTOMERS. Most of TES's business is developing solutions
and providing equipment for denim and workwear clothing manufacturers. See
"Business." Currently, although it has shipped products to several hundred
customers all over the world, 80% of TES's annual revenues come from three
principal customers - Levi Strauss & Co., Wrangler, Inc. and A.B. Fab Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The loss of any of these customers without replacement with
comparable customers for any reason could materially affect TES's revenues and
income. Management hopes that its new products and license fees generated
thereby will minimize this risk.
FIXED PRICE CONTRACTS. TES principally performs under agreements to develop
products, or modifications to existing products, to solve particular industry
problems or otherwise increase efficiency or lower costs of a manufacturing
process. Generally, in pricing a job, TES estimates the time expected to produce
the solution and a prototype product. The proposed price is based on estimates
provided in-house with suitable margins to accommodate reasonable contingencies.
Should development costs exceed the estimated price, TES may be required to
complete the project and incur whatever losses result. Even if it incurs losses
on the initial contract, it may recoup some or all of the losses by selling the
product to other manufacturers or developing other uses or improvements to the
product and marketing the modified product. See "Business - Products."
DEPENDENCE ON SEWN PRODUCTS INDUSTRY. Currently, most of TES's revenues are
derived from products and services related to the sewn products industry. Should
this industry take a substantial downturn, business opportunities would be
limited significantly. However, management does not believe that a substantial
downturn is likely in the near future. See "Business."
COMPETITION. TES is aware of four companies in the United States and two in
Europe that perform work similar to TES. In addition, all of the world's leading
sewing machine manufacturers (mainly based in Japan) engage in research and
development. Several of such manufacturers (some of which are also customers of
TES) have tried or are trying to develop machines which are similar or
competitive to TES's electronically geared machines. However, management is not
aware of the development of any method or machine which is performance
competitive to TES's newest machines. These larger competitors have
significantly greater resources, financial and otherwise, than TES. See
"Business - Competition." TES's ability to compete depends upon its ability to
provide cost effective solutions and products to manufacturers. There can be no
assurance that TES can continue to compete effectively with these companies.
CHANGING TECHNOLOGY. Although it has not been so in the past, it is
expected that the apparel industry will show more rapid changes in what is
state-of-the-art in the future. Any of TES's products could become obsolete at
any time due to technological changes and TES may not be able to update its
products quickly enough to remain competitive. See "Risk Factors - Research and
Development" and "Business - Research and Development." In addition, some of
TES's customers have told management that they are delaying purchases in
expectation of the development of applications of new technology owned by Tice.
8
<PAGE>
PATENTS AND PROPRIETARY PROTECTION. TES has applied for and received patent
protection on certain of its inventions, including most recently, its
electronically geared sewing machine. There can be no assurance that others will
not independently develop proprietary information or obtain access to know-how
and expertise (patented or otherwise) substantially equivalent to that developed
by TES. There also can be no assurance that existing patents held by TES or
future patents obtained by TES will be enforceable, that TES's products will not
infringe on patents owned by others or that competitors will not develop similar
or functionally similar patents. In the event that TES has infringed on any such
rights, it could be required to pay damages. In addition, if TES were unable to
change the design of such product so that it no longer infringed on any
intellectual property rights, it would lose the ability to sell such product as
well as the benefits of all previous marketing efforts and name recognition
associated with the product. Even if alterations to avoid any intellectual
property problems were possible, the product as changed might not be successful
in the marketplace. See "Business - Patents."
GENERAL ENVIRONMENTAL. TES is the owner of the real estate on which its
operations are located which is part of a small retail shopping facility,
commonly referred to as a strip center, the remainder of which it rents to
approximately twelve retail tenants. In addition, TES owns real estate on which
it intends to build a new facility. See "Business -Property." Accordingly, TES
is an "owner/operator" under applicable state and federal environmental laws. As
an operator, TES is potentially responsible for the clean-up of any hazardous or
toxic materials that may be improperly located in any of its facilities. The
development and manufacturing processes of TES do not generate any significant
quantities of hazardous or toxic materials. See "Business - Manufacturing." The
officers of TES are not aware of any hazardous materials improperly located at
any of TES's facilities.
RELIANCE ON EXISTING MANAGEMENT. TES's success is dependent upon the
capabilities and reputation of its President, William A. Tice, and of its senior
management and technical personnel and on their maintaining or enhancing
existing relationships with TES's customers. See "Management." The loss of Mr.
Tice or senior management or technical staff could have a materially adverse
affect on TES's business. In such event, there can be no assurance that TES
could attract qualified replacements.
SHORTAGE OF QUALIFIED EMPLOYEES. As a result of the expansion of the number
of business users of computers and the expansion in demand for computer services
and custom software programming, there is a short supply of computer
professionals. Computers and software figure in the development of and expansion
of the applications of the electronically geared sewing machine technology
recently patented by TES. The situation is not expected to improve in the near
future. Thus, it is possible that TES could have problems finding, keeping and
replacing employees. However, defense contractors have laid off many of their
computer/engineering employees and this trend is expected to continue thereby
creating a pool of employees from which TES has drawn in the past and who would
likely have at least some of the expertise needed by TES.
UNCERTAINTY OF MARKET ACCEPTANCE. TES's success is at least partially
dependent on the market's acceptance of the technology involved in the
electronically geared sewing machine.
9
<PAGE>
Historically, clothing manufacturing has not had significant technological
progression since the invention of the sewing machine. Failure to achieve
significant market acceptance will have a material adverse effect on TES's
business, financial condition and results of operations.
WARRANTY AND SUPPORT. TES traditionally has provided a 90-day warranty
against defects in materials and workmanship with most of its products. TES
plans to continue with this warranty policy. It has been TES's past experience
that the warranties have cost it less than 0.5% of gross sales over the past
five years. However, this experience could change at any time. In addition, TES
anticipates that it will need to implement a support program for the computer
software associated with the new technology for the electronically geared
machine which is expected to include computer technicians on call 24 hours a
day. During the first 24 months, a minimal number of technicians are expected to
be needed at an estimated cost of $100,000 per year. The number of technicians
needed and costs of the program are expected to increase as more products are
sold, but is not expected to exceed 0.5% of gross sales. If TES's estimates of
the need for and costs of the support program are significantly lower than the
actual costs, TES's profits could be significantly reduced.
TRADEMARKS. Management of TES does not believe that it is infringing on the
trademark of any other entity in the world. TES obtained a certificate of
registration of the name "tice(R)" for use in connection with certain components
of stitching machines from the U.S. Patent and Trademark Office ("PTO") in 1980.
In addition, TES has applied to register the name, "Tice Technology," and the
related logo. If TES were prohibited from using the name, it would lose the
benefits of name recognition and its previous marketing.
LACK OF OPERATIONAL HISTORY. The Issuer was incorporated on June 21, 1996
and has not yet engaged in business other than the acquisition of TES as
described in this Prospectus. See "Plan of Distribution." It therefore has no
earnings record. However, the Issuer's wholly owned subsidiary, TES, has been in
business since 1964, first as a sole proprietorship then as a partnership and
since 1973 as a corporation. See "Selected Financial Data," "Business History"
and "Financial Statements."
CURRENT PROSPECTUS AND STATE "BLUE SKY" REGISTRATION OR EXEMPTION REQUIRED
TO EXERCISE THE WARRANTS. Holders of the Warrants will have the right to
exercise the Warrants to purchase Common Shares only if such shares qualify for
sale under state securities laws or are exempt from qualification under
applicable securities or "blue sky" laws of the states in which the various
holders of the Warrants then reside and there is available a current Prospectus
permitting the sale of the Common Shares underlying the Warrants. The Issuer has
undertaken and intends to use reasonable efforts to keep current a prospectus
which will permit the sale of the Common Shares underlying the Warrants, but
there can be no assurance that the Issuer will be able to do so. The Issuer is
not required to qualify for sale the Common Shares in any state. The Warrants
may lose some of all of their value if a prospectus covering the underlying
shares is not kept effective or if the underlying shares are not, or cannot be,
qualified in an applicable state. See "Securities."
10
<PAGE>
LACK OF DIVIDENDS. The Issuer is newly formed and has not paid dividends.
It's only significant source of earnings out of which to pay dividends will be
dividends it receives from its subsidiary, TES. TES has not historically paid
dividends to its shareholders, and has no present plans to institute a policy of
declaring dividends. In the foreseeable future, the capital requirements of TES
will likely consume all applicable operating profits and other available cash.
There is no guarantee that TES, and therefore the Issuer, will pay dividends in
the future.
AUTHORIZATION OF PREFERRED STOCK. The Issuer's Certificate of Incorporation
authorizes the issuance of Preferred Shares with designations, rights and
preferences as determined from time to time by its Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue Preferred Shares with dividends, liquidation, conversion, voting or
other rights that could adversely affect the dividends, liquidation rights,
voting rights or other rights of the holders of Common Shares. The voting rights
of any Preferred Shares, however, are limited by the Certificate of
Incorporation and cannot exceed the voting rights of any Common Shares. In the
event of issuance, Preferred Shares could be used, under certain circumstances,
as a method of discouraging, delaying or preventing a change of control of the
Issuer. See "Securities."
ABSENCE OF TRADING MARKET. There is not an established public trading
market for the Shares or the Warrants. There can be no assurance as to the
prices at which the Shares or the Warrants will trade or that such prices will
not be significantly below the book value per share of the Shares. Until the
Shares and the Warrants are fully distributed and an orderly market develops (if
at all), the prices at which the Shares or the Warrants trade may fluctuate
significantly. Prices for the Shares and the Warrants will be determined in the
marketplace and may be influenced by many factors, including the depth and
liquidity of the market, investor perception of the Issuer and the industry in
which the Issuer participates, and general economic and market conditions.
SHARES AVAILABLE FOR RESALE. Approximately 67% of the issued and
outstanding Common Shares of the Issuer (all shares except the Common Shares
described in this Prospectus) are "restricted securities" as such term is
defined in Rule 144 promulgated under the Securities Act of 1933 (the "1933
Act"). (Class B Common Shares may be converted to Common Shares.) Sales of
securities by affiliates of the Issuer may also be subject to Rule 144 resale
limitations. Currently, all of the restricted securities are held by William A.
Tice. See "Principal and Selling Shareholders." In general, under Rule 144, if
adequate public information is available with respect to the Issuer, beginning
90 days after the date of this Prospectus a person who has satisfied a two year
holding period may sell, within any three month period, a number of shares which
does not exceed the greater of 1% of the then outstanding shares of the class of
securities in question or the average weekly trading volume during the four
calendar weeks prior to such sale. Sales under Rule 144 are also subject to
certain restrictions relating to manner of sale, notice and the availability of
current public information about the issuer. Sales of restricted securities by a
person who is not an affiliate of the issuer (as defined in the 1933 Act) and
who has satisfied a three year holding period may be made without regard to
volume limitations, manner of sale, notice or other requirements of Rule 144.
The Issuer is unable to predict the effect that sales made pursuant to Rule 144
or other exemptions under the 1933 Act may have on the prevailing market price
of the registered Common Shares, or when such sales may begin under the holding
period requirements of Rule 144.
11
<PAGE>
PLAN OF DISTRIBUTION
--------------------
The Issuer issued 300,000 Common Shares and 1,000,000 Common Stock Purchase
Warrants to Monogenesis, a closed-end registered investment company. Monogenesis
distributed Shares and Warrants to its shareholders as of the date of this
Prospectus at a rate of 125 Common Shares and 400 Warrants for each share of
stock of Monogenesis held on _______________, 1996. Monogenesis purchased the
Shares and Warrants at a price of $0.01 each which is the par value of the
Common Shares. In addition, Monogenesis agreed to distribute Shares and Warrants
to its approximately 1,200 primarily institutional shareholders at the rate
described above. The price was determined by Monogenesis and TES. Monogenesis
will retain the Shares and Warrants not distributed and will own less than 1% of
the outstanding Common Shares of the Issuer after the Distribution. The Issuer
and TES have agreed to pay the expense of registering the Shares and Warrants
issued to Monogenesis which expenses include legal, accounting, consulting,
transfer agent and filing fees. Through the distribution of the Shares and
Warrants by Monogenesis (and the sale of Shares by the Selling Shareholders and
the note holders from time to time), the Issuer hopes to create a public trading
market in its Common Shares to facilitate access to public markets and equity
capital and future acquisitions and to provide liquidity for employee stock
incentive programs and existing shareholders. See "Risk Factors - Absence of
Trading Market."
Since Monogenesis is purchasing Shares and Warrants with the intent to
distribute, it is a statutory underwriter under the 1933 Act. Monogenesis is not
a broker-dealer and has not participated in any traditional underwritings. It is
registered as a closed-end investment company under the Investment Company Act
of 1940 and was formed to provide a mechanism for companies to become reporting
companies under the 1934 Act in transactions similar to the Distribution.
Monogenesis completed one such distribution in 1992. TES and Mr. Tice have
agreed to indemnify Monogenesis against any liability arising out of any
representation, warranty or covenant made by TES or Mr. Tice in the agreement
with Monogenesis.
Shareholders of Monogenesis that receive Shares and Warrants will receive
such securities as a dividend. No holder of Monogenesis stock will be required
to pay any cash or other consideration for the Shares or the Warrants received
in the Distribution or surrender or exchange Monogenesis stock in order to
receive Shares or Warrants. Holders of the Warrants will be required to pay the
exercise price to exercise the Warrants. See "Securities."
Shareholders, including the recipients of Common Shares distributed by
Monogenesis, will be able to sell their Shares and Warrants which are
registered, at any time, although the sale of securities by affiliates is
limited under Rule 144. It is expected that, at such time as registered Shares
or Warrants are sold, such securities will be sold through the selling efforts
of brokers or dealers. There is no agreement with any specific brokers or
dealers relating to the Shares or the Warrants nor has any plan of distribution
or sale of the Shares or Warrants been developed, other than the dividend
distribution to Monogenesis shareholders and the debt conversion described
above.
12
<PAGE>
The Shares and Warrants held by Selling Shareholders and registered
hereunder may be disposed of from time to time by the Selling Shareholders, or
by permitted transferees, in one or more of the following: (i) to purchasers
directly; (ii) in ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (iii) through underwriters or dealers who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders or permitted transferees or from the
purchasers of the securities for whom they may act as agent; (iv) by the pledge
of the Shares or Warrants as security for any loan or obligation, including
pledges to brokers or dealers who may, from time to time, effect distribution of
the Shares or Warrants or interests therein; (v) to purchasers by a broker or
dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus; (vi) in a block trade in which the broker or dealer
so engaged will attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate a transaction; and
(vii) through an exchange distribution in accordance with the rules of the
exchange or in transactions in the over-the-counter market. Such sales may be
made at then prevailing prices and terms which may be related to the then
current market price or at negotiated prices and terms. In effecting sales
brokers or dealers may arrange for other brokers or dealers to participate.
The Selling Shareholders or their successors in interest, and any
underwriters, brokers, dealers or agents that participate in the distribution of
the Shares and Warrants held by the Selling Shareholders, may be deemed to be
"underwriters" within the meaning of the 1933 Act, and any profit on the sale of
securities by them and any discounts, concessions or commissions received by any
such underwriters, brokers, dealers or agents may be deemed to be underwriting
commissions or discounts under the 1933 Act. The Issuer and TES will pay all
expenses incident to the registration of the Selling Shareholders' Shares and
Warrants other than underwriting discounts or commissions, brokerage fees and
the fees and expenses of counsel to the Selling Shareholders, if any. The Issuer
will not receive any proceeds from the sale of Shares or Warrants by the Selling
Shareholders. In the event of a material change in the plan of distribution
disclosed in this Prospectus, the Selling Shareholders will not be able to
effect transactions in the Shares and Warrants pursuant to this Prospectus until
such time as a post-effective amendment to the registration statement is filed
with, and declared effective by, the Commission.
Prior to or on the effective date of the registration statement, the Issuer
will file a registration statement under the 1934 Act registering the Shares and
the Warrants thereunder. Such filing together with the filing of the
registration statement under the 1933 Act will subject the Issuer to the
reporting requirements of the 1934 Act and the Issuer will be a public company.
The Issuer intends to apply for a listing of the Shares and the Warrants on a
national exchange which reports transactions on a real time basis; however,
there can be no assurance that the Shares and the Warrants will be so listed.
USE OF PROCEEDS
---------------
TES borrowed $270,000 from six persons in July and August of 1996. The debt
was evidenced by promissory notes bearing interest at 10% per annum with a
maturity date of September
13
<PAGE>
1, 1996. The proceeds of the notes were used as working capital. The Issuer is
offering the holders of the notes up to 90,000 Common Shares in exchange for
such debt at $3.00 per share.
The minimal proceeds derived from the sale of the Shares and Warrants to
Monogenesis and any proceeds derived upon the exercise of any Warrants or
options held by TES employees will be used as working capital. The Issuer will
not receive any proceeds from the sale of Shares or Warrants by the Selling
Shareholders. See "Plan of Distribution."
CAPITALIZATION
--------------
The capitalization of TES (prior to its acquisition by the Issuer) and the
pro forma capitalization of the Issuer (giving effect to the acquisition of TES)
as of June 30, 1996 are as follows:
================================================================================
Capitalization of TES Prior to Acquisition:
================================================================================
<TABLE>
<CAPTION>
<S> <C>
Stockholders' Equity:
Common stock
no par value; 2,000 shares authorized;
750 shares issued and outstanding $ 8,634
Retained Earnings 105,831
--------
Total Stockholders' Equity $114,465
========
</TABLE>
================================================================================
Pro Forma Capitalization of the Issuer Assuming Acquisition of TES and
Conversion of TES Debt:
================================================================================
<TABLE>
<CAPTION>
<S> <C>
Stockholders' Equity
Common Shares
par value - $0.01 per share;
30,000,000 authorized
5,840,220 shares issued and outstanding(1) $ 58,402
Class B Common Shares
par value - $0.01 per share;
5,000,000 shares authorized;
750,000 shares issued and outstanding 7,500
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Class D Common Shares
par value - $0.01 per share;
600,000 shares authorized;
no shares issued and outstanding -0-
--------
Total Common Shares $ 65,902
Preferred Shares
par value - $0.01 per share;
10,000,000 shares authorized;
no shares issued and outstanding -0-
Paid-in Surplus (2) 217,098
Retained Earnings 105,831
--------
Total Stockholders' Equity $388,831
========
</TABLE>
- -------------------------------------------------------------------------------
(1) In addition to the Common Shares of the Issuer held by the former
shareholder of TES, the issued and outstanding Common Shares of the Issuer
include the 300,000 Common Shares issued to Monogenesis for $3,000, the
238,470 Common Shares issued to JWSI upon conversion of warrants issued by
TES and the 90,000 which may be issued upon conversion of TES debt. This
number does not include the 1,054,750 Common Shares which may be issued
upon the exercise of the Warrants or the options held by TES employees. See
"Securities."
(2) The calculation of paid-in surplus assumes that all of the debt which may
be converted to Common Shares at $3.00 per share is converted increasing
capital by $270,000 and includes the $0.01 per Common Share and Warrant
paid by Monogenesis.
TES has two loans from Home Federal Bank. One loan in the principal amount
of $700,000 with a maturity date of May 6, 2006 is payable in 119 monthly
payments of $9,112.13, adjusted as described below, with the final payment in
the amount of the remaining unpaid balance and accrued interest. The interest
rate is fixed at 9.5% per annum through May 6, 1999. On May 6, 1999 and on the
anniversary date thereafter, the interest rate will be adjusted to the one year
Treasury Bill Index Rate plus 3.5%. Payment amounts will be adjusted at the same
time as the interest rate. The proceeds of the loan were used to refinance
existing loans. See "Financial Statements." The other loan is in the principal
amount of $100,000 with a maturity date of August 31, 1996. Interest only is
payable monthly beginning on May 31, 1996. The interest rate is a variable rate
equal to 2% over the lender's Base or Reference Rate. The initial rate is
10.25%. The proceeds were used for working capital.
The Home Federal Bank loans are secured by: (i) a first mortgage Deed of
Trust on real estate owned by TES known as Tice Plaza Shopping Center; (ii) the
accounts receivable, inventory,
15
<PAGE>
fixtures and equipment owned by TES; (iii) an assignment of a life insurance
policy on Mr. Tice's life; (iv) a second mortgage Deed of Trust on Mr. Tice's
residence; and (v) Mr. Tice's personal guarantee. Under the commitment letter,
TES is required to maintain a debt service coverage ratio of no less than
1.1:1.0 and a maximum debt to net worth ratio of 4:1 for the year ending March
31, 1997 and a debt to net worth ratio of 3:1 thereafter. As of March 31, 1996,
TES had a debt service ratio of 1.55:1 and a debt to net worth ratio of 6.2:1.
The Deed of Trust also restricts transfer of any interest in TES without the
prior written approval of the lender. The lender approved the transfer of the
shares by which the Issuer became the sole shareholder of TES.
TES has a revolving credit in the amount of $225,000 from SunTrust Bank,
East Tennessee, N.A. with a maturity date of August 31, 1996. Accrued interest
is payable on the first day of each month. The interest rate is the lender's
Base Rate plus 1% which is currently 8.25%. As of July 18, 1996, TES had drawn
the entire amount of the line of credit. The line of credit is secured by a Deed
of Trust on Lot #4 on Tice Lane which is the undeveloped real estate on which
TES intends to build its new facility.
TES also has borrowed funds from Mr. Tice. As of July 31, 1996, the
principal balance owed him was $89,209.04 All of the debt bears interest at the
rate of 10% per annum and is subordinate to other debts of TES unless written
notice is otherwise given. Accrued interest from March 31, 1996 to June 30, 1996
was paid by issuance of a new promissory note. Payments totaling $39,906.82 have
been made to Mr. Tice on these notes in fiscal year 1997. The outstanding
promissory notes are due and payable as follows: $68,256.48 on September 26,
1996, $9,000 on September 27, 1996, $5,952.56 on September 29, 1996, $1,000 on
October 17, 1996, $3,000 on October 23, 1996 and $2,000 on October 28, 1996.
BUSINESS
--------
GENERAL
- -------
The Issuer was formed as a holding company for TES on June 21, 1996 in
connection with the registration of the Shares and Warrants and for the purpose
of facilitating acquisitions at some point in the future. The Issuer received
all of the issued and outstanding shares of stock of TES from Mr. Tice in
exchange for 5,211,750 Common Shares and 750,000 Class B Common Shares. The
number of shares exchanged was determined by TES and Monogenesis taking into
consideration the proposed public float and ownership interests. All of the
Issuer's current business operations are conducted through TES.
TES performs original research engineering design, prototype development
and testing for its garment production line stitching machines and related
equipment. During manufacture and assembly, the arrangement of component parts
of a tice(R) product are configured to meet the purchaser's special production
line application requirements. Accordingly, most of TES's products are made-to-
order pursuant to contractual arrangements with purchasers. See "Business -
Products." Generally, a potential customer outlines a need or problem relating
to their manufacturing process, TES reviews the need and estimates the cost to
provide the product or solution. See "Risk Factors -
16
<PAGE>
Fixed Price Contracts." Often then TES applies the technology developed pursuant
to a contract to other applications or sells the product developed to other
parties. See "Business - Products." TES also manufactures replacement parts for
its products and a few minor attachments and provides consulting services at
hourly rates.
PRODUCTS
- --------
TES sells various products mainly to the sewn products industry. Many of
its products are covered by patents which generally provide protection for
seventeen years from date of issue. TES's basic products include:
1) Twin Needle Belt-Loop Sewing Machines -- This machine takes pre-sewn
belt loop material which is in lengths of 50 to 150 feet. The machine
feeds the belt loop out to the proper length, cuts the belt loop and
folds both ends under by way of turning pins. Next, the operator
activation presents the pre-cut, pre-folded belt loop to the pants
waistband whereupon two air-operated presser feet descend upon the
folded belt loop ends, the turning pins retract and both ends of the
belt loop are sewn on simultaneously. The presser feet return to the up
position, the operator moves the garment and the process is repeated.
This product is covered by TES's patent #5,458,075 which was issued on
October 17, 1995.
2) Ergonomic Stands -- These stands are either pneumatically or
electronically activated by the operator who can move the table top up
and down, stopping at any desired height, thus helping production and
physical approach to the machine/stand combination. These stands are
covered by TES's patent #5,313,892 which was issued on May 24, 1994.
3) Single Needle Belt-Loop Machines -- This machine takes pre-sewn belt
loop material which is in lengths of 50 to 150 feet. The machine feeds
the belt loop out to the proper length, cuts the belt loop and folds
both ends under by way of turning pins. Next, the operator activation
presents the pre-cut, pre-folded belt loop to the pants waistband
whereupon two air-operated presser feet descend upon the folded belt
loop ends, the turning pins then retract, one end of the belt loop is
sewn, the unit indexes and the opposite end of the belt loop is sewn.
The presser feet return to the up position, the operator moves the
garment and the process is repeated. All patents, if any, on this
product have expired.
4) Button Hole Indexers -- This unit uses a conventional single head
buttonhole machine. The operator places a shirt panel with the placard
already formed at the beginning position on the buttonhole indexer
moving plate and engages the starting button. The first buttonhole is
sewn, upon completion the shirt panel is indexed the proper distance
where the second buttonhole is sewn, it is once again indexed and this
process continues through six, seven or eight buttonholes. The panel is
then
17
<PAGE>
removed and the operator starts the process again. All patents, if
any, on this product have expired.
5) Takeaway Mechanisms -- These mechanisms are built to customer
specifications and are used for the purpose of moving parts or full
garments from one point to another. This product is covered under
TES's patent #5,303,910 which was issued on April 19, 1994.
6) Indexing Stackers -- Indexing stackers incorporate the patented take-
away and pick-up device described in patent #5,303,910 where as the
pick-up / take-away mechanism moves the particular part to a
predetermined position where it is placed, the stacker then moves so
that the next part picked up by the take-away is placed in a different
stack, the indexer then returns to the original position to await
receipt of the next part. The sequence is then repeated.
7) Label Loader Folders -- The label loader folders feeds a label from a
hopper to a folding mechanism that folds the label, if required. It
presents the label to the sewing machine which is then activated, the
label is sewn on the garment. The label loader repeats the process.
This product is covered by TES's patents #4,677,923 and #4,979,934
which were issued on July 7, 1987 and December 25, 1990 respectively.
8) Automatic "J" Tackers -- The term automatic "J" tacker is a generic
term for a machine designed to make one tack then shift and place a
second tack automatically. These tacks are normally placed in
positions on garments that require additional reinforcement to add
strength. Patents on this product, if any, have expired.
9) Belt-Loop Winders -- During the process of manufacturing a belt loop
in lengths of 50 to 150 feet, the belt loop winder winds the belt loop
up on a reel (very similar in appearance to a movie reel that film is
wound on). These reels are then taken to a belt loop machine where the
belt loop material is then pulled off these reels by the belt loop
sewing machine. No patents exist on this product.
10) Needle Positioners -- Needle positioners are air operated units that
are retrofitted to existing conventional sewing machines. This unit
when activated positions the needle up and out of the sewn work. This
process was traditionally done by the operator turning the pulley hand
wheel. This product is covered under TES's patents #4,271,775 and
#4,270,474 which were issued on June 9, 1981 and June 2, 1981
respectively.
11) Pocket Creasers -- The pocket creaser takes the pre-formed and cut
pocket material and first folds it, then creases it by means of heat
so that the operator can sew the pocket in a closed fashion into the
garment or, in the case of a back pocket, onto the outside of the
garment. No patents exist on this product.
18
<PAGE>
12) Pneumatic Circuit Boards -- This technology was discovered in the mid-
1970's at which time TES was only one of two companies (that TES is
aware of) who were capable of manufacturing multi-level pneumatic
circuit boards. Basically, the circuit boards are multi-layered
acrylic sheets that are grooved and ported to facilitate the flow of
air to specific ports in a valve configuration. This technology to air
is similar to an electronic printed circuit board and greatly enhances
the capability of pneumatic operations. No patents exist on this
technology although the circuit boards created were copyrighted from
1976 to 1986 at which time the use was greatly reduced as TES
converted to electronics.
13) Air Operated Clamp Lifts -- The function of the air operated clamp
lift is to semi-automate tacker sewing machines. The clamp lift
controls the raising and lowering of the presser foot and the engaging
of the sewing machine into the sew cycle. TES's patents on this
product have expired.
14) Electronic Gearing Components for Sewing Machines -- The technology
referred to as electronic gearing is the ability to coordinate to
within one-eighth of one degree the accuracy between the needle and
the bobbin hook assembly of a sewing machine. This technology is
covered by TES's patent #5,458,075 which was issued on October 17,
1995.
Of TES's revenue, 95% is derived from the design and manufacture of TES's
basic product line described above. The remaining 5% comes from rents received
from real property owned by TES and some consulting fees. See "Business -
Property." The consulting fees are very minor as independent revenues;
traditionally these fees are encompassed in the design and manufacture of TES's
products for a particular customer.
RESEARCH AND DEVELOPMENT
- ------------------------
TES primarily performs research and develops solutions to production or
ergonomic problems of its customers which are primarily sewing manufacturers. It
also produces and markets products or technology developed for a particular
customer to other customers or modifies such products and markets them for
different applications. When a sewing manufacturer or other customer comes to
TES with a problem, TES will generally consult, build and then manufacture a
piece of equipment designed to eliminate or lessen production or ergonomic
problems or enhance production capabilities. Once the piece of equipment has
been designed and produced as required by the customer, TES generally retains
rights to the design and will then offer the equipment and technology to the
industry as a whole. In many cases, TES obtains a patent on the process to
protect its rights. See "Risk Factors - Patents and Proprietary Protection."
At the present time, TES is in the process of designing and building the
following equipment:
. A custom designed pickup and delivery system for a bedding
manufacturer.
19
<PAGE>
. An apparatus to automatically inflate soccer balls for a sporting goods
manufacturer.
. A special system to rotate heating dryers for silk screen printing for
the same sporting goods manufacturer.
. A unit to cut belt loop and other like materials to obtain a point cut
on both ends.
TES is also in the process of designing the following equipment which uses TES's
newly patented electronically gearing technology:
. A multi-head button hole machine.
. A multi-head button sewing machine.
. A felling machine.
. A single needle plain sewer.
With respect to the felling machine, TES entered into a Joint Development
Agreement with a denim clothing manufacturer to develop a felling machine
suitable for inseaming jeans using the TES computer controlled sewing mechanism.
Under the agreement, TES retains ownership of the technology, but granted the
manufacturer a nonexclusive, paid-up license to the jointly developed
technology. The manufacturer paid TES a fee of $300,000 to develop the
technology. In return, in addition to the license, it has the exclusive right
after production of the first sewing machine to purchase the resulting sewing
machines so long as it purchases a minimum of the lesser of TES's entire
production or 249 machines during each year. The cost of each machine is as
agreed to, but in no event in excess of $20,000 per machine. With respect to
machines sold to any other person, the manufacturer is entitled to receive a
royalty of 4% of the gross selling price until such time as it has received an
amount equal to the amount paid by it to develop the product plus interest at a
rate of 10% per annum. TES currently has a first generation prototype of the
felling machine in operation.
TES also has entered into a non-binding letter of agreement with Brother
Industries, Ltd. of Nagoya, Japan relating to a license of the technology to be
used with the electronically geared sewing machines which sets out certain terms
relating to a potential license. This license would also be nonexclusive.
MARKET
- ------
TES's customers are primarily, but not exclusively, apparel manufacturers.
In addition to providing products used in apparel manufacturing, TES has built
special equipment for Ford Motor Company, Lockheed Aerospace, Camel Tent and
Awning, and California Sail and Rigging as well as a number of furniture
manufacturers and medical supply companies.
20
<PAGE>
TES currently markets primarily to the apparel industry. It sells its
products and services directly to end users as well as by means of a dealer
network of approximately 125 dealers worldwide. In addition, TES advertises
monthly in one or more of the apparel industry's international trade magazines.
TES also regularly attends apparel industry trade shows as an exhibitor to
display its equipment and technology. TES exhibited at a trade show in Japan in
May 1996 and plans to exhibit at the Bobbin Show in Atlanta in October 1996 and
the IMB Show in Cologne, Germany in May 1997.
BACKLOG
- -------
TES estimates that its backlog orders believed to be firm as of March 31,
1996 and 1995 were $780,000 and $612,000 respectively. TES estimates that 98% of
its backlog on March 31, 1996 will be completed during the fiscal year which
will end on March 31, 1997.
COMPETITION
- -----------
Management believes that all of the large Japanese and most of the other
manufacturers of equipment for the apparel industry maintain research and
development departments which perform research along the same lines as TES. All
of these companies are much larger than TES and have much larger research and
development facilities. See "Risk Factors -Competition." In addition, management
estimates that there are four companies of approximately the same size as TES
that provide similar services and products. TES's management is also aware of
two companies in Europe which perform similar services, but does not know the
size of the companies. Like TES, most of these competitors perform research and
development at a customer's request. TES has found that its competitors have
designed products similar to TES's Single Needle Belt Loop Machine, Ergonomic
Stands and Pocket Creasers to which extent there is direct competition with
these TES products.
MANUFACTURING
- -------------
TES generally manufactures all prototype products which it develops
pursuant to service agreements and manufactures the already developed products
it offers. It also sometimes manufactures the final products under such
contracts for the customer. TES's facility has the machining capabilities of
sawing, milling, welding, brazing, sanding, surface grinding, drilling, tapping,
threading, turning (lathe), riveting, bending, heat treating, anodizing and
painting. TES maintains an assembly department which consists of eight assembly
stations, each with an assortment of hand tools, electronic and air-driven power
tools, vises, air supply and electronic requirements. In addition, the assembly
department has two stations designated for the assembly of electronic circuit
boards and components. During manufacture and assembly and prior to shipment,
each product manufactured by TES goes through a series of quality checks.
TES maintains an in-house inventory of all parts it manufactures and
approximately 80% of the components supplied by outside vendors. Approximately
25% of components of TES products are vendor supplied. TES generally uses
components supplied by a number of different sources and
21
<PAGE>
is therefore not predominantly dependant on one supplier of any component of any
of its products. In addition, with the exception of a few items such as
P.L.C.'s, PC computers, electric motors and electric switches (which are
available from numerous suppliers), TES has the capability of manufacturing the
components used in its products. Raw materials are also available from many
suppliers.
PROPERTY
- --------
TES currently owns a small retail shopping facility (commonly known as a
strip center) in Knoxville, Tennessee. The land and building are valued at
$755,000 on TES's balance sheet; however, the most recent appraisal (1996)
values the land and building at $1,200,000. TES uses approximately 20,000 square
feet of the total 33,000 square feet available at the strip center for its
operations. Of that space, the manufacturing area consists of 18,000 square feet
, 2,000 square feet of which constitute research and development operations. The
remaining 2,000 square feet houses the administrative offices. Management
expects the current facility to meet its space needs until August 1997. TES also
owns approximately 5.71 acres of undeveloped land approximately one quarter mile
from the existing facility. To meet anticipated growth needs, TES plans to build
a 55,000 square foot building consisting of 40,000 square feet for manufacturing
and assembly and 15,000 for research and development and administrative offices
on the land. TES has architectural drawings of the proposed facility and,
assuming sufficient capital is available, expects the facility to be complete by
September 1997. See "Risk Factors - Capital Requirements."
Approximately twelve different retail tenants rent the remainder of the
strip center which had an occupancy rate of 95% as of July 1, 1996. TES uses any
vacant space as temporary warehouse facilities. The strip center is currently
listed for sale with a commercial real estate broker. If the property is not
sold by the time TES's new facility is completed, the approximately 20,000
square feet currently occupied by TES will be made available for lease.
TES's machinery and equipment consists of saws, mills, welding and brazing
equipment, sanders, surface grinders, drill presses, tapping and threading
machines, lathes, riveting and binding equipment, heat treating ovens, anodizing
and painting equipment, hand tools, electronic and air-driven power tools,
vises, air compressors and electronic testing equipment. TES's machinery and
equipment is valued at $560,000 on TES's balance sheet. Management believes
replacement costs would be closer to $1,000,000.
EMPLOYEES
- ---------
TES is a non-union shop with eighteen hourly employees. It also has eight
salaried employees. TES employees are machinists, welding specialists,
electronic specialists, assembly personnel, shipping and inventory personnel,
clerical workers, electronic and mechanical engineers and sales and service
personnel. Approximately 70% of TES's employees have been employees of TES for
at least ten years.
22
<PAGE>
HISTORY
- -------
TES was founded by Richard E. Tice (William Tice's father) in 1964 as a
contract designer and manufacturer of specialized, pneumatically operated
garment sewing equipment. Richard Tice had entered the garment making industry
in 1916 as a 13 year old apparel factory worker and worked through the years as
a sewing machine mechanic and equipment innovator, obtaining his first patent in
1950. William A. Tice began working in his father's firm in the 1960's when he
was a teenager. Upon his father's retirement in 1972, William Tice purchased the
business and in 1973 incorporated as Tice Engineering and Sales, Inc. William
Tice obtained his first patent in 1975.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following is management's discussion and analysis of (i) TES's
financial condition and results of operations for the three month periods ended
June 30, 1996 and 1995 and the years ended March 31, 1996, 1995 and 1994; and
(ii) TES's financial condition as of March 31, 1996 compared with the fiscal
year ended March 31, 1995.
ANALYSIS OF OPERATIONS
- ----------------------
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995.
- ------------------------------------------------------------------------
Net sales revenue for the first three months of fiscal year 1996 was
$499,089 compared with $166,065 for the first three months of fiscal year 1997.
The first three months of 1996 included $100,000 received from a contract with a
denim clothing manufacturer as well as $204,600 in sales of Label Loader/Folders
whereas the first three months sales of 1997 contained no comparable contract or
shipment. Equipment such as the Label Loader/Folders are sometimes ordered by an
apparel manufacturer in large quantities in one quarter to replace or update
their existing equipment within their budget period and such sales can easily
affect the total sales dollars of one period versus another. In addition,
management believes that the decrease in sales for the first quarter of fiscal
1997 as compared to the period of the previous year was due to the adverse
effect of the development of the new technology on sales of existing products.
Some of TES's customers have indicated that they are holding orders for
traditional equipment anticipating a conversion to the new technology.
Cost of sales for the three months ended June 30, 1995 amounted to $161,092
compared to $59,285 for the three months ended June 30, 1996. This represents a
reduction in cost of sales of $101,807. The contract with the denim clothing
manufacturer which contributed $100,000 in gross revenues in the first three
months of fiscal 1996 with little cost involved as well as the reduction in the
sales of Label Loader/Folders in the first three months of fiscal 1997
contributed to the reduction of the gross margin by $231,217 in comparing the
first quarter of fiscal year 1996 with the same period in fiscal year 1997.
23
<PAGE>
Operating expenses (selling, general and administrative expenses) decreased
from $242,218 for the first three months of fiscal 1996 to $205,884 for the
first three months of fiscal 1997. The decrease was largely due to airplane and
related travel expenses decreasing from $48,996 in the first quarter of fiscal
1996 to $23,181 in the first quarter of fiscal 1997 which resulted from the sale
of an aircraft in fiscal year ending March 31, 1996.
Other Expenses Net increased from a net other expense of $8,874 for the
first three months of fiscal year end 1996 to a net other expense of $15,255 for
the first three months of fiscal year end 1997. The increase in other expense
was directly related to the interest expense on additional financing activities
for the first three months of fiscal 1997.
TES had a net income of $86,905 in the first three months of fiscal 1996
compared with a net loss before provision for income taxes of $114,359 in the
first three months of fiscal 1997. The major factor in the net income for the
first quarter of fiscal 1996 was the contract with the denim clothing
manufacturer as well as the large demand for Label Loader/Folders which was not
repeated in the first quarter of fiscal 1997. The net loss in the first quarter
of 1997 has resulted in an income tax benefit for that quarter of $20,585
thereby reducing the first quarter net loss to $93,774.
Year ended March 31, 1996 Compared with Years Ended March 31, 1995 and 1994
- ---------------------------------------------------------------------------
Net sales revenue for 1996 was $1,392,558 compared to $1,389,854 for 1995,
and $1,308,708 for 1994. Gross profit was $941,621 for 1996 as compared to
$891,854 for the prior year. Gross profit margin went from 54.22% in 1994 to
64.18% in 1995 to 67.62% in 1996. The major factor in the increase in gross
profit margin was the contract with the denim clothing manufacturer which
contributed $150,000 in gross revenues in both 1995 and 1996 with little cost
involved.
Cost of sales have decreased in each succeeding year since 1994. Cost of
sales amounted to $599,184 in 1994, $498,000 in 1995 and $450,937 in 1996. The
primary reason for this improvement was due to revenue generated from the
contract with the denim clothing manufacturer discussed above.
Operating expenses (selling, general and administrative) decreased from
$873,501 in 1994 to $869,660 in 1995 then increased to $968,760 in 1996. The
increase in 1996 expenses was largely due to additional airplane and related
travel expenses increasing from $47,242 in 1995 to $71,728 in 1996 as well as
the legal and accounting expenses increasing from $8,448 in 1995 to $42,076 in
1996. These increases were associated with registering and documenting potential
licenses of TES's patented new technology as well as expenses in preparing for
the public offering. Payroll and benefit costs went from $577,758 in 1994 to
$533,894 in 1995 then increased to $556,614 in 1996. In 1995 TES recognized an
income item of $184,715 due to the cumulative effect to March 31, 1994 of
application of statement of financial accounting standard #109 Accounting for
Income Taxes. In 1996 TES sold an aircraft which resulted in a gain of $105,593.
24
<PAGE>
In 1994 TES had a net loss of $221,082 as compared with the net loss before
change in accounting principal as discussed above of $30,322 for the year ended
1995, and in 1996 a net income of $14,299. The main reason for the profit was
due to the increase in gross margin. TES has Federal and State tax loss carry-
forwards of $407,410 and $481,356 respectively, which have an estimated value to
the company of $138,765.
PAYROLL AND BENEFIT COSTS
- -------------------------
Payroll and benefit costs were $124,339 for the first quarter of fiscal
1996 representing 25% of sales compared to $117,231 and 71% of sales in the
first quarter of fiscal 1997. The reduction in payroll and benefit cost for the
first quarter 1997 as compared to 1996 was largely due to the retirement of
Daisy Tice as Vice President of TES in August 1995.
Payroll and benefit costs were $577,758 in 1994 as compared with $533,894
in 1995 and $556,614 in 1996. Payroll and benefit cost in 1996 represent 40% of
sales; this compares with 38.41% of sales in 1995 and 44.15% of sales in 1994.
FUTURE OPERATIONS
- -----------------
Assuming that sufficient capital can be raised, TES plans to build a new
facility on undeveloped property it owns. The new facility will allow for
continued growth in personnel and product development. TES plans to continue to
expand the capabilities and applications of the electronic gearing technology
and research other industries to which the technology may be applicable. TES
also plans to increase its marketing efforts internationally through licenses of
the technology and through direct marketing.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1995 the ratio of current assets to current liabilities was
0.61 to 1 compared with 1.13 to 1 at March 31, 1996. The major reason of the
change was the restructuring of the notes payable from short term to long term
debt. Quick liquidity (current assets less inventories to current liabilities)
was 0.39 to 1 at March 31, 1996 and 0.24 to 1 at March 31, 1995. The current
ratio and quick ratio both improved due to the restructuring of current debt.
The monthly average collection period was 36 days in 1995 and 41 days in 1996.
In the year ended March 31, 1995, cash provided by operating activities was
($174,723) compared to 1996 at ($71,284). Cash used by investing activities in
1995 was $4,957 and in 1996 cash provided by investing activities was $311,830.
The sale of the aircraft generating $350,000 was the cause for this change. Cash
provided from financing activities in 1995 was $202,307 and cash usage from
financing activities in 1996 was $283,292.
The ratio of debt to total capitalization was 0.16 to 1 at March 31, 1996
and 0.13 to 1 at March 31, 1995. Total expenditures for fixed assets consisted
mainly of improvements to the buildings of $27,835 and $9,422 for new equipment.
25
<PAGE>
All of TES's real estate, equipment, inventory and receivables are pledged
to lenders as collateral for loans. The loan documents require TES to maintain
certain financial ratios and limit or prohibit TES from merging or consolidating
with another corporation and selling all or substantially all of its assets. See
"Capitalization." The bank consented to the transfer of the TES shares to the
Issuer.
As of March 31, 1996, TES was in compliance with the financial ratio
requirements of its loan documents to the extent applicable. To date, TES's
indebtedness has been personally guaranteed by TES's sole shareholder.
LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings currently pending against TES or
the Issuer.
MANAGEMENT
----------
OFFICERS AND DIRECTORS OF THE ISSUER AND TES
- --------------------------------------------
<TABLE>
<CAPTION>
NAME POSITION WITH THE ISSUER (1) POSITION WITH TES
- ---- ---------------------------- -----------------
<S> <C> <C>
William A. Tice President, Chairman of the President, Chairman of
Board, Director the Board, Director
Karen Ann Walton Vice President, Secretary/ Vice President,
Treasurer, Director Secretary/Treasurer,
Director
Sarah Y. Sheppeard Director Director
M. Wayne Colvin Director Director
Billie Joe Clayton Director Director
- -----------------------------------------------------------------------------------
</TABLE>
(1) All persons listed were appointed to such positions in 1996.
Officers serve at the discretion of the Board of Directors. Directors hold
office until the next annual meeting of shareholders and until their successors
have been elected and accept office. Directors receive directors' fees of $300
per year.
William A. Tice, age 52, has been President, Chairman of the Board and a
director of TES since 1972 when he purchased the business from his father. Mr.
Tice received an associate degree in Accounting and Business Administration from
Knoxville Business College in 1974
Karen Ann Walton, age 36, has been Secretary and a director of TES since
1983, Treasurer from December 1983 to June 1986 and since July 1996 and an
employee since 1978. She became
26
<PAGE>
General Manager and a Vice President in 1988. From June 1992 to March 1993, she
also worked for Kimberly-Clark Corp assisting in relocating their accounts
receivable department from Neenah, Wisconsin to Knoxville. Ms. Walton is a
Licensed Public Accountant and received Associates Degrees in Accounting and
Computer Programming from Draughon's Junior College in Knoxville, Tennessee in
1986.
Sarah Y. Sheppeard, age 41, has been a director of TES since 1995. She is
currently a partner with the Knoxville law firm of Sheppeard & Swanson and has
held such position since April 1994. Prior to forming her current firm, she was
a partner with the Knoxville law firm of Sheppeard and Susano from 1989 to 1994.
Prior to that, she was a sole practitioner since leaving Lockridge & Becker,
P.C. in 1985. She received her J.D. from the University of Tennessee College of
Law in 1979 and a B.S. also from the University of Tennessee in 1976.
M. Wayne Colvin, age 59, recently became a director of TES and the Issuer.
Mr. Colvin is currently the President and an owner of Col-Byn Enterprises, Inc.
which has provided consulting services and acted as a manufacturer's
representative in the sewn products industry since 1992. Prior to that from 1964
to 1992, Mr. Colvin worked for Levi Strauss & Co. and held various positions
including plant engineering area engineer, Director of Engineering and Vice
President of Manufacturing, Menswear Division. Prior to working for Levi
Strauss, he was engineering and plant manager for Blue Bell, Inc. (Wrangler) in
Greensboro, North Carolina.
Billie Joe Clayton, age 60, recently became a director of TES and the
Issuer. Mr. Clayton is currently the chief executive officer of Clayton Motors,
Inc. and affiliated companies and has held such position since 1961. He is also
a director and Vice Chairman of the Board of Clayton Homes, Inc. since 1985. He
is a Regional Director for First Tennessee Bank.
EXECUTIVE COMPENSATION
The following table sets forth the compensation of the President (the Chief
Executive Officer) for the fiscal years ending March 31, 1996, 1995 and 1994.
The Issuer has not paid any compensation.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)(1)
------------------ ---- ---------- --------- -------------------
<S> <C> <C> <C> <C>
William A. Tice, President, 1996 75,000 -0- 29,600
Chief Executive Officer 1995 68,500 -0- 17,218
1994 100,000 -0- 12,978
- -------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
(1) Other annual compensation mostly consisting of life insurance premiums on
split dollar and regular insurance, but also includes health insurance
premiums. TES provides Mr. Tice with the use of a 1984 Mercedes 420 SEL; he
pays expenses of operation. Mr. Tice also received interest on certain
notes reflecting funds loaned to TES. See "Management - Certain
Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
For all years referenced in the Summary Compensation Table, the two
shareholders of TES, Bill Tice and Daisy Tice (his mother), determined executive
compensation.
CERTAIN TRANSACTIONS
During the last three years, Mr. Tice has loaned TES money on which debt he
had received interest at a rate of 10% per annum. For fiscal years ending
March 31, 1994, 1995 and 1996, he received interest totaling $12,859, $15, 327
and $11,628, respectively. See "Capitalization."
TES invested $1,245.25 in gold and silver certificates which subsequently
declined in value by approximately $200. Mr. Tice purchased the certificates at
the purchase price of $1,245.25 to avoid future losses by TES.
Mr. Colvin has acted as a manufacturer's representative and provided
consulting services to TES. TES pays him commissions on sales of equipment. It
is expected that he will continue to provide services to TES from time to time.
Mr. Clayton loaned TES $130,000 at an interest rate of 10% per annum and is
entitled to convert such debt into Common Shares of the Issuer at a rate of
$3.00 per share.
28
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to ownership of
issued and outstanding stock and warrants of the Issuer by management and 5% or
greater shareholders as of the date hereof and Selling Shareholders:
<TABLE>
<CAPTION>
Total Number of Percent Number of Percent
Securities Owned of Registered After
Name and Address Title of Class Beneficially Class (1) Shares Sale (2)
- ---------------- -------------- ------------ --------- ------ --------
<S> <C> <C> <C> <C> <C>
William A. Tice (3) Common Shares 5,211,750 88% 1,302,937 66%
7610 Breckenridge Lane Class B Common Shares 750,000 100% -0- N/A
Knoxville, TN
Joseph Walker & Sons Common Shares 238,470 4% 238,470 0%
88 Walker Creek Road Class B Common Shares -0- 0% -0- N/A
Walker, WV
Billie Joe Clayton (5) Common Shares 43,333 1% 43,333 N/A
817 Laurel Hill Road Class B Common Shares -0- 0% -0- N/A
Knoxville, TN
Karen Ann Walton (4) Common Shares 15,000 * 15,000 N/A
7633 Breckenridge Lane Class B Common Shares -0- 0% -0- N/A
Knoxville, TN
Total number of shares Common Shares 5,270,083 89% 1,361,270 N/A
owned by directors and Class B Common Shares 750,000 100% -0- N/A
executive officers as
a group
- ---------------------------------------------------------------------------------------------------
*Less than 1%
</TABLE>
(1) These figures do not include Common Shares which may be issued upon the
exercise of the Warrants, but do include Common Shares which may be issued
upon exercise of employee options. See "Securities."
(2) This is the percent of class of the Shares held by Selling Shareholders
assuming all Shares offered are sold, all employee options are exercised
and no Warrants are exercised.
(3) Mr. Tice's son Chris, who is an employee of TES, has options to purchase up
to 10,000 Common Shares upon the same terms and conditions as the other
employees. See "Securities." These shares are not included in the numbers
listed opposite Mr. Tice's name. In addition, Mr. Tice intends to give a
total of 65,000 of his Shares to his brothers, sister and a daughter either
outright or in trust.
29
<PAGE>
(4) The shares listed are shares which Ms. Walton is entitled to receive if she
exercises options she received as an employee of TES. The terms and
conditions of the options are the same as for other employees who hold
options. See "Securities."
(5) These are the Common Shares that Mr. Clayton will receive if he converts
all eligible debt to equity. See "Management - Certain Transactions."
Joseph Walker and Sons, Inc. ("JWSI") performed certain consulting services
for TES and the Issuer in partial consideration of which it received warrants of
TES which it exchanged for 238,470 Common Shares which constitute approximately
4% of the total issued and outstanding Common Shares. (By agreement with TES,
JWSI converted all Class B Common Shares it was entitled to receive under its
warrants to Common Shares.)
SECURITIES
----------
DESCRIPTION OF CAPITAL STOCK
- ----------------------------
COMMON SHARES. The Issuer is authorized to issue 30,000,000 Common Shares,
par value $.01 per share, of which 5,840,220 shares were issued and outstanding
as of the date of this Prospectus. There will be approximately 1,200 holders of
the issued and outstanding Common Shares after the Distribution. However,
William A. Tice currently owns 89% of the issued and outstanding Common Shares
and together with his ownership of 100% of the Class B Common Shares controls
the Issuer. See "Risk Factors - Control by Holder of Class B Common Shares." See
"Principal and Selling Shareholders." The holders of Common Shares of the Issuer
are entitled to one vote per share on all entitled matters including the
election of directors and do not have cumulative voting rights. With respect to
the election of directors, holders of Common Shares (together with holders of
Class D Common Shares and of any Preferred Shares with voting rights) voting as
a separate class are entitled to elect 25% of the members of the Board of
Directors of the Issuer. Holders of Class B Common Shares are entitled to elect
the remaining directors. See "Risk Factors - Control By Holders of Class B
Common Shares." Notwithstanding the foregoing, if, on the record date for any
shareholders' meeting at which directors are to be elected, the number of issued
and outstanding Common Shares, Class D Common Shares and voting Preferred Shares
is less than 10% of the aggregate number of issued and outstanding voting shares
of all classes, all directors will be elected by the holders of all voting
shares voting together.
The holders of Common Shares have a noncumulative $.05 per share annual
dividend preference over non-stock dividends paid on Class B Common Shares
(described below) from funds legally available for dividends when, as and if
declared by the Board of Directors of the Issuer. See "Risk Factors - Lack of
Dividends." In addition, holders of Class B Common Shares may not receive any
dividends unless holders of Common Shares receive a dividend per share at least
equal to the dividend per share paid to holders of Class B Common Shares. Stock
dividends may only be paid to holders of Common Shares in Common Shares and only
if the same number of Class B Common Shares will be paid with respect to each
outstanding Class B Common Share. The payment of dividends may also be subject
to preferential or identical rights, if any, of the holders
30
<PAGE>
of other outstanding securities. See "Risk Factors - Authorization of Preferred
Stock." Common Shares or Class B Common Shares may not be combined or subdivided
without at the same time making a proportionate combination or subdivision of
the shares of the other of such classes.
Holders of Common Shares are also entitled to share ratably in all of the
assets of the Issuer available for distribution to holders of common shares
(including Class B Common Shares and Class D Common Shares) upon liquidation,
dissolution or winding up of the affairs of the Issuer subject to the preference
of holders of Common Shares, but only to the extent of the par value of such
Common Shares, and subject to any preferential rights of the holders of any
other outstanding securities. See "Risk Factors - Authorization of Preferred
Stock." Common Shares do not have preemptive, subscription or conversion rights
and are not subject to call or redemption (there are no applicable sinking fund
provisions). All Common Shares now outstanding are fully paid and nonassessable.
CLASS B COMMON SHARES. In addition to Common Shares, the Issuer is
authorized to issue 5,000,000 Class B Common Shares, $.01 par value per share,
of which 750,000 shares were issued and outstanding as of the date hereof. See
"Principal and Selling Shareholders." There is one holder of Class B Common
Shares, William A. Tice. Holders of Class B Common Shares have the right to one
noncumulative vote per share on all matters on which they are entitled to vote.
For the election of directors, the holders of a majority of Class B Common
Shares are entitled to elect 75% of the members of the Board of Directors. If,
on the record date for any shareholders' meeting at which directors are to be
elected, the number of issued and outstanding Common Shares, Class D Common
Shares and voting Preferred Shares is less than 10% of the aggregate number of
issued and outstanding voting shares of all classes, all directors will be
elected by the holders of all voting shares voting together. If more than 90% of
the aggregate number of issued and outstanding Common Shares, Class B Common
Shares, Class D Common Shares and voting Preferred Shares are Class B Common
Shares, the holders of a majority of Class B Common Shares will in practice be
able to elect all of the members of the Board of Directors. See "Risk Factors -
Control By Holder of Class B Common Shares."
Holders of Class B Common Shares are entitled to receive dividends when, as
and if declared subject to a non-cumulative $.05 per share annual dividend
preference on each Common Share. See "Risk Factors - Lack of Dividends." In
addition, holders of Class B Common Shares may not receive any dividend unless
holders of Common Shares receive a dividend per share at least equal to the
dividend per share paid to holders of Class B Common Shares. Stock dividends may
only be paid to holders of Class B Common Shares in Class B Common Shares and
may only be paid in shares at all if the same number of Common Shares will be
paid with respect to each outstanding Common Share. The payment of dividends may
also be subject to preferential or identical rights, if any, of the holders of
other outstanding securities. See "Risk Factors - Authorization of Preferred
Stock."
Holders of Class B Common Shares are also entitled to share ratably in all
of the assets of the Issuer available for distribution to holders of common
shares (including Common Shares and Class D Common Shares) upon liquidation,
dissolution or winding up of the affairs of the Issuer,
31
<PAGE>
subject to the preference of holders of Common Shares, but only to the extent of
the par value of such Common Shares, and subject to any preferential rights of
other shareholders. See "Risk Factors - Authorization of Preferred Stock."
Holders of Class B Common Shares have preemptive rights only as to Class B
Common Shares. Class B Common Shares are not subject to call or redemption
(there are no applicable sinking fund provisions). All Class B Common Shares now
outstanding are fully paid and nonassessable.
In addition, the Board of Directors must seek the approval of a majority of
the holders of Class B Common Shares to grant rights to subscribe for, purchase
or issue shares of authorized and unissued Class B Common Shares. Common Shares
or Class B Common Shares may not be combined or subdivided without at the same
time making a proportionate combination or subdivision of the shares of the
other of such classes. Each share may also be converted into one Common Share at
any time at the option of the holder.
At this time, 100% of the issued and outstanding Class B Common Shares are
owned by William A. Tice. See "Principal and Selling Shareholders." The holders
of Class B Common Shares elect 75% of the directors and therefore Mr. Tice
controls the Issuer. In addition, Mr. Tice held 89% of the issued and
outstanding Common Shares by which ownership he controls decisions by holders of
Common Shares as well. See "Risk Factors - Control By Holder of Class B Common
Shares."
CLASS D COMMON SHARES. Class D Common Shares are a convertible security
created in order to secure highly motivated executive personnel for the Issuer
and its subsidiaries and take the place of compensation stock options, although
the Issuer remains authorized to issue stock options. There are 600,000 Class D
Common Shares authorized at $.01 par value per share. Class D Common Shares are
identical to Common Shares and have equal rights and privileges with Common
Shares except as described below. Class D Common Shares are nontransferable. The
Board of Directors, by resolution, may authorize the issuance of Class D Common
Shares; provided that, each such resolution contains a formula under which the
shares may be converted to Common Shares. In no case may the Board of Directors
set any conversion rights which could result in the issuance of more than ten
Common Shares for each Class D Common Share. At the close of business on the
fifth anniversary of the date of a resolution authorizing the issuance of any
Class D Common Shares, such issued and outstanding but unconverted shares will
be deemed to have been converted at the rate of one Common Share for each such
Class D Common Share. There are no issued and outstanding Class D Common Shares
as of the date of this Prospectus.
PREFERRED SHARES. The Board of Directors of the Issuer, by resolution, has
the authority to issue, in one or more series, up to 10,000,000 Preferred
Shares. Such unissued shares will have such preferences, rights and limitations
as are established by the Board of Directors except that the voting rights, if
any, of one Preferred Share may not exceed the voting rights of one Common
Share. See "Risk Factors - Authorization of Preferred Stock." There are no
issued and outstanding Preferred Shares as of the date of this Prospectus.
32
<PAGE>
COMMON STOCK PURCHASE WARRANTS. The Issuer has issued and outstanding
1,000,000 Common Stock Purchase Warrants, each Warrant entitling the holder to
purchase one Common Share of the Issuer. The Warrants may be exercised at any
time during the 24 month period beginning on the date of this Prospectus at an
exercise price of $8.00 per share, subject to adjustment, by surrendering the
Warrant to the Warrant Agent with the subscription properly completed and
executed with payment of the exercise price. No fractional Common Shares will be
issued in connection with the exercise of Warrants. The Issuer has no right to
call the Warrants.
If a holder of Warrants fails to exercise the Warrants prior to their
expiration, the Warrants will expire and the holder will have no further rights
with respect to the Warrants. If a market for the Warrants develops, the holder
may sell the Warrants instead of exercising them. There can be no assurance that
a market for the Warrants will develop or continue. See "Risk Factors - Absence
of Trading Market." If the Issuer is unable to qualify for sale the Common
Shares underlying the Warrants (or the shares are exempt from qualification) in
the states in which the various holders of the Warrants then reside, holder of
the Warrants may have no choice but to let the Warrants expire. See "Risk
Factors - Current Prospectus and State 'Blue Sky' Registration or Exemption
Required to Exercise the Warrants."
A holder of Warrants will not have any rights or privileges of a
shareholder of the Issuer prior to exercise of such Warrants. The Issuer will
keep available a sufficient number of authorized Common Shares to permit
exercise of the Warrants. The exercise price of the Warrants and the number of
shares issuable upon exercise of the Warrants will be subject to adjustment in
the event of stock dividends, stock splits, combinations, reorganizations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Issuer's Common Shares will exceed the exercise price at any time
during the term of the Warrants.
The Warrants were issued pursuant to a Warrant Agreement between the Issuer
and Mid-America Bank of Louisville and Trust Company (the "Warrant Agent"). All
descriptions of the Warrants are qualified in their entirety by reference to the
Warrant Agreement which is included as an exhibit to the Registration Statement
of which this Prospectus is a part.
EMPLOYEE STOCK OPTIONS. The Issuer granted options to purchase 54,750
Common Shares to ten of the employees of TES as of the date of this Prospectus.
The options may be exercised at any time during the 24-month period after
issuance at an exercise price of $1.00 per share. The options are "nonqualified"
options and the employees will have compensation income upon the exercise of the
options to the extent of the difference between the exercise price and the fair
market value of the Common Shares. The options are nontransferable except upon
the employee's death. A holder of the options will not have any rights or
privileges of a shareholder of the Issuer prior to exercise of the options.
33
<PAGE>
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
- -------------------------------------------
The transfer agent and registrar for the Common Shares and the Warrant
Agent is Mid-America Bank of Louisville and Trust Company, P.O. Box 1101,
Louisville, Kentucky 40201-1101.
DIVIDENDS
---------
The Issuer has not paid any dividends. In addition, TES historically has
not paid dividends. It is expected that the capital requirements of TES will
prevent payment of dividends in the near future. There is no guarantee that TES,
and therefore the Issuer, will pay dividends in the future. See "Risk Factors -
Lack of Dividends" and "Authorization of Preferred Stock."
LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS
----------------------
Officers and directors of the Issuer are covered by certain provisions of
the Delaware General Corporation Law and the Certificate of Incorporation and
Bylaws of the Issuer, which serve to limit, and, in certain instances, to
indemnify them against, certain liabilities which they may incur in such
capacities.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
- -------------------------------------------------
Delaware has enacted legislation which authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
shareholders for monetary damages for breach of a director's fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
the legislation, directors are accountable to corporations and their
shareholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission by including
certain provisions in its Certificate of Incorporation.
The Issuer's Certificate of Incorporation limits the liability of its
directors to the Issuer or its shareholders (in their capacity as directors, but
not in their capacity as officers) to the fullest extent permitted by the
legislation. Specifically, the directors of the Issuer will not be personally
liable for monetary damages for breach of director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Issuer or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit.
34
<PAGE>
INDEMNIFICATION
- ---------------
The Issuer's Certificate of Incorporation provides that the Issuer
indemnify any and all of its directors or officers or former directors or
officers or any person who may have served at its request as a director or
officer of another corporation in which it owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by
them in connection with the defense of any action, suit or proceeding in which
they, or any of them, are made parties, or a party, by reason of being or having
been directors or officers of the Issuer, or of such other corporation, except
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
In addition, Section 7.1(a) of the Issuer's Bylaws provides that the Issuer
must indemnify any person 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 Issuer) by reason of the fact that such person is or
was a director, officer, employee or agent of the Issuer, or is or was serving
at the request of the Issuer as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Issuer, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe the conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Issuer, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that this conduct was unlawful.
Section 7.1(b) of the Issuer's Bylaws provides that the Issuer must
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
Issuer to procure a judgment in its favor by reason of the fact that such person
is or was a director, officer, employee or agent of the Issuer or is or was
serving at the request of the Issuer as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Issuer, 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 Issuer unless and
only to the extent that the Delaware 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 Delaware Court of Chancery or such other court shall deem proper.
35
<PAGE>
Section 7.1(d) of the Issuer's Bylaws provides that any indemnification
under Sections 7.1(a) and (b) (unless ordered by a court) shall be made by the
Issuer only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the shareholders of the Issuer. To the
extent, however, that a director, officer, employee or agent of the Issuer has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in the defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred in connection therewith, without the
necessity of authorization in the specific case under Section 7.1(c).
Under Section 7.1(e), expenses incurred by a director, officer, employee or
agent of the Issuer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Issuer in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director, officer, employee or agent to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Issuer.
The indemnification and advancement of expenses provided by or granted
pursuant to the Issuer's Bylaws are not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any Bylaw, agreement, contract, vote of shareholders or disinterested directors
or otherwise, both as to action in official capacity and as to action in another
capacity while holding such office, it being the Issuer's policy that
indemnification of the persons specified in the Bylaws shall be made to the
fullest extent permitted by law. The indemnification and advancement of expenses
provided by, or granted pursuant to the Issuer's Bylaws shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling the Issuer pursuant
to the foregoing provisions, the Issuer has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is therefore unenforceable.
LEGAL MATTERS
-------------
The Issuer has been advised with respect to certain legal aspects of the
offering by Ogden Newell & Welch, 1200 One Riverfront Plaza, Louisville,
Kentucky 40202.
36
<PAGE>
EXPERTS
-------
The financial statements of TES at June 30, 1996 and March 31, 1996, 1995
and 1994, and for each of the years in the three year period ended March 31,
1996, appearing in this Prospectus have been audited by Boring & Goins, P.C.,
Certified Public Accountants, 107 Main Avenue, P. O. Box 2850, Knoxville,
Tennessee 37901, as set forth in its reports thereon appearing elsewhere herein.
The financial statements are included in reliance upon such report given upon
the authority of such firm as an expert in accounting and auditing.
37
<PAGE>
FINANCIAL STATEMENTS
--------------------
TABLE OF CONTENTS
-----------------
Tice Engineering and Sales, Inc.
Three Months Ended June 30, 1996 and 1995
Years Ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets - June 30, 1996 and 1995 39
Unaudited Statements of Income and Retained Earnings - For the Three Months Ended
June 30, 1996 and 1995 41
Unaudited Statements of Cash Flows - For the Three Months Ended June 30, 1996 and 1995 42
Unaudited Notes to Financial Statements (June 30, 1996) 43
Schedule of Expenses 47
Independent Auditor's Report - May 23, 1996 48
Balance Sheet - March 31, 1996 49
Statement of Income and Retained Earnings - For the Year Ended March 31, 1996 51
Statement of Cash Flows - For the Year Ended March 31, 1996 52
Notes to Financial Statements - March 31, 1996 53
Independent Auditor's Report - Supplemental Information 58
Schedule of Expenses 59
Independent Auditor's Report - June 1, 1995 60
Balance Sheet - March 31, 1995 61
Statement of Income and Retained Earnings - For the Year Ended March 31, 1995 63
Statement of Cash Flows - For the Year Ended March 31, 1995 64
Notes to Financial Statements - March 31, 1995 65
Independent Auditor's Report - Supplemental Information 69
Schedule of Expenses 70
Independent Auditor's Report - May 20, 1994 71
Balance Sheet - March 31, 1994 72
Statement of Operations and Retained Earnings - For the Year Ended March 31, 1994 74
Statement of Cash Flows - For the Year Ended March 31, 1994 75
Notes to Financial Statements - March 31, 1994 76
Independent Auditor's Report - Supplemental Information 79
Schedule of Expenses 80
</TABLE>
F-1
<PAGE>
TICE ENGINEERING AND SALES, INC.
UNAUDITED BALANCE SHEET
JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 54,619 $ 10,280
Accounts receivable
Trade 235,652 102,585
Employee 9,774 15,685
Prepaid expenses 30,670 32,661
Inventory 327,295 476,986
Due from related company 13,000
Deferred income tax benefit 80,000
---------- ----------
Total current assets 658,010 731,197
Fixed assets:
Land 305,000 305,000
Building and improvements 425,050 453,710
Equipment 558,534 558,531
Vehicles 450,859 124,599
---------- ----------
1,739,443 1,441,840
Less accumulated depreciation 922,308 886,454
---------- ----------
Net fixed assets 817,135 555,386
Other assets:
Deferred income tax benefit 189,646 119,912
Utility deposit 890 890
Cash surrender value -
officer's life 14,250
Patent, net of accumulated
amortization 69,508 108,610
Investments 1,245
Note receivable - officer 28,448
---------- ----------
Total other assets 261,289 272,110
---------- ----------
$1,736,434 $1,558,693
========== ==========
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - officer $ 121,699 $ 106,609
Accounts payable 176,646 183,358
Franchise tax payable 2,870 2,647
Customer deposits 25,000
Payroll taxes payable 3,352
Garnished wages payable 623
Current maturities of
long-term debt 858,492 475,123
---------- ----------
Total current liabilities 1,163,682 792,737
Long-term debt, less current
maturities 291,907 651,491
Stockholders' equity:
Capital stock, no stated
value, 750 shares authorized,
issued and outstanding 8,634 8,634
Retained earnings 272,211 105,831
---------- ----------
Total stockholders' equity 280,845 114,465
---------- ----------
$1,736,434 $1,558,693
========== ==========
</TABLE>
See accompanying notes and accountants' report
F-3
<PAGE>
TICE ENGINEERING AND SALES, INC.
UNAUDITED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revenues $499,089 $ 166,065
Cost of sales:
Beginning inventory 327,295 464,997
Purchases 161,092 71,274
-------- ---------
488,387 536,271
Less: ending inventory 327,295 476,986
-------- ---------
Total cost of sales 161,092 59,285
-------- ---------
Gross margin 337,997 106,780
Expenses 242,218 205,884
-------- ---------
Income (loss) from operations 95,779 (99,104)
Other income (expense):
Rental income 11,750 12,575
Interest expense (20,624) (27,830)
-------- ---------
Total other income (expense) (8,874) (15,255)
-------- ---------
Net income (loss) before
provision for income taxes 86,905 (114,359)
Income tax benefit (20,585)
-------- ---------
Net income (loss) 86,905 (93,774)
Retained earnings, March 31 185,306 199,605
-------- ---------
Retained earnings, June 30 $272,221 $ 105,831
======== =========
</TABLE>
See accompanying notes and accountants' report
F-4
<PAGE>
TICE ENGINEERING AND SALES, INC.
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 86,905 $ (93,774)
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 12,294 12,187
Changes in operating assets and
liabilities:
Decrease (Increase) in receivables (39,443) 16,792
(Increase) in inventories (11,989)
(Increase) in prepaid expenses (3,412) (4,370)
(Increase) in other assets (34,434) (26,484)
(Increase) in deferred tax asset (20,584)
Increase (Decrease) in accounts payable 71,105 (13,554)
(Decrease) in accrued expenses (56) (4,605)
-------- ---------
Net cash provided by (used in) operating activities 92,959 (146,381)
INVESTING ACTIVITIES:
Purchase of fixed assets (12,425) (3,825)
-------- ---------
Net cash used by investing activities (12,425) (3,825)
FINANCING ACTIVITIES:
Proceeds from short term borrowings 205,000
Proceeds from refinancing of long term debt 700,000
Principal payments on notes payable (71,479) (750,158)
-------- ---------
Net cash (used in) provided by financing activities (71,479) 154,842
-------- ---------
Net increase in cash 9,055 4,636
Cash Balance, Beginning of Period 45,564 2,822
-------- ---------
Cash Balance, End of Period $ 54,619 $ 7,458
======== =========
</TABLE>
See accompanying notes and accountants' report
F-5
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
The Company designs and manufactures robotic and pneumatic industrial sewing
machine attachments.
TRADE ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made.
INVENTORIES
Inventories are stated at lower of cost or market. Cost is determined using the
first-in, first-out method.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash and/or cash equivalents.
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C>
Interest $ 25,237
Taxes -0-
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method and accelerated methods over the estimated useful
lives of the assets. Significant improvements are capitalized while
maintenance and repairs are expensed as incurred.
F-6
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PATENTS
Certain legal and other direct expenses incurred in order to obtain patents on
company designed and manufactured parts have been capitalized at cost.
Amortization is calculated by the straight-line-method over a seventeen year
estimated useful life. Amortization expense totaled $1,137 during the three
months ended June 30, 1996.
2. LONG-TERM DEBT
<TABLE>
<CAPTION>
Notes payable consisted of the following at June 30, 1996:
<S> <C>
Note payable to a bank, interest at 9.5% per
annum until 1999; thereafter at prime +
3.5% payable monthly in equal installments
of $9,112, secured by accounts receivable,
inventory, furniture, fixtures, equipment
and real estate. $ 696,614
Note payable to a bank, interest at prime +
2% payable monthly, principal due at maturity
on August 31, 1996, secured by real estate. 100,000
Note payable to a bank, interest at bank
index rate plus 1% payable monthly, due
10/1/96 secured by assignment of officer's
life insurance. 225,000
Note payable to a bank, interest at 9% per
annum payable monthly, principal due on
thirty day demand and secured by a vehicle. 25,000
Note payable to an individual, interest
at 10%, per annum and principal due at
maturity on September 1, 1996. Principal
and interest are convertible into common
shares of a related company at $3 a share. 80,000
----------
1,126,614
Less current maturities (475,123)
----------
$ 651,491
==========
</TABLE>
F-7
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1996
2. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows at June 30:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1998 $ 46,590
1999 51,214
2000 56,296
2001 61,884
2002 68,025
Thereafter 367,482
---------
$ 651,491
=========
</TABLE>
3. NOTE PAYABLE - OFFICER
At June 30, 1996 the Company had an unsecured note for $106,609 payable to an
officer with interest at 10%, due on demand.
4. CONTINGENT LIABILITY
In December, 1994, the Company entered into a Joint Development Agreement with a
denim clothing manufacturer to develop a specialized sewing machine for the
manufacture of jeans. The manufacturer paid the Company $150,000 in development
fees during the year ended March 31, 1995 and an additional $150,000 in the year
ended March 31, 1996. Under the terms of the agreement, the manufacturer will
have exclusive rights to purchase said sewing machine for an initial period of
two years from the date of shipment of the first production machine. After the
initial two year period, in order to maintain its exclusive rights, the
manufacturer must purchase certain minimum quantities. In the event the Company
sells machines to a third party, the Company is required to pay royalties to the
manufacturer up to the amount paid to the company for development fees, plus 10%
interest.
5. RELATED PARTY TRANSACTIONS
Included in notes payable is a note payable to a major stockholder. The note
bears 10% interest and is due on demand and is subordinated debt.
The Company made principal payments of $19,914 during the three months ended
June 30, 1996. In addition, the Company accrued interest of $2,593 on the note.
F-8
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
JUNE 30, 1996
6. INCOME TAXES
Effective March 31, 1994, the Company changed to an asset and liability method
of accounting for income taxes in accordance with Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax basis of assets and liabilities and are
measured using enacted tax rates.
Deferred tax assets in the accompanying balance sheet include the following
components at June 30, 1996:
Net operating loss carryover $199,912
========
The company has federal and state loss carry forwards of $407,410 and $481,356,
respectively, substantially all of which expire by 2008.
7. MAJOR CUSTOMERS
The Company has sales primarily to three major customers totaling almost 80% of
gross revenues with the largest of the three being almost 50% of revenues.
8. GOING CONCERN
The Company has incurred losses from operations causing a capital deficiency.
This factor, along with uncertainties regarding the ability of the Company to
obtain additional financing or outside investors to contribute additional
capital, create an uncertainty about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management plans to seek additional investors to contribute capital based on new
technology the Company has invented, and the Company is also planning to raise
additional capital by going public.
F-9
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF EXPENSES
(UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
EXPENSES
Advertising $ 9,438 $ 5,356
Airplane 45,601 10,925
Amortization 306 1,137
Bad debts 283 33
Commissions 1,000 550
Depreciation 11,988 11,050
Dues and fees 60 2,661
Employee benefits 2,648
Equipment maintenance 338 295
Insurance 16,574 14,909
Legal and accounting 17,008 16,475
Marketing and promotions 6,000
Meals and entertainment 349 711
Office supplies 3,888 2,007
Postage 265 250
Production 982 521
Research and development 1,793 802
Repairs and maintenance
- real estate 1,635 2,450
Royalty 887 887
Salaries - assembly 11,857 14,014
Salaries - clerical 10,662 31,334
Salaries - manufacturing 15,876 15,734
Salaries - engineering 5,850 10,381
Salaries - officers 22,350 6,000
Salaries - sales and service 39,478 20,775
Shop 1,079 712
Taxes - payroll 9,587 7,303
Taxes - other 10 2,131
Telephone 3,381 2,039
Travel 3,395 12,256
Utilities 2,915 3,325
Vehicle 3,383 213
-------- --------
Total expenses $242,218 $205,884
======== ========
</TABLE>
See accompanying notes and accountants' report
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
We have audited the accompanying balance sheet of Tice Engineering and Sales,
Inc. as of March 31, 1996, and the related statements of income and retained
earnings and cash flows for the year 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 financial statements referred to above present fairly, in
all material respects, the financial position of Tice Engineering and Sales,
Inc. as of March 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered losses from operations
subsequent to the date of these financial statements causing a capital
deficiency which raises substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described
in Note 9. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Boring & Goins, P.C.
Knoxville, Tennessee
May 23, 1996
F-11
<PAGE>
TICE ENGINEERING AND SALES, INC.
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 2,822
Accounts receivable
Trade 119,060
Employee 16,002
Prepaid expenses 28,291
Inventory 464,997
Deferred income tax benefit 80,000
----------
Total current assets 711,172
Fixed assets:
Land 305,000
Building and improvements 449,885
Equipment 558,531
Vehicles 124,599
----------
1,438,015
Less accumulated depreciation (875,404)
----------
Net fixed assets 562,611
Other assets:
Deferred income tax benefit 99,328
Utility deposit 890
Cash surrender value - officer's life 14,250
Patent, net of accumulated amortization 91,657
Note receivable - officer 17,780
----------
Total other assets 223,905
----------
$1,497,688
==========
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - officer $ 129,116
Accounts payable 196,912
Payroll and payroll taxes payable 4,605
Franchise tax payable 2,647
Customer deposits 25,000
Current maturities of long-term debt 269,844
----------
Total current liabilities 628,124
Long-term debt, less current maturities 661,325
Stockholders' equity:
Capital stock, no stated value, 750 shares
authorized, issued and outstanding 8,634
Retained earnings 199,605
----------
Total stockholders' equity 208,239
----------
$1,497,688
==========
</TABLE>
The accompanying notes are an integral part of these statements
F-13
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Revenues $1,392,558
Cost of sales:
Beginning inventory 327,295
Purchases 588,639
Less: ending inventory 464,997
----------
Total cost of sales 450,937
----------
Gross margin 941,621
Expenses 968,760
----------
Income (loss) from operations (27,139)
Other income (expense):
Rental income 49,575
Interest income 176
Other income 7,275
Gain on sale of fixed assets 105,593
Interest expense (110,863)
----------
Total other income (expense) 51,756
----------
Net income before provision for income taxes 24,617
Provision for income taxes 10,318
----------
Net income 14,299
Retained earnings, March 31, 1995 185,306
----------
Retained earnings, March 31, 1996 $ 199,605
==========
</TABLE>
The accompanying notes are an integral part of these statements
F-14
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
<S> <C>
Net income $ 14,299
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 51,887
Gain on sale of fixed assets (105,593)
Changes in operating assets and liabilities:
Decrease in receivables 70,921
Increase in inventories (137,702)
Increase in prepaid expenses (1,033)
Increase in other assets (91,104)
Decrease in deferred tax asset 10,320
Increase in accounts payable 91,371
Increase in accrued expenses 25,350
---------
Net cash provided by operating activities (71,284)
INVESTING ACTIVITIES:
Purchase of fixed assets (37,257)
Proceeds from sale of fixed assets 349,091
---------
Net cash used by investing activities 311,834
FINANCING ACTIVITIES:
Principal payments on notes payable (283,292)
---------
Net decrease in cash (42,742)
Cash Balance, April 1, 1995 45,564
---------
Cash Balance, March 31, 1996 $ 2,822
=========
</TABLE>
The accompanying notes are an integral part of these statements
F-15
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
The Company designs and manufactures robotic and pneumatic industrial sewing
machine attachments.
TRADE ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made.
INVENTORIES
Inventories are stated at lower of cost or market. Cost is determined using
the first-in, first-out method.
<TABLE>
<CAPTION>
Inventories at March 31, 1996 consist of:
<S> <C>
Raw materials $ 278,735
Work in progress 141,994
Finished goods 44,268
---------
$ 464,997
=========
</TABLE>
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash and/or cash equivalents.
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C>
Interest $ 107,504
Taxes 2,870
</TABLE>
F-16
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using the
straight-line method and accelerated methods over the estimated useful lives of
the assets. Significant improvements are capitalized while maintenance and
repairs are expensed as incurred.
PATENTS
Certain legal and other direct expenses incurred in order to obtain patents on
company designed and manufactured parts have been capitalized at cost.
Amortization is calculated by the straight-line-method over a seventeen year
estimated useful life. Amortization expense totaled $ 4,042 during the year
ended March 31, 1996.
2. LONG-TERM DEBT
<TABLE>
<CAPTION>
Notes payable consisted of the following at March 31, 1996:
<S> <C>
Note payable to a bank, interest at 9.5%
payable monthly, due on demand, secured
by accounts receivable, inventory, furniture,
fixtures and equipment. $ 400,000
Note payable to a bank, interest at bank
index rate plus 1% payable monthly, due
10/1/96 secured by assignment of officer's
life insurance. 225,000
Note payable, to an individual, interest
at 10%, principal and interest of
$6,343, due monthly through April 2001,
secured by real estate. 306,169
---------
931,169
Less current maturities (269,844)
---------
$ 661,325
=========
</TABLE>
F-17
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
2. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows at March 31:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1997 $ 269,844
1998 49,212
1999 54,096
2000 59,465
2001 65,367
Thereafter 163,341
---------
$ 661,325
==========
</TABLE>
On May 6, 1996, the Company borrowed $ 700,000 from a bank at 9.5% thru May of
1999 and 3.5% over prime thereafter. The loan is payable in 120 equal
installments of $9,112. The company intends to use the proceeds to pay $625,000
to refinance short term borrowings and accordingly, that amount has been
classified as long term debt at March 31, 1996.
In addition the Company, on March 6, 1996, obtained a working capital loan of
$100,000 with interest a prime + 2% due and payable on August 31, 1996.
3. NOTE PAYABLE - OFFICER
At March 31, 1996 the Company had an unsecured note for $129,116 payable to an
officer with interest at 10%, due on demand.
4. CONTINGENT LIABILITY
In December, 1994, the company entered into a Joint Development Agreement with a
denim clothing manufacturer to develop a specialized sewing machine for the
manufacture of jeans. The manufacturer paid the company $150,000 in development
fees during the year ended March 31, 1995 and an additional $150,000 in the year
ended March 31, 1996. Under the terms of the agreement, the manufacturer will
have exclusive rights to purchase said sewing machine for an initial period of
two years from the date of shipment of the first production machine. After the
initial two year period, in order to maintain its exclusive rights, the
manufacturer must purchase certain minimum quantities. In the event the company
sells machines to a third party, the company is required to pay royalties to the
manufacturer up to the amount paid to the company for development fees, plus 10%
interest.
F-18
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
5. RESEARCH AND DEVELOPMENT
As required by statement of Financial Accounting Standards No. 2, the Company
expenses research and development costs as incurred. Included in current year
expenses are the following attributable to research and development:
<TABLE>
<CAPTION>
<S> <C>
Legal, patent fees $ 58,321
Salaries 150,496
Travel 2,135
Insurance 5,614
Payroll tax 11,513
Interest 24,778
Telephone 2,337
Utilities 1,433
--------
$256,627
========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Included in notes payable is a note payable to a major stockholder. The note
bears 10% interest and is due on demand and is subordinated debt.
The Company borrowed an additional $63,000 from the stockholder and made
principal payments of $131,652 during the year ended March 31, 1996. In
addition, the Company accrued interest of $16,312 on the note.
7. INCOME TAXES
Effective March 31, 1994, the Company changed to an asset and liability method
of accounting for income taxes in accordance with Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax basis of assets and
liabilities and are measured using enacted tax rates.
Summaries of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
Federal State Total
------- ----- -------
<S> <C> <C> <C>
Current -0- -0- -0-
Deferred 8,254 2,064 10,318
----- ----- -------
$10,318
=======
</TABLE>
F-19
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
7. INCOME TAXES (CONTINUED)
Deferred tax assets in the accompanying balance sheet include the following
components at March 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Section 263A cost in inventory $ 40,563
Net operating loss carryover 138,765
--------
Net deferred tax asset $179,328
========
</TABLE>
The Company has federal and state loss carry forwards of $407,410 and $481,356,
respectively, substantially all of which expire by 2008.
8. MAJOR CUSTOMERS
During the year, sales to three major customers totaled approximately
$1,125,000 or 80% of gross revenues with the largest of the three being 47% of
revenues.
9. GOING CONCERN - SUBSEQUENT EVENTS
Subsequent to the date of the financial statements, the Company has incurred
losses from operations causing a capital deficiency. This factor, along with
uncertainties regarding the ability of the Company to obtain additional
financing or outside investors to contribute additional capital, create an
uncertainty about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Management plans to seek investors to contribute capital based on new
technology the Company has invented, and the Company is also planning to raise
additional capital by going public.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
ON SUPPLEMENTAL INFORMATION
---------------------------
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
Our report on our audit of the basic financial statements of Tice Engineering
and Sales, Inc. for the year ended March 31, 1996 appears on page one. That
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Supplemental Schedule of Operating Expenses
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Boring & Goins, P.C.
Knoxville, Tennessee
May 23, 1996
F-21
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF EXPENSES
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
EXPENSES
<S> <C>
Advertising $ 70,539
Airplane 71,728
Amortization 4,042
Assembly 584
Bad debts 587
Commissions 14,405
Depreciation 47,845
Dues and fees 525
Employee benefits 23,734
Equipment maintenance 1,085
Insurance 30,248
Legal and accounting 42,076
Meals and entertainment 1,630
Office supplies 13,883
Postage 1,323
Production 3,461
Research and development 15,997
Rent 1,126
Repairs and maintenance - real estate 3,733
Royalty 3,843
Salaries - assembly 56,260
Salaries - clerical 47,557
Salaries - manufacturing 72,640
Salaries - engineering 78,204
Salaries - officers 145,617
Salaries - sales and service 108,868
Shop 3,210
Taxes - payroll 39,608
Taxes - other 15,808
Telephone 11,687
Travel 15,187
Utilities 15,360
Vehicle 6,360
--------
Total expenses $968,760
========
</TABLE>
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
We have audited the accompanying balance sheet of Tice Engineering and
Sales, Inc. as of March 31, 1995, and the related statements of income and
retained earnings and cash flows for the year 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 financial statements referred to above present fairly,
in all material respects, the financial position of Tice Engineering and Sales,
Inc. as of March 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
June 1, 1995
Boring & Goins, P.C.
Knoxville, TN
F-23
<PAGE>
TICE ENGINEERING AND SALES, INC.
BALANCE SHEET
MARCH 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash in bank $ 45,564
Accounts receivable
Trade 196,209
Employee 9,774
Prepaid expenses 27,258
Inventory 327,295
----------
Total Current Assets $ 606,100
FIXED ASSETS
Land 305,000
Building and improvements 422,050
Equipment 549,109
Vehicles 450,859
----------
1,727,018
Less: Accumulated depreciation 910,320
----------
Net Fixed Assets 816,698
OTHER ASSETS
Deferred taxes 189,646
Utility deposit 890
Investments 1,245
Patent, net of accumulated amortization 35,380
----------
Total Other Assets 227,161
----------
$1,649,959
==========
</TABLE>
F-24
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Notes payable $ 997,70
Accounts payable 105,541
Payroll taxes payable 4,031
Franchise tax payable 2,870
Current maturities of long-term debt 43,492
----------
Total Current Liabilities $1,153,642
LONG-TERM DEBT, LESS CURRENT MATURITIES 302,377
STOCKHOLDERS' EQUITY
Capital stock, no stated value,
750 shares authorized, issued
and outstanding
8,634
Retained earnings 185,306
----------
Total Stockholders' Equity 193,940
----------
$1,649,959
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-25
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
AMOUNT %
------ ------
<S> <C> <C>
INCOME
Sales $1,389,854 100.00
COST OF SALES
Beginning inventory 291,810 20.99
Purchases 527,940 37.98
Commissions 5,545 .39
Less: Ending inventory (327,295) (23.54)
---------- ------
Total Cost of Sales 498,000 35.82
---------- ------
GROSS MARGIN 891,854 64.18
OPERATING EXPENSES 869,660 62.57
---------- ------
INCOME FROM OPERATIONS 22,194 1.61
OTHER INCOME
Rental income 52,920 3.80
Interest income 618 0.04
Other income 787 0.05
Interest expense (111,772) (8.04)
---------- ------
Total Other Income (Expense) (57,447) (4.15)
---------- ------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (35,253) (2.54)
PROVISION FOR INCOME TAX BENEFIT OF NET OPERATING LOSS 4,931 .35
---------- ------
NET LOSS BEFORE CHANGE IN ACCOUNTING PRINCIPLE (30,322) (2.19)
======
CHANGE IN ACCOUNTING PRINCIPLE 184,715
----------
Cumulative effect to March 31, 1994 of application of statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
NET INCOME 154,393
RETAINED EARNINGS, March 31, 1994 30,913
----------
RETAINED EARNINGS, March 31, 1995 $ 185,306
==========
The accompanying notes are an integral part of these financial statements
</TABLE>
F-26
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net Income $ 154,393
Adjustment to reconcile net income to
net cash used by operating activities:
Depreciation & Amortization 51,994
Change in Operating Assets and Liabilities:
Increase in receivables (124,393)
Increase in inventories (35,485)
Increase in prepaid expenses (1,261)
Increase in other assets (31,757)
Increase in deferred tax asset (189,646)
Decrease in accounts payable (1,639)
Increase in accrued expenses 3,071
---------
Net Cash Used by Operating Activities (174,723)
INVESTING ACTIVITIES:
Purchase of fixed assets (4,957)
FINANCING ACTIVITIES:
Proceeds from notes payable 305,526
Principal payments on long term debt (63,850)
Principal payments on notes payable (39,369)
Net Cash Provided By Financing Activities 202,307
---------
Net Increase in Cash 22,627
CASH BALANCE, April 1, 1994 22,937
---------
CASH BALANCE, March 31, 1995 $ 45,564
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company's Activities - The Company designs and manufactures robotic and
pneumatic industrial sewing machine attachments.
Trade Accounts Receivable - The Company considers accounts receivable to be
fully collectible; accordingly, no allowance for doubtful accounts is required.
If amounts become uncollectible, they will be charged to operations when that
determined is made.
Inventories - Inventories are valued at lower of cost or market on a first-in,
first-out basis (FIFO).
Investments - Investments are valued at cost less any impairments in the values
that are not temporary in nature.
Property and Equipment - Assets are recorded at cost. Depreciation is computed
using the straight-line method and accelerated methods over the estimated useful
lives of the assets. Significant improvements are capitalized while maintenance
and repairs are expensed as incurred.
Patents - Certain legal and other direct expenses incurred in order to obtain
patents on company designed and manufactured parts have been capitalized at
cost. Amortization is calculated by the straight-line-method over a seventeen
year estimated useful life. Amortization expense totaled $1,223 during the year
ended March 31, 1995.
Income Taxes - Effective April 1, 1994, the company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (FAS 109).
Under the provisions of FAS 109, deferred income tax assets and liabilities are
computed based on the tax benefit or liability in future years of the reversal
of temporary differences in the recognition of income or the deduction of
expenses between financial and tax reporting purposes. The principal item
resulting in the differences is section 263A cost in ending inventory. Deferred
taxes are also recognized for operating losses that are available to offset
future taxable income. The company has federal and state loss carry forwards of
$463,416 and 537,361, respectively. Substantially all of the carry forwards
expire in approximately equal amounts in 2007 and 2008.
The net difference between tax expense (benefit) and taxes currently payable is
reflected on the balance sheet as deferred income taxes.
F-28
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 2 - STATEMENT OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
The Company considers deposits in banks, certificates of deposits, and highly -
liquid investments with an original maturity of three months or less as cash and
cash equivalents for the purposes of the statement of Cash Flows.
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C>
Interest $ 96,445
Taxes 2,891
</TABLE>
NOTE 3 - NOTE PAYABLE
<TABLE>
<CAPTION>
Notes payable consisted of the following at March 31, 1995:
<S> <C>
Note payable to a bank; interest at
bank index rate plus 1% payable
monthly, due on demand, secured
by Jet airplane. $ 190,000
Note payable to a bank, interest at
9.5% payable monthly, due on demand,
secured by accounts receivable,
inventory, furniture, fixtures and equipment. 400,000
Note payable to a bank, interest at bank
index rate plus 1% payable monthly, due
10/1/95 secured by cash value of officer's
life insurance. 225,000
Note payable to a officer, interest
at 10%, due on demand, unsecured 182,708
----------
$ 997,708
==========
</TABLE>
F-29
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 4 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following at March 31, 1995:
<S> <C>
Note payable, to an individual,
interest at 10%, principal and
interest of $6,343.44, due monthly
through April 2001, secured by
shopping center. $ 345,869
Current maturities (43,492)
---------
$ 302,377
=========
Maturities of long-term debt are as follows at March 31:
Principal
Year Requirements
---- ------------
<S> <C>
1996 $ 43,492
1997 48,046
1998 53,077
1999 58,635
2000 64,775
Thereafter 77,844
--------
$ 345,869
=========
</TABLE>
NOTE 5 - CONTINGENT LIABILITY
In December, 1994, the company entered into a Joint Development Agreement with a
denim clothing manufacturer to develop a specialized sewing machine for the
manufacture of jeans. The manufacturer paid the company $150,000 in development
fees during the year ended March 31, 1995. Under the terms of the agreement, the
manufacturer will have exclusive rights to purchase said sewing machine for an
initial period of two years from the date of shipment of the first production
machine. After the initial two year period, in order to maintain its exclusive
rights, the manufacturer must purchase certain minimum quantities. In the event
the company sells machines to a third party, the company is required to the pay
royalties to the manufacturer up to the amount paid to the company for
development fee, plus 10% interest.
F-30
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 6 - RESEARCH AND DEVELOPMENT
As required by statement of Financial Accounting Standards No. 2, the company
expenses research and development costs as incurred. Included in current year
expenses are the following attributable to research and development:
<TABLE>
<CAPTION>
<S> <C>
Materials $ 19,045
Salaries 134,077
Travel 4,000
Insurance 4,893
Payroll Tax 9,336
Interest 16,588
Telephone 2,350
Utilities 1,353
--------
$191,642
========
</TABLE>
In addition, the company purchased $4,018 of equipment to be used for product
development.
NOTE 7 - RELATED PARTY TRANSACTIONS
Included in notes payable is a note payable to William Tice, a Company officer.
The note bears 10% interest and is due on demand.
The Company borrowed an additional $65,200 from Mr. Tice and made principal
payments of $63,850 during the year ended March 31, 1995. In addition, the
Company accrued interest of $15,326 on the note.
NOTE 8 - INCOME TAXES
The provision for income taxes consist of the following components.
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
------- ----- -----
<S> <C> <C> <C>
Current $ 0 $ 0 $ 0
Deferred (3,522) (1,409) (4,931)
------- ------- -------
$(3,522) $(1,409) $(4,391)
======= ======= =======
</TABLE>
Deferred tax assets consist of the following at March 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Section 263A cost in inventory $ 27,637
Net operating loss carryover 162,009
--------
Total deferred tax asset $189,646
========
</TABLE>
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
Our report on our audit of the basic financial statements of Tice Engineering
and Sales, Inc. for the year ended March 31, 1995 appears on page one. That
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Supplemental Schedule of Operating Expenses
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Boring & Goins, P.C.
June 1, 1995
F-32
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Amount %
-------- ------
<S> <C> <C>
OPERATING EXPENSES
Advertising $ 68,111 4.90
Airplane 47,242 3.40
Amortization 1,223 0.09
Assembly 143 0.01
Bad debts 28 0.00
Depreciation 50,771 3.65
Dues and fees 993 0.07
Employee benefits 35,009 2.52
Equipment maintenance 638 0.05
Insurance 27,068 1.95
Legal and accounting 8,448 0.61
Meals and entertainment 1,964 0.14
Office supplies 9,791 0.70
Postage 1,374 0.10
Production 1,886 0.14
Research and development 36,355 2.62
Rent 1,350 0.10
Repairs and maintenance - shopping ctr. 2,299 0.17
Royalty 3,714 0.27
Salaries - assembly 49,120 3.53
Salaries - clerical 35,285 2.53
Salaries - manufacturing 57,398 4.13
Salaries - R & D 23,850 1.72
Salaries - officers 158,250 11.39
Salaries - sales & service 155,560 11.19
Shop 3,079 0.22
Taxes - payroll 33,939 2.44
Taxes - other 15,820 1.14
Telephone 11,751 0.84
Travel 11,280 0.81
Utilities 13,533 0.97
Vehicle 2,388 0.17
-------- -----
Total Operating Expenses $869,660 62.57
======== =====
</TABLE>
See accompanying independent auditors' report
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
We have audited the accompanying balance sheet of Tice Engineering and
Sales, Inc. as of March 31, 1994, and the related statements of income and
retained earnings, and cash flows for the year 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 financial statements referred to above present fairly, in
all material respects, the financial position of Tice Engineering and Sales,
Inc. as of March 31, 1994, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
May 20, 1994 Boring & Goins, P.C.
Knoxville, TN
See accompanying independent auditors' report
F-34
<PAGE>
TICE ENGINEERING AND SALES, INC.
BALANCE SHEET
MARCH 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash in bank $ 22,937
Accounts receivable:
Trade 79,173
Employee 2,417
Prepaid expenses 25,997
Inventory 291,810
---------
Total Current Assets $ 422,334
FIXED ASSETS
Land 305,000
Building and improvements 421,111
Equipment 545,091
Vehicles 450,859
---------
1,722,061
Less: Accumulated depreciation 859,549
---------
Net Fixed Assets 862,512
OTHER ASSETS
Utility deposit 89
Investments 1,245
Patent, net of accumulated amortization 4,846
---------
Total Other Assets 6,981
----------
$1,291,827
==========
</TABLE>
F-35
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Notes payable $756,032
Accounts payable 107,180
Payroll taxes payable 1,674
Franchise tax payable 2,156
Current maturities of long-term debt 39,369
--------
Total Current Liabilities $ 906,411
LONG-TERM DEBT, less current maturities 345,869
</TABLE>
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Capital stock, no stated value,
750 shares authorized, issued
and outstanding 8,634
Retained earnings 30,913
--------
Total Stockholders' Equity 39,547
----------
$1,291,827
==========
</TABLE>
F-36
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
AMOUNT %
------ ------
<S> <C> <C>
INCOME $1,308,708 100.00
Sales
COST OF SALES
Beginning inventory 365,793 27.95
Purchases 513,243 39.22
Commission expense 11,958 .91
Less: Ending inventory (291,810) (22.30)
---------- ------
Total Cost of Sales
599,184 45.78
---------- ------
GROSS MARGIN 709,524 54.22
OPERATING EXPENSES 873,501 (66.74)
---------- ------
LOSS FROM OPERATIONS (163,977) (12.52)
OTHER INCOME (EXPENSES)
Rental income 33,675 2.57
Interest income 500 0.04
Daycare income 256 0.02
Other income 49 0.00
Interest expense (91,575) 7.00
---------- ------
Total Other Income (Expense) (57,105) (4.37)
---------- ------
NET LOSS (221,082) (16.89)
======
RETAINED EARNINGS, April 1, 1993 251,995
----------
RETAINED EARNINGS, March 31, 1994 $ 30,913
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-37
<PAGE>
TICE ENGINEERING AND SALES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
OPERATING ACTIVITIES:
<S> <C>
Net Loss $ (221,082)
Adjustment to reconcile net income to net cash
used by operating activities:
Depreciation 60,436
Change in Operating Assets and Liabilities:
Decrease in receivables 120,216
Decrease in inventories 73,983
Increase in prepaid expenses (14,146)
Increase in other assets (4,846)
Decrease in accounts payable (72,925)
Decrease in accrued expenses 397
----------
Net Cash Used by Operating Activities (57,967)
INVESTING ACTIVITIES:
Purchase of fixed assets (10,624)
FINANCING ACTIVITIES:
Proceeds from notes payable 114,211
Principal payments on notes payable (21,429)
Principal payments on long-term debt (35,638)
----------
Net Cash Provided By Financing Activities 57,144
----------
Net Decrease in Cash (11,447)
CASH BALANCE, April 1, 1993 34,384
----------
CASH BALANCE, March 31, 1994 $ 22,937
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-38
<PAGE>
TICE ENGINEERING AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company's Activities - The Company designs and manufactures robotic and
pneumatic industrial sewing machine attachments.
Trade Accounts Receivable - The Company considers accounts receivable to be
fully collectible; accordingly, no allowance for doubtful accounts is required.
If amounts become uncollectible, they will be charged to operations when that
determination is made.
Inventories - Inventories are valued at lower of cost or market on a first-in,
first-out basis (FIFO).
Investments - Investments are valued at cost less any impairments in the values
that are not temporary in nature.
Property and Equipment - Assets are recorded at cost. Depreciation is computed
using the straight-line method and accelerated methods over the estimated useful
lives of the assets. Significant improvements are capitalized while maintenance
and repairs are expensed as incurred.
Patents - Certain legal and other direct expenses incurred in order to obtain
patents on company designed and manufactured parts have been capitalized at
cost. Amortization is calculated by the straight-line method over a seventeen
year estimated useful life. Amortization expense totaled $72 during the year
ended March 31, 1994.
Income Taxes - The Company has elected to defer the adoption of SFAS 109,
Accounting for Income Taxes, to account for deferred income taxes. Deferred
taxes are computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or deduction of
expenses between financial and tax reporting purposes. The principal item
resulting in the differences is the Section 263A inventory adjustment. However,
the difference is insignificant and management does not believe that the
application of SFAS 109 will have a material effect on the financial statements.
The Company has available for federal and state income tax purposes
approximately $423,000 and $524,955 in net operating loss carry-fowards which
schedule to predominately expire in 2007 and 2008, respectively.
F-39
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED MARCH 31, 1994
NOTE 2 - STATEMENT OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
The Company considers deposits in banks, certificates of deposits, and highly
liquid investments with an original maturity of three months or less as cash and
cash equivalents for the purposes of the statement of Cash Flows.
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 91,585
Taxes 2,281
NOTE 3 - NOTES PAYABLE
Notes payable consisted of the following at March 31, 1994:
Note payable to a bank, interest at
bank index rate plus 1% payable
monthly, due on demand, secured
by Jet airplane. $ 190,000
Note payable to a bank, interest at
6.75% payable monthly, due on demand
secured by accounts receivable,
inventory, furniture, fixtures
and equipment. 400,000
Note payable to an officer, interest
at 10%, due on demand, unsecured. 166,032
---------
$ 756,032
=========
NOTE 4 - LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 1994:
Note payable, to an individual interest
at 10%, principal and interest payments
of $6,343.44 due monthly through April
2001, secured by shopping center. $ 385,238
Current maturities (39,369)
-------
$ 345,869
=========
F-40
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED MARCH 31, 1994
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are a follows at March 31:
Year
----
1995 $ 39,369
1996 43,492
1997 48,046
1998 53,077
1999 58,635
Thereafter 142,619
--------
$ 385,238
=========
NOTE 5 - RELATED PARTY TRANSACTIONS
Included in current liabilities is a note payable to William Tice, a Company
officer. The note bears 10% interest and is due on demand.
The Company borrowed an additional $92,000 from Mr. Tice and made principal
payments of $46,116 during the year ended March 31, 1994. In addition, the
Company accrued interest of $11,127 on the note.
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
Board of Directors
Tice Engineering and Sales, Inc.
Knoxville, Tennessee
Our report on our audit of the basic financial statements of Tice Engineering
and Sales, Inc. for 1994 appears on page 1. That audit was made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
Supplemental Schedule of Operating Expenses is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Boring & Goins, P.C.
May 20, 1994
F-42
<PAGE>
TICE ENGINEERING AND SALES, INC.
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
Amount %
------ ----
OPERATING EXPENSES
<S> <C> <C>
Advertising $ 52,082 3.98
Airplane expense 33,584 2.57
Amortization expense 72 0.01
Assembly expense 170 0.01
Bad debts expense 1,143 0.09
Depreciation 60,435 4.62
Donations 744 0.06
Dues and fees 957 0.07
Employee benefits 29,633 2.26
Employee training 1,184 0.09
Equipment expense 1,210 0.09
Insurance 36,613 2.80
Legal and accounting 6,253 0.48
Meals and entertainment 1,247 0.10
Office supplies 9,617 0.73
Postage 1,112 0.09
Production expense 3,673 0.28
Research and development 5,263 0.40
Rent expense 675 0.05
Repairs and maintenance - shopping ctr. 7,772 0.59
Royalty expense 942 0.07
Salaries - assembly 63,618 4.86
Salaries - child care 635 0.05
Salaries - clerical 30,559 2.34
Salaries - manufacturing 74,242 5.67
Salaries - R & D 23,400 1.79
Salaries - officers 188,300 14.39
Salaries - sales & service 144,160 11.02
Scholarship fund 2,408 0.18
Shop expense 3,098 0.24
Taxes - payroll 38,876 2.97
Taxes - other 14,319 1.09
Telephone 10,258 0.78
Travel 6,159 0.47
Utilities 14,977 1.14
Vehicle expense 4,111 0.31
-------- -----
Total Operating Expenses $873,501 66.74
======== =====
</TABLE>
F-43
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and if given or made, such information or representations must not be
relied upon as having been authorized by the Issuer. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to its date of issue. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of these securities.
-------------------------
TABLE OF CONTENTS
-------------------------
Page
----
Additional Information 2
Summary 2
Risk Factors 7
Plan of Distribution 12
Use of Proceeds 13
Capitalization 14
Business 16
Management's Discussion 23
and Analysis of Financial
Condition
Legal Proceedings 26
Management 26
Principal and Selling 29
Shareholders
Securities 30
Dividends 34
Liability and Indemnification 34
of Directors
Legal Matters 36
Experts 37
Financial Statements 38
-------------------------
2,986,157 COMMON SHARES
AND
1,000,000 COMMON STOCK
PURCHASE WARRANTS
OF
TICE TECHNOLOGY, INC.
-------------------------
PROSPECTUS
-------------------------
______________, 1996
UNTIL ______________, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
- ------- --------------------------------------
Item 13. Other Expenses of Issuance and Distribution
-------------------------------------------
Expenses of the offering are estimated to be approximately $100,000 which
amount includes the following items:
Registration fee - federal $ 2,883
Registration fees - state $ 0
Transfer Agent Fees* $15,000
Printing and EDGAR Filing Costs* $12,000
Legal Fees (including fees relating
to the reorganization)* $50,000
Accounting Fees $20,000
- --------------------------------------------------------------------------------
*estimates
Item 14. Indemnification of Directors and Officers
-----------------------------------------
The Issuer has provisions in its Certificate of Incorporation which limit
its directors' monetary liability to it or its shareholders except: (a) for any
breach of the director's duty of loyalty to the corporation or its shareholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) for unlawful payment of dividends
or unlawful repurchase or redemption of its own stock; or (d) for any
transaction from which the director derived an improper personal benefit.
The Issuer is required to indemnify its officers and directors for any
liability incurred by them in their capacity as such except in relation to
matters as to which any such director or officer or former director or officer
or person shall be adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty.
Item 15. Recent Sales of Unregistered Securities
---------------------------------------
On the effective date of this Registration Statement, the Issuer issued
5,211,750 Common Shares and 750,000 Class B Common Shares to the sole
shareholder of Tice Engineering and Sales, Inc. in exchange for all of TES's
issued and outstanding stock, 238,470 Common Shares to JWSI in exchange for
certain warrants (Class B Common Shares were converted to Common Shares) and
options to purchase 54,750 Common Shares to ten employees. The Issuer claims
exemption from registration under Section 4(2) of the Securities Act of 1933.
Of the Common Shares issued to TES shareholders, 1,541,407 shares (in
addition to the Common Shares sold to Monogenesis and the note holders) will be
registered under this Registration Statement. The remaining securities issued
will bear a restrictive legend. The Common Shares which may be issued upon
exercise of the employee stock options will also be registered under this
Registration Statement.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
<TABLE>
<CAPTION>
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------
- -------------------------------------------------------------------------------------------
Exhibit Page
Table Number Number
------------ ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------
I. Plan of Acquisition, Reorganization, Arrangement, 2
Liquidation or Succession
- -------------------------------------------------------------------------------------------
(i) Stock Purchase Agreement and Plan of 90
Reorganization (excluding all Schedules except 1.1)
- -------------------------------------------------------------------------------------------
II. Articles of Incorporation and Bylaws 3
- -------------------------------------------------------------------------------------------
(i) Certificate of Incorporation of Tice Technology, Inc. 123
- -------------------------------------------------------------------------------------------
(ii) Bylaws of Tice Technology, Inc. 132
- -------------------------------------------------------------------------------------------
III. Instruments Defining the Rights of Security Holders 4
- -------------------------------------------------------------------------------------------
(i) Common Stock Purchase Warrant Agreement 155
Between Tice Technology, Inc. and Warrant Agent
- -------------------------------------------------------------------------------------------
IV. Opinion of Counsel - Legality of Securities Being 5 165
Registered
- -------------------------------------------------------------------------------------------
V. Material Contracts 10
- -------------------------------------------------------------------------------------------
(i) Agreement Between Tice Technology, Inc. and 167
Transfer Agent
- -------------------------------------------------------------------------------------------
VI. Subsidiaries of the Registrant 21 177
- -------------------------------------------------------------------------------------------
VII. Consent of Experts 23
- -------------------------------------------------------------------------------------------
(i) Consent of Boring & Goins, P.C., 178
Certified Public Accountants
- -------------------------------------------------------------------------------------------
(ii) Consent of Counsel - See Exhibit 5
- -------------------------------------------------------------------------------------------
VIII. Financial Data Schedule 27 179
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 17. Undertakings
------------
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To 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;
and
(iii) To 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Knoxville, State of
Tennessee, on September 4, 1996.
Tice Technology, Inc.
By: /s/ William A. Tice
---------------------------------------------------
William A. Tice, President, Chief Executive Officer
Pursuant to 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 indicated.
/s/ William A. Tice on September 4, 1996
- --------------------------------------------------------
William A. Tice, President, Chief Executive Officer
/s/ Karen A. Walton on September 4, 1996
- --------------------------------------------------------
Karen A. Walton, Chief Financial Officer
The following are at least a majority of the directors of Tice Technology,
Inc.:
/s/ William A. Tice on September 4, 1996
- --------------------------------------------------------
William A. Tice, Director
/s/ Karen A. Walton on September 4, 1996
- --------------------------------------------------------
Karen A. Walton, Director
/s/ Sarah Y. Sheppeard on September 4, 1996
- --------------------------------------------------------
Sarah Y. Sheppeard, Director
<PAGE>
EXHIBIT 2
---------
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
AMONG
TICE ENGINEERING AND SALES, INC.,
MONOGENESIS CORPORATION,
JOSEPH WALKER & SONS, INC.
AND
SOLE SHAREHOLDER OF TICE ENGINEERING
AND SALES, INC.
DATED: ___________, 1996
<PAGE>
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I - SECURITIES
1.1 Exchange of Securities.................................... 2
1.2 JWSI Warrants............................................. 2
1.3 Issuance of Securities to Monogenesis..................... 3
1.4 Registration Statement.................................... 3
1.5 Dispositions of Shares By the Shareholder................. 3
ARTICLE II - CLOSING
2.1 Time and Place............................................ 3
2.2 Actions at the Closing.................................... 4
2.3 Holding Company Directors................................. 4
2.4 Simultaneous Actions...................................... 4
ARTICLE III - REPRESENTATIONS AND WARRANTS OF TICE
3.1 Organization.............................................. 4
3.2 Capitalization............................................ 5
3.3 Subsidiaries.............................................. 5
3.4 Authority................................................. 5
3.5 Financial Statements...................................... 5
3.6 Absence of Undisclosed Liabilities........................ 6
3.7 Absence of Changes........................................ 6
3.8 Title to Assets........................................... 7
3.9 Litigation................................................ 7
3.10 Compliance; Governmental Authorization.................... 7
3.11 Labor Relations; Employees................................ 8
3.12 Employee Benefit Plans.................................... 8
3.13 Intellectual Property..................................... 9
3.14 Accounts and Notes Receivable............................. 9
3.15 Inventories............................................... 10
3.16 Tax Matters............................................... 10
3.17 Books and Records......................................... 10
3.18 Disposition of Holding Company Stock...................... 11
3.19 Disclosure................................................ 11
3.20 Best Knowledge of Tice.................................... 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
4.1 Authority................................................. 11
4.2 Stock Ownership........................................... 12
4.3 Disposition of Holding Company Stock...................... 12
4.4 Investment Representations................................ 12
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF MONOGENESIS
5.1 Organization.............................................. 13
5.2 Authority................................................. 13
5.3 Shareholders.............................................. 14
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF JWSI
6.1 Organization.............................................. 14
6.2 Authority................................................. 14
6.3 Ownership of Warrants..................................... 14
ARTICLE VII - COVENANTS OF TICE
7.1 Conduct of Business Until Closing Date.................... 14
7.2 Access to Properties and Records.......................... 15
7.3 Advice of Changes......................................... 15
7.4 Conduct................................................... 16
7.5 Approvals, Consents....................................... 16
ARTICLE VIII - COVENANTS OF MONOGENESIS
8.1 Confidentiality; Return of Documents...................... 16
ARTICLE IX - CONDITIONS TO OBLIGATIONS OF MONOGENESIS
9.1 Accuracy of Representations and Warranties................ 16
9.2 Performance of Agreements................................. 17
9.3 Tice's Certificate........................................ 17
9.4 Secretary's Certificate................................... 17
9.5 Consents, Authorizations.................................. 17
9.6 Legislation............................................... 17
9.7 JWSI Warrants............................................. 18
9.8 Issuance, Registration and Distribution of Shares and
Warrants.................................................. 18
9.9 Good Standing Certificates................................ 18
9.10 Interim Financial Statements.............................. 18
9.11 Casualty.................................................. 18
ARTICLE X - CONDITIONS TO OBLIGATIONS OF TICE, THE SHAREHOLDER
AND JWSI
10.1 Accuracy of Representations and Warranties................ 19
10.2 Performance of Agreements................................. 19
10.3 Officer's Certification................................... 19
10.4 Secretary's Certificate................................... 19
10.5 Consents, Authorizations.................................. 19
10.6 Legislation............................................... 20
10.7 JWSI Warrants............................................. 20
10.8 Issuance, Registration and Distribution of Shares and
Warrants.................................................. 20
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI - TERMINATION
11.1 Termination............................................... 20
ARTICLE XII - INDEMNIFICATION
12.1 Indemnification........................................... 21
12.2 Third Party Claims........................................ 22
12.3 Remedies Cumulative....................................... 23
12.4 Recoveries................................................ 23
ARTICLE XIII - MISCELLANEOUS
13.1 Expenses; Transfer Taxes.................................. 23
13.2 Binding Effect............................................ 23
13.3 Entire Agreement; Amendments.............................. 23
13.4 Headings.................................................. 24
13.5 Notices................................................... 24
13.6 Publicity................................................. 25
13.7 Governing Law............................................. 25
13.8 Waivers................................................... 25
13.9 Defined Terms............................................. 25
13.10 Fees...................................................... 25
SCHEDULE 1.1..................................................... 27
Holding Company Stock To Be Issued to the Shareholder and JWSI
SCHEDULE 3.1..................................................... 28
Jurisdictions in Which Tice is Qualified to Do Business
Officers and Directors of Tice
SCHEDULE 3.2..................................................... 29
Convertible Securities, Options, Warrants, Agreements
Relating to Stock of Tice
SCHEDULE 3.5..................................................... 30
Financial Statements
SCHEDULE 3.6..................................................... 31
Undisclosed Liabilities
SCHEDULE 3.7..................................................... 32
Changes Since Balance Sheet Date
SCHEDULE 3.8..................................................... 33
Permitted Encumbrances
SCHEDULE 3.9..................................................... 34
Litigation
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE 3.10(a)................................................. 35
Consents Required - Licenses, Permits
SCHEDULE 3.10(c)................................................. 36
Hazardous Substances
SCHEDULE 3.11.................................................... 37
Employment Matters
SCHEDULE 3.12.................................................... 38
Employee Benefit Plans
SCHEDULE 3.13.................................................... 39
Intellectual Property
SCHEDULE 3.14.................................................... 40
Accounts and Notes Receivable Matters
SCHEDULE 4.2..................................................... 41
Encumbrances on, or Agreements Relating to, Tice Common Stock
EXHIBIT 1.3...................................................... 42
Form of Common Stock Purchase Warrants
EXHIBIT 3.5...................................................... 43
Certificate Relating to Financial Statements
</TABLE>
iv
<PAGE>
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
----------------------
This Stock Purchase Agreement and Plan of Reorganization (the "Agreement")
is entered into as of this ____ day of ________, 1996 by and among Tice
Engineering and Sales, Inc., a Tennessee corporation ("Tice"); Monogenesis
Corporation, a Delaware corporation ("Monogenesis"); Joseph Walker & Sons, Inc.,
a Delaware corporation ("JWSI"); and William A. Tice, the sole shareholder of
Tice (the "Shareholder").
WHEREAS, Monogenesis is a closed-end investment company with approximately
1,200 institutional shareholders which was formed to provide a mechanism for
companies to become reporting companies under the Securities Act of 1934 through
distributions to its shareholders;
WHEREAS, Tice desires to form a holding company which will have a class of
shares for which a public trading market exists to facilitate access to equity
capital and future acquisitions and to provide liquidity for employee stock
incentive programs and its shareholders;
WHEREAS, a Delaware corporation (the "Holding Company") will be created
which will acquire all of the issued and outstanding shares of stock of Tice in
a stock for stock exchange;
WHEREAS, the Holding Company will have four classes of stock authorized:
Common Shares, Class B Common Shares, Class D Common Shares and Preferred Shares
as well as common stock purchase warrants as described below;
WHEREAS, Tice has authorized 7,500 shares of common stock, 750 of which are
issued and outstanding and has outstanding warrants to purchase 30 shares of
common stock of Tice;
WHEREAS, the Shareholder owns all of the issued and outstanding stock of
Tice and desires to exchange his stock in Tice for stock in the Holding Company,
in the ratio of 1,000 Class B Common Shares and 6,949 Common Shares of the
Holding Company for each share of common stock of Tice;
WHEREAS, JWSI has received warrants to purchase 30 shares of common stock
of Tice which will entitle JWSI to purchase 238,470 Common Shares of the Holding
Company (JWSI will agree to convert
<PAGE>
the 1,000 Class B Common Shares which are part of the exchange to Common Shares;
WHEREAS, the Holding Company will authorize Common Stock Purchase Warrants
(the "Warrants") to purchase Common Shares of the Holding Company (which
Warrants will be exercisable for 24 months and have an exercise price of $8.00
per share);
WHEREAS, prior to the Closing Date (as hereinafter defined), Monogenesis
will purchase, and the Holding Company will issue to Monogenesis, 300,000 of its
Common Shares at a purchase price of $0.01 per share together with 1,000,000
Warrants at a purchase price of $0.01 per Warrant;
WHEREAS, prior to the stock for stock exchange, the Holding Company (and
Tice) will file a registration statement (the "Registration Statement")
registering 1,302,937 of the Common Shares to be issued to the Shareholder, all
of the Common Shares and all of the Warrants to be issued to Monogenesis and
JWSI and all of the Common Shares underlying the Warrants pursuant to the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, on the Closing Date, Monogenesis will authorize its transfer agent
to distribute to Monogenesis shareholders 125 Common Shares of the Holding
Company and 400 Warrants of the Holding Company for each share of stock of
Monogenesis held;
NOW THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties agree as follows:
ARTICLE I
SECURITIES
1.1 EXCHANGE OF SECURITIES. Subject to the terms and conditions
hereinafter set forth, on the Closing Date (as defined below), the Holding
Company shall cause to be issued and delivered to the Shareholder and JWSI (upon
exercise of its warrants) the class and the number of shares of stock of the
Holding Company (the "Shares") set forth opposite their names on Schedule 1.1,
which is attached hereto and made a part hereof, in exchange for which the
Shareholder and JWSI shall deliver to the Holding Company all of the issued and
outstanding stock and warrants of Tice.
1.2 JWSI WARRANTS. In connection with the proposed transactions, Tice has
issued to JWSI warrants to purchase 30 of its shares of common stock which will
be exercised to purchase 238,470 Common Shares of the Holding Company which
shares will be
2
<PAGE>
registered. JWSI agrees to convert all Class B Common Shares which it is
eligible to receive in the exchange upon exercise of its warrants to Common
Shares.
1.3 ISSUANCE OF SECURITIES TO MONOGENESIS. Prior to the exchange of
securities described in Section 1.1 above, the Holding Company shall issue to
Monogenesis 300,000 Common Shares upon receipt of the purchase price of $0.01
per share and 1,000,000 Warrants (in substantially the form attached hereto as
Exhibit 1.3) upon receipt of the purchase price of $0.01 per Warrant.
1.4 REGISTRATION STATEMENT. The Holding Company and Tice shall prepare and
file the Registration Statement pursuant to the 1933 Act registering a total of
2,631,407 Common Shares and 1,000,000 Warrants, which constitute 1,302,937 of
the 5,211,750 Common Shares to be issued to the Shareholder, the 300,000 Common
Shares and 1,000,000 Warrants to be issued to Monogenesis, the 238,470 Common
Shares to be issued to JWSI and the 1,000,000 Common Shares underlying the
Warrants. The Shareholder shall receive the registered shares as indicated on
Schedule 1.1.
1.5 DISPOSITIONS OF SHARES BY THE SHAREHOLDER. The parties desire that
this transaction qualify as a tax free reorganization under Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended. In furtherance thereof, the
Shareholder shall not dispose of any shares of the Holding Company stock
received in the exchange within five years of the exchange if such disposition
would reduce the aggregate fair value of the Holding Company stock (measured as
of the date of the exchange) retained by the Shareholder to an amount less than
50% of the aggregate fair value of all of Tice's issued and outstanding stock
immediately before the exchange, unless he obtains an opinion of counsel
reasonably satisfactory to the Holding Company that such transfer will not
violate the continuity of shareholder interest requirement set forth in Treas.
Reg. (S) 1.368-1. The Shareholder shall provide written notice to the Holding
Company, not less than five business days prior to the intended date of
disposition, specifying the number of shares of which the Shareholder proposes
to dispose.
ARTICLE II
CLOSING
2.1 TIME AND PLACE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the place and on such date and at
such time within ten business days after the date on which all of the conditions
set forth in Articles IX and X to each party's obligations hereunder have been
3
<PAGE>
satisfied or waived, as set forth in a written notice from Monogenesis at least
five business days prior thereto; or on such other date and at such other time
and place as Tice and Monogenesis may mutually agree. The date on which the
Closing actually occurs is herein referred to as the "Closing Date".
2.2 ACTIONS AT THE CLOSING. (a) At the Closing, the Shareholder shall
deliver to the Holding Company and the Holding Company shall deliver to the
Shareholder the shares to be exchanged in accordance with Sections 1.1 and 1.2
of this Agreement. The Shareholder shall deliver the certificates and agreements
representing all of the issued and outstanding shares of stock of Tice to the
Holding Company in negotiable form or together with completed and executed stock
powers transferring such shares and warrants to the Holding Company. Upon
receipt of such shares and warrants, the Holding Company shall instruct the
transfer agent to prepare and deliver certificates representing the Shares.
(b) After the share exchange, JWSI will exercise the warrants, convert
the Class B Common Shares to Common Shares and receive a total of 238,470 Common
Shares of the Holding Company.
2.3 HOLDING COMPANY DIRECTORS. The Board of Directors of the Holding
Company shall have the number of directors designated by Tice and shall consist
of the individuals designated by Tice.
2.4 SIMULTANEOUS ACTIONS. All proceedings to be taken and all documents to
be executed and delivered by the parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed and
delivered.
ARTICLE III
REPRESENTATIONS AND WARRANTS OF TICE
Tice represents and warrants to Monogenesis, all of which representations
and warranties shall be true on the Closing Date and shall survive the Closing,
that:
3.1 ORGANIZATION. Tice is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee and has the
corporate power to own its property and carry on its business as it is now being
conducted. Tice is duly qualified and in good standing to do business in every
jurisdiction in which such qualification is necessary and each of such
jurisdictions is listed on Schedule 3.1 attached hereto. Copies of
4
<PAGE>
the Certificate of Incorporation and the Bylaws of Tice, which have been
furnished by Tice to Monogenesis, are true and correct copies of said documents
including all amendments to the date hereof. The offices and directors of Tice
are listed on Schedule 3.1.
3.2 CAPITALIZATION. Tice has authorized 7,500 shares of Common Stock which
have no par value. Of such shares, 750 are issued and outstanding and have been
and will be duly authorized, validly issued, fully paid and nonassessable.
Except for the warrants issued to JWSI and as set forth on Schedule 3.2 hereto
and as described herein, there is no: (i) outstanding security convertible into
or exchangeable for Common Stock; (ii) option, warrant, put, call or other right
to purchase or subscribe to Common Stock; or (iii) contract, commitment,
agreement, understanding or arrangement of any kind relating to the issuance or
disposition of Common Stock or the issuance or disposition of any security
convertible into Common Stock. Tice's records reflect the ownership of all
issued and outstanding shares of its stock by the Shareholder.
3.3 SUBSIDIARIES. Tice has no subsidiaries and owns no stock, partnership
or other equity interest in any other entity.
3.4 AUTHORITY. Tice has full power to execute and perform this Agreement.
The execution and delivery of this Agreement has been duly authorized by all
necessary corporate and other actions. Neither the execution nor delivery of
this Agreement nor the performance, observation or compliance with its terms and
conditions will violate any provision of law, any order of court or other
governmental agency, the Certificate of Incorporation or Bylaws of Tice, or any
indenture, agreement or other instrument to which Tice is a party, or by which
it is bound or by which any of its property is bound. No consent to the
performance, observation or compliance with the terms and conditions of this
Agreement by Tice is required from any third party.
3.5 FINANCIAL STATEMENTS. Schedule 3.5 attached hereto contains true and
complete copies of the following (collectively, the "Financial Statements"):
(a) the audited balance sheets of Tice as of March 31, 1994, 1995 and
1996, and the related audited statements of earnings and retained earnings and
cash flow for the fiscal years then ended, and notes related thereto; and
(b) the unaudited balance sheet (the "Balance Sheet") of Tice as of
June 30, 1996 (the "Balance Sheet Date") and the related unaudited statement of
earnings for the three months then
5
<PAGE>
ended, prepared by Tice and accompanied by a certificate in the form of Exhibit
3.5 hereto executed by the persons indicated on said Exhibit.
The Financial Statements either eliminate or clearly disclose all transactions
between Tice, the Shareholder and their affiliates. Except as otherwise noted in
the Financial Statements, the Financial Statements are complete and present
fairly the financial position of Tice and the results of its operations as of
the dates thereof and for the periods covered thereby in conformity with
generally accepted accounting principles applied on a consistent basis.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.6 attached hereto, to the Best Knowledge (as defined in Section 3.20 below) of
Tice, at the Balance Sheet Date (i) Tice had no liabilities or obligations of
any nature (matured or unmatured, fixed or contingent) which were not provided
for or disclosed on the Balance Sheet, (ii) all reserves and allowances provided
on the Balance Sheet were adequate for the purposes indicated therein and (iii)
there were no loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board
("FASB")) which were not adequately provided for in the Balance Sheet.
3.7 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 3.7 attached hereto, Tice's business has operated in the ordinary
course and there has not been (i) any adverse change in its condition (financial
or otherwise), assets, liabilities, earnings or business; (ii) any obligation or
liability (whether absolute, accrued, contingent or otherwise and whether due or
to become due) incurred, or any transaction, contract or commitment entered
into, other than items incurred or entered into (as the case may be) in the
ordinary course of the business; (iii) any amendment or termination of a
material contract, license, lease, commitment or other agreement to which Tice
is a party, except in the ordinary course of business and consistent with past
practice; (iv) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset or Intellectual Property (as
defined in Section 3.13 below) except sales of inventory in the ordinary course
of business and consistent with past practice; (v) any failure to operate its
business in the ordinary course consistent with past practice, including, but
not limited to, any failure to make capital expenditures or investments
necessary to continue business in the ordinary course or any failure to pay
trade accounts payable when due; or (vi) any dividend or other distribution
declared or paid or any change in its Common Stock outstanding.
6
<PAGE>
3.8 TITLE TO ASSETS. Tice has good and marketable title to all of its
assets, free and clear of all mortgages, liens, pledges, charges, security
interests, rights of way, options, rights of first refusal, conditions,
restrictions or encumbrances of any kind or character, whether or not relating
to the extension of credit or the borrowing of money (collectively,
"Encumbrances"), except for (i) the Encumbrances disclosed in the Financial
Statements or set forth on Schedule 3.8, and (ii) liens for taxes and
governmental charges not yet payable without penalty or which Tice is contesting
in good faith by appropriate action and which are identified on Schedule 3.8
attached hereto (collectively, but only to the extent expressly so designated on
such Schedule 3.8, the "Permitted Encumbrances"). There is no asset used or
required by Tice in the conduct of its business which is not either owned by it
or licensed or leased to it, all of which licenses or leases are disclosed on
Schedule 3.8.
3.9 LITIGATION. Except as set forth on Schedule 3.9 attached hereto,
there are no (i) audits, inspections, actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending or threatened against
Tice, whether at law or in equity, whether civil or criminal in nature or
whether before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, nor, to the Best Knowledge of Tice, does any basis exist therefor or
(ii) judgments, decrees, injunctions or orders of any court, governmental
department, commission, agency, instrumentality or arbitrator against Tice. Tice
has made available to Monogenesis all documents and correspondence relating to
matters referred to in Schedule 3.9.
3.10 COMPLIANCE; GOVERNMENTAL AUTHORIZATION. (a) Tice has complied with
all federal, state, territorial, local or foreign laws, ordinances, regulations
or orders applicable to its business or assets, including, by way of
description, and not limitation, matters relating to the environment, anti-
competitive practices, discrimination, employment, health and safety, taxes,
issuance of securities, customs duties and requirements and foreign practices.
Tice has all federal, state, territorial, local and foreign governmental
licenses and permits necessary in the conduct of its business as presently
conducted, which licenses and permits are in full force and effect, and no
violations are outstanding or uncured with respect to any such licenses or
permits and no proceeding is pending or threatened to revoke or limit any of
them. Except as set forth on Schedule 3.10(a), such licenses, consents and
permits shall not be affected in any respect by the transactions contemplated
hereby.
7
<PAGE>
(b) As used in this Agreement, "Hazardous Substance" shall mean and include
all hazardous or toxic substances, wastes or materials, any pollutants or
contaminants (including, without limitation, all oil and petroleum of any kind
and in any form, asbestos and raw materials which include hazardous
constituents), or any other similar substances, or materials which are included
under or regulated by any applicable local, state, federal or foreign law, rule
or regulation pertaining to environmental regulation, contamination, clean-up or
disclosure, including, without limitation, the Clean Air Act, the Federal Water
Pollution Control Act, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Resource Conservation and Recovery Act of 1976, the Toxic Substances
Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act, the Emergency Planning and Community Right-
to-Know Act of 1986, and all comparable applicable state or local laws, orders
and regulations, as any of the foregoing has heretofore been amended.
(c) Tice hereby warrants to Monogenesis that Tice and the supervisory
employees, officers and directors of Tice have no knowledge of the presence,
storage, disposition, generation, treatment, release or discharge of any
Hazardous Substance on, under or about the assets owned by Tice or the land and
buildings on and in which Tice currently conducts or previously conducted its
operations except as set forth on Schedule 3.10(c).
3.11 LABOR RELATIONS; EMPLOYEES. Tice is in compliance with all
applicable federal, state, territorial, local and foreign laws and regulations
respecting labor, employment and employment practices, terms and conditions of
employment and wages and hours. There is no unfair labor practice complaint
against Tice pending before any state, local or foreign agency. Except as set
forth on Schedule 3.11 hereto, there is no labor strike, dispute, slowdown,
stoppage or organizational effort or similar activity actually pending or, to
the Best Knowledge of Tice, threatened involving Tice; no representation
question exists respecting the employees of Tice; and no collective bargaining
agreement presently covers any employees of Tice, nor is any currently being
negotiated.
3.12 EMPLOYEE BENEFIT PLANS. (a) Schedule 3.12 attached hereto lists all
"employee pension benefit" plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all "employee
welfare benefit" plans (as defined in Section 3(1) of ERISA) and any other
qualified or non-qualified plans, programs or letters of commitment promising
current or future benefits or deferred compensation (individually, a "Plan" and,
collectively, the "Plans") maintained by Tice. All
8
<PAGE>
Plans which are "employee pension benefit" plans are so indicated on Schedule
3.12. All reports, statements, returns and other information required to be
furnished or filed with respect to the Plans have been furnished or filed, or
both, and all required records have been maintained. There are no actions, suits
or claims pending, or to the Best Knowledge of Tice, threatened against,
involving, or affecting any Plan. Tice has no material liability, civil or
criminal, under any provision of ERISA or any other applicable statute or rule
of law with respect to the Plans.
(b) There are no violations of the health care continuation coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") with respect to employees of Tice or any qualified
beneficiaries of such employees.
3.13 INTELLECTUAL PROPERTY. Set forth on Schedule 3.13 is a list and a
brief description or identification of all intellectual property rights owned,
leased or licensed by Tice or used in connection with its business, including
without limitation all patents, patent applications, trade names, fictitious or
assumed names, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, patterns, inventions, trade
secrets, proprietary processes and formulae, license agreements, and all other
similar proprietary rights, whether patentable or unpatentable (collectively,
the "Intellectual Property"). Except only as set forth on Schedule 3.13, Tice is
not a licensor or licensee in respect of any Intellectual Property. Tice owns or
possesses adequate licenses or other rights to use all Intellectual Property
necessary to conduct its business as now operated and all of such Intellectual
Property is owned outright by Tice except as is otherwise specifically noted on
Schedule 3.13. To the Best Knowledge of Tice, there is no infringement,
misappropriation or other misuse being made by any other party of the
Intellectual Property. No claim is pending or threatened to the effect that the
present or past operations of Tice infringe or conflict with the asserted rights
of others in respect of any Intellectual Property, and no claim is pending or
threatened to the effect that any of such Intellectual Property is invalid or
unenforceable.
3.14 ACCOUNTS AND NOTES RECEIVABLE. All unpaid accounts and notes
receivable outstanding at the date hereof constitute, and those outstanding at
the Closing Date will constitute, valid and enforceable claims arising in bona
fide transactions in the ordinary course of business, except as enforceability
is limited by applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar laws affecting the enforcement of
9
<PAGE>
creditors rights generally. Except as set forth in Schedule 3.14 or reserved
against in the Final Balance Sheet, there is (i) no account or note debtor who
has refused or threatened to refuse to pay its obligations or who has or
threatened to set-off such obligations for any reason, (ii) no account or note
debtor who is to Tice's Best Knowledge insolvent or bankrupt and (iii) no
account or note receivable pledged to any third party. The reserves and
allowances provided for on the Balance Sheet have been established on the basis
of historical experience in accordance with generally accepted accounting
principles. To the Best Knowledge of Tice, no material customer of Tice is
currently a debtor in any proceeding under the Federal Bankruptcy Code or other
similar law except as specifically described in Schedule 3.14, in which is also
set forth the amount of such customer's payments to Tice during the ninety days
prior to the bankruptcy filing and the amount of any preference claims pending
or threatened against Tice.
3.15 INVENTORIES. The inventories of Tice are, and at the Closing Date
will be, (i) of a quantity which is reasonable in the circumstances of Tice; and
(ii) of a quality which is substantially similar to the historical quality of
Tice's inventory.
3.16 TAX MATTERS. For purposes of this Agreement, the term "Taxes" means
all taxes of any kind or nature, including but not limited to federal, state,
local and foreign income taxes, withholding taxes, branch profit taxes, gross
receipts taxes, franchise taxes, sales and use taxes, business and occupation
taxes, property taxes, VAT, custom duties or imposts, stamp taxes, excise taxes,
payroll taxes, intangible taxes and capital taxes and any penalties or interest
thereon. Tice has filed within the time and in the manner prescribed by law all
tax returns and reports required to be filed by it under the laws of the United
States and each state or other jurisdiction in which it conducts business
activities requiring the filing of tax returns or reports. Tice has paid or set
up adequate reserves in the Balance Sheet in respect of all Taxes. Except as
noted in Schedule 3.8, there are no tax liens, whether imposed by the United
States, any state, local, foreign or other taxing authority, outstanding against
Tice or its assets. All Taxes and assessments that Tice is required to withhold
or to collect have been duly withheld or collected and all withholdings and
collections have either been duly and timely paid over to the appropriate
governmental authorities or are, together with the payments due or to become due
in connection therewith, duly reflected on the Balance Sheet in accordance with
generally accepted accounting principles.
3.17 BOOKS AND RECORDS. The books of account and other corporate
financial records of Tice are in all material respects
10
<PAGE>
complete and correct, have been maintained in accordance with good business
practices and matters contained therein are appropriately and accurately
reflected in the Financial Statements. The corporate record book of Tice
contains true and complete copies of all meetings of its shareholders and
directors.
3.18 DISPOSITION OF HOLDING COMPANY STOCK. Tice is not aware of any
present plan, intention or arrangement of the Shareholder to dispose of the
Holding Company stock to be received hereunder which would reduce the aggregate
fair value of the Holding Company stock (as measured as of the date of the
exchange) retained by the Shareholder to an amount less than 50% of the
aggregate value of all Tice stock immediately prior to the exchange.
3.19 DISCLOSURE. Neither this Agreement (including the Schedules and
Exhibits attached hereto) nor any other document, certificate or statement
furnished to Monogenesis by or on behalf of Tice in connection with the
transactions contemplated hereby, when considered in the aggregate with all
other such documents, certificates or statements, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
3.20 BEST KNOWLEDGE OF TICE. Tice represents and warrants that each time a
representation and warranty is based on "Best Knowledge" that Tice has made a
duly diligent investigation and inquiry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants, all of which representations and
warranties shall be true on the Closing Date and shall survive the Closing,
that:
4.1 AUTHORITY. The Shareholder has full power and authority to execute
and perform this Agreement and to exchange the shares of stock of Tice upon the
terms provided in this Agreement. The execution and delivery of this Agreement
has been duly authorized by the Shareholder. Neither the execution nor delivery
of this Agreement nor the performance, observation or compliance with its terms
and provisions will violate any provision of law, any order of court or other
governmental agency, or any indenture, agreement or other instrument to which
the Shareholder is a party, or by which he is bound or by which his property is
bound. No consent to the performance, observation or compliance with the terms
and
11
<PAGE>
conditions of this Agreement by the Shareholder is required from any third
party.
4.2 STOCK OWNERSHIP. All of the Common Stock of Tice is directly owned by
the Shareholder, as indicated herein, free and clear of all liens, encumbrances,
security interests, charges, pledges, options, restrictions on transfer, rights
of refusal or other adverse claims of any kind except as set forth on Schedule
4.2 attached hereto. No person owns or has any beneficial interest in any Common
Stock except the Shareholder. The Shareholder has good and marketable title to
the shares being transferred. The Shareholder has not transferred or assigned,
or entered into any agreement or understanding to transfer or assign, any of the
Common Stock of Tice or any of the voting rights pertaining to the shares except
as set forth on Schedule 4.2 attached hereto.
4.3 DISPOSITION OF HOLDING COMPANY STOCK. The Shareholder does not have any
present plan, intention or arrangement to dispose of the Holding Company stock
to be received hereunder which would reduce the aggregate fair value of the
Holding Company stock (as measured as of the date of the exchange) retained by
the Shareholder to an amount less than 50% of the aggregate value of all Tice
stock immediately prior to the exchange.
4.4 INVESTMENT REPRESENTATIONS. (a) The Shareholder has received such
material information as has been requested for purposes of becoming fully
familiar with the financial condition of Tice and the expected condition of the
Holding Company, the administration of their business affairs, and their
prospects for future business.
(b) The Shareholder is fully aware and has been advised that the
securities received pursuant to this Agreement are speculative in nature and
that neither Tice nor the Holding Company make any assurance whatever concerning
the present or prospective value of the securities.
(c) The Shareholder understands that, with the exception of the
1,302,397 Common Shares which will be registered pursuant to the 1933 Act, the
Common Shares to be received by the Shareholder pursuant to this Agreement will
not be registered under the 1933 Act, on the ground that the securities are
being issued and sold in a transaction not involving any public offering and
that, consequently, the transaction is exempt from registration under the 1933
Act by virtue of the provisions of Section 4(2) thereof; nor are the securities
to be registered under the securities laws of any state on the ground that the
sale is exempt,
12
<PAGE>
or registration of securities is not required, under the securities laws of
Tennessee in which state the Shareholder resides.
(d) The Shareholder understands that the reliance of Tice and the
Holding Company upon the above exemptions is predicated in part on the
representation of the Shareholder that such unregistered securities are being
acquired for the account of the Shareholder with no present intention of
reselling or otherwise distributing the same.
(e) The Shareholder understands that he will not be able to dispose
of any shares acquired pursuant to this Agreement, except such shares as are
registered as described in Article I, or any interest therein unless and until
such shares or interests have been registered under the 1933 Act and applicable
state securities laws or the Holding Company has received an opinion from
counsel satisfactory to it that registration is not required in connection with
such disposition. The Shareholder understands that the Holding Company will
prohibit transfers of the shares which are not registered as described in
Article I in the absence of registration or the mentioned opinion of counsel and
a restrictive legend will be placed on the Class B Common Shares and on the
Common Shares received by the Shareholder which are not registered as described
in Article I reflecting these restrictions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MONOGENESIS
Monogenesis represents and warrants, all of which representations and
warranties shall be true on the Closing Date and shall survive the Closing,
that:
5.1 ORGANIZATION. Monogenesis is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted.
5.2 AUTHORITY. Monogenesis has the full power to execute and perform this
Agreement. The execution and delivery of this Agreement has been duly authorized
by all necessary corporate and other actions. Neither the execution nor delivery
of this Agreement nor the performance, observance or compliance with its terms
and conditions will violate any provision of law, any order of court or other
governmental agency, the Certificate of Incorporation or Bylaws of Monogenesis
or any indenture, agreement or other instrument to which Monogenesis is a party,
or by which it is bound. No consent to the performance, observation or
compliance
13
<PAGE>
with the terms and conditions of this Agreement by Monogenesis is required from
any third party.
5.3 SHAREHOLDERS. Monogenesis has in excess of 1,000 shareholders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JWSI
JWSI represents and warrants, all of which representations and warranties
shall be true on the Closing Date and shall survive the Closing, that:
6.1 ORGANIZATION. JWSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power to carry on its business as it is now being conducted.
6.2 AUTHORITY. JWSI has the full power to execute and perform this
Agreement. The execution and delivery of this Agreement has been duly authorized
by all necessary corporate and other actions. Neither the execution nor delivery
of this Agreement nor the performance, observance or compliance with its terms
and conditions will violate any provision of law, any order of court or other
governmental agency, the Certificate of Incorporation or Bylaws of JWSI or any
indenture, agreement or other instrument to which JWSI is a party, or by which
it is bound. No consent to the performance, observation or compliance with the
terms and conditions of this Agreement by JWSI is required from any third party.
6.3 OWNERSHIP OF WARRANTS. JWSI owns the warrants of Tice to be exchanged
hereunder free and clear of all liens, encumbrances, security interests,
charges, pledges, options, restrictions on transfer, rights of refusal or other
adverse claims of any kind. JWSI has good and marketable title to the warrants
being transferred. JWSI has not transferred or assigned, or entered into any
agreement or understanding to transfer or assign, any of the warrants.
ARTICLE VII
COVENANTS OF TICE
Tice hereby covenants and agrees with Monogenesis as follows:
7.1 CONDUCT OF BUSINESS UNTIL CLOSING DATE. Except as permitted or
required hereby or as Monogenesis may otherwise
14
<PAGE>
consent in writing, between the date hereof and the Closing Date, Tice shall:
(a) operate its business only in the usual, regular and ordinary
manner as such business was conducted prior to the Balance Sheet Date and, to
the extent consistent with such operation, use its best efforts to (i) preserve
the present business organization intact, (ii) keep available the services of
the present employees, and (iii) preserve the present business relationship with
customers, suppliers and others having business dealings with it;
(b) maintain all properties necessary for the conduct of the
business, whether owned or leased, in substantially the same condition as they
now are (reasonable wear and tear which are not such as to materially adversely
affect operations and damage due to unavoidable casualty excepted);
(c) neither (i) encumber, mortgage or voluntarily subject to lien,
except for liens created pursuant to existing loan agreements, any of the
properties or assets, (ii) convey, transfer or acquire any material asset or
property other than in the ordinary course of business, nor (iii) except in the
ordinary course of business, incur any material fixed or contingent obligation
or enter into any material agreement, commitment or other transaction or
arrangement; and
(d) neither declare, set aside, pay or make any dividend or other
distribution or payment on or in respect of shares of its stock, nor directly or
indirectly redeem, retire, purchase or otherwise acquire any of its stock.
7.2 ACCESS TO PROPERTIES AND RECORDS. Tice shall give to Monogenesis
and its representatives reasonable access during normal business hours to Tice's
properties, personnel, books, tax returns, contracts, commitments and records
and the right to make copies thereof. Tice shall furnish to Monogenesis and
such representatives all such additional documents and financial and other
information as Monogenesis or its representatives may from time to time
reasonably request and permit Monogenesis and such representatives to examine
all records and working papers relating to the preparation, review and audits of
Tice's financial statements and tax returns.
7.3 ADVICE OF CHANGES. Between the date hereof and the Closing Date,
Tice shall advise Monogenesis promptly in writing of any fact of which any Tice
becomes aware, which, if known at the date hereof, would have been required to
be set forth or disclosed in or pursuant to this Agreement.
15
<PAGE>
7.4 CONDUCT. Except as permitted or required hereby or as Tice may
notify Monogenesis in writing, Tice shall not enter into any transaction, take
any action, or fail to take any action, which would result in any of the
representations and warranties of Tice contained in this Agreement or in any
Schedule or Exhibit hereto not being true and correct at and as of the time
immediately after such transaction has been entered into or such event has
occurred and on the Closing Date.
7.5 APPROVALS, CONSENTS. Tice shall obtain in writing prior to the
Closing Date all approvals, consents and waivers, required to be obtained by
Tice in order to effectuate the transactions contemplated hereby, and shall
deliver to Monogenesis copies thereof, reasonably satisfactory in form and
substance to Monogenesis.
ARTICLE VIII
COVENANTS OF MONOGENESIS
Monogenesis hereby covenants and agrees with Tice as follows:
8.1 CONFIDENTIALITY; RETURN OF DOCUMENTS. Unless and until the
transactions contemplated by this Agreement are consummated, Monogenesis shall
keep in confidence all proprietary and financial information of Tice, and shall
not, except to the extent required by law or to the extent any such information
is otherwise publicly available, without the prior written consent of Tice,
reveal any such financial or proprietary information to any third party other
than securities regulatory authorities in connection with the Registration
Statement or counsel, accountants or experts retained by Monogenesis who shall
be bound by the same restrictions. If the transactions contemplated by this
Agreement are not consummated, Monogenesis shall return to Tice, at Tice's
request, all documents supplied to Monogenesis by Tice pursuant to the
provisions of this Agreement.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF MONOGENESIS
The obligation of Monogenesis to perform as provided in this Agreement
is subject to the satisfaction at or prior to the Closing Date of the following
conditions unless waived by Monogenesis in its sole discretion:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Tice and the Shareholder contained in this Agreement and in any
Schedule or Exhibit hereto
16
<PAGE>
shall be true and accurate in all material respects on and as of the Closing
Date, with the same force and effect as if made on the Closing Date, except as
affected by transactions required or permitted hereby, and except that any such
representation or warranty made as of a specified date (other than the date of
this Agreement) shall have been true and accurate in all material respects on
and as of such date.
9.2 PERFORMANCE OF AGREEMENTS. Tice and the Shareholder shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with, on or before the Closing Date pursuant to this
Agreement or any Schedule or Exhibit hereto, including, but not limited to, the
transfer of the Shares to the Holding Company.
9.3 TICE'S CERTIFICATE. Monogenesis shall have received an accurate
certificate, dated the Closing Date, of Tice, satisfactory in form and substance
to Monogenesis, certifying as to the fulfillment of the matters specified in
Sections 9.1 and 9.2.
9.4 SECRETARY'S CERTIFICATE. Monogenesis shall have received an accurate
certificate, dated the Closing Date, of the Secretary or Assistant Secretary of
Tice, satisfactory in form and substance to Monogenesis, with respect to the
resolutions adopted by the Board of Directors of Tice approving this Agreement
and the transactions contemplated hereby.
9.5 CONSENTS, AUTHORIZATIONS. All consents, authorizations, orders or
approvals of, and filings or registrations with and the expiration of all
waiting periods imposed by, any third party, including, without limitation, any
federal, state or local commission, board or other regulatory body, lender,
lessor, licensor or supplier which are required for or in connection with the
execution and delivery of this Agreement by Tice and the Shareholder and the
consummation of the transactions contemplated hereby shall have been duly
obtained or made and shall be in full force and effect.
9.6 LEGISLATION. No federal, state or local statute, rule or regulation
shall have been enacted after the date of this Agreement which prohibits,
restricts, delays or materially adversely affects the business of Tice or the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions. No temporary restraining
order or injunction shall be in effect, or threatened by a governmental agency,
restraining the consummation of the transactions contemplated hereby.
17
<PAGE>
9.7 JWSI WARRANTS. Tice shall have sold to JWSI warrants to purchase 30
of its shares of common stock.
9.8 ISSUANCE, REGISTRATION AND DISTRIBUTION OF SHARES AND WARRANTS. The
Holding Company shall have been formed and shall have taken all steps necessary
to issue the Shares and Warrants in accordance with this Agreement. Monogenesis
shall have resolved to distribute to each of its shareholders 125 Common Shares
and 400 Warrants of the Holding Company to be issued to Monogenesis for each
share of stock of Monogenesis held by such shareholder. The Registration
Statement shall have been filed registering 1,302,937 of the Common Shares to be
issued to the Shareholder, all of the Common Shares to be issued to Monogenesis
and JWSI, all of the Warrants and all of the Common Shares underlying the
Warrants, and such Registration Statement shall have become effective.
9.9 GOOD STANDING CERTIFICATES. Monogenesis shall have received
certificates acceptable to it from the Secretary of State of (i) the
jurisdiction in which Tice is incorporated, certifying that Tice is in good
standing under the laws of such jurisdiction and a certified copy of the
Certificate of Incorporation of Tice and all amendments, and (ii) each
jurisdiction in which Tice is qualified to do business as a foreign corporation,
certifying that Tice is so qualified and in good standing.
9.10 INTERIM FINANCIAL STATEMENTS. Monogenesis shall have received the
unaudited balance sheet of Tice as of the month-end immediately preceding the
Closing Date (or the prior month-end if the Closing occurs prior to the tenth
business day of a month), and the related unaudited statements of earnings,
retained earnings and cash flows for the portion then ended of the fiscal year
commencing April 1, 1996, presented on a comparative basis with financial
statements of the same portion of the preceding fiscal year, prepared by Tice
and accompanied by a certificate in the form of Exhibit 3.5 attached hereto
executed by the persons indicated on said Exhibit. Such statements for the
fiscal year commencing April 1, 1996 shall not differ from those for the
comparable period of the preceding fiscal year in any materially adverse
respect.
9.11 CASUALTY. There shall have not occurred any fire, flood, earthquake
or other casualty to assets of Tice resulting in a cost of repair or replacement
of more than $25,000 in excess of applicable insurance coverage.
18
<PAGE>
ARTICLE X
CONDITIONS TO OBLIGATIONS OF TICE, THE SHAREHOLDER AND JWSI
The obligation of Tice, the Shareholder and JWSI to perform their
obligations under this Agreement is subject to the satisfaction at or prior to
the Closing Date of the following conditions unless waived by Tice, the
Shareholder and JWSI in their sole discretion:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Monogenesis contained in this Agreement or in any Schedule or
Exhibit hereto shall be true and accurate in all material respects on and as of
the Closing Date, with the same force and effect as if made on the Closing Date,
except as affected by transactions required or permitted hereby, and except that
any such representation or warranty made as of a specified date (other than the
date of this Agreement), shall have been true and accurate in all material
respects on and as of such date.
10.2 PERFORMANCE OF AGREEMENTS. Monogenesis shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement or any Schedule or Exhibit hereto.
10.3 OFFICER'S CERTIFICATION. Tice and the Shareholder shall have received
an accurate certificate, dated the Closing Date, of a duly authorized officer of
Monogenesis, satisfactory in form and substance to Tice and the Shareholder,
certifying as to the fulfillment of the matters specified in Sections 10.1 and
10.2.
10.4 SECRETARY'S CERTIFICATE. Tice and the Shareholder shall have received
an accurate certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of Monogenesis, satisfactory in form and substance to Tice and the
Shareholder, with respect to the resolutions adopted by the Board of Directors
of Monogenesis approving this Agreement and the transactions contemplated
hereby.
10.5 CONSENTS, AUTHORIZATIONS. All consents, authorizations, orders or
approvals of, and filings or registrations with, and the expiration of all
waiting periods imposed by any third party, including without limitation, any
federal, state or local commission, board or other regulatory body which are
required for or in connection with the execution and delivery by Monogenesis of
this Agreement and the consummation by Monogenesis of the
19
<PAGE>
transactions contemplated hereby shall have been obtained or made and shall be
in full force and effect.
10.6 LEGISLATION. No federal, state or local statute, rule or regulation
shall have been enacted after the date of this Agreement which prohibits,
restricts, delays or materially adversely affects the consummation of the
transactions contemplated by this Agreement or any of the conditions to the
consummation of such transactions. No temporary restraining order or injunction
shall be in effect, or threatened by a governmental agency, restraining the
consummation of the transactions contemplated hereby.
10.7 JWSI WARRANTS. Tice shall have sold to JWSI warrants to purchase 30
of its shares of common stock.
10.8 ISSUANCE, REGISTRATION AND DISTRIBUTION OF SHARES AND WARRANTS. The
Holding Company shall have been formed and shall have taken all steps necessary
to issue the Shares in accordance with this Agreement. Monogenesis shall have
resolved to distribute to each of its shareholders 125 Common Shares and 400
Warrants of the Holding Company to be issued to Monogenesis for each share of
stock of Monogenesis held by such shareholder. The Registration Statement shall
have been filed registering 1,302,937 of the Common Shares to be issued to the
Shareholder, all of the Common Shares to be issued to Monogenesis and JWSI, all
of the Warrants and all of the Common Shares underlying the Warrants, and such
Registration Statement shall have be become effective.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by Tice or Monogenesis at any time after ________, 1996;
provided, however, that if the Registration Statement has not become effective
and Monogenesis is diligently pursuing the registration of the Shares then
Monogenesis may extend such date beyond _________, 1996 to a date within ten
business days of the effective date, but not later than ___________, 199_;
(b) by Monogenesis, if the after tax earnings of Tice do not equal an
average of $________ per month for the period beginning immediately after the
end of the last fiscal year and ending on the day prior to the effective date of
the Registration Statement;
20
<PAGE>
(c) by Monogenesis, if there has been a violation or breach by Tice
or the Shareholder of any material agreement, representation or warranty of any
of them contained in this Agreement and such violation or breach has not been
waived by Monogenesis, or, with respect to a violation or breach of an
agreement, cured within ten business days after the receipt of written notice
thereof; or
(d) by Tice, if there has been a violation or breach by Monogenesis
of any material agreement, representation or warranty of Monogenesis contained
in this Agreement and such violation or breach has not been waived by Tice or,
with respect to a violation or breach of an agreement, cured within ten business
days after the receipt of written notice thereof.
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Section 11.1, written notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. The provisions of Sections 8.1,
13.1 and 13.2 shall survive any such termination.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION. (a) Tice and the Shareholder shall, jointly and
severally, indemnify, defend and save Monogenesis harmless from, against, for
and in respect of the following: (i) any damages, losses, obligations,
liabilities, claims, actions or causes of action sustained or suffered by
Monogenesis and arising from a breach of any representation, warranty, covenant
or agreement of Tice or the Shareholder contained in or made pursuant to this
Agreement (including the Schedules and Exhibits attached hereto), or in any
certificate, instrument or agreement delivered by Tice or the Shareholder
pursuant hereto or in connection with the transactions contemplated hereby; and
(ii) all reasonable costs and expenses (including, without limitation,
reasonable attorneys', accountants', and other professional fees and expenses)
incurred by Monogenesis in connection with any action, suit, proceeding, demand,
investigation, assessment or judgment incident to any of the matters indemnified
against under this Section 12.1(a). No claim, demand, suit or cause of action
shall be brought against Tice under or pursuant to this Section 12.1(a) with
respect to the representations and warranties set forth in Articles III and IV
hereof unless Monogenesis gives Tice and the Shareholder written notice, with
reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon
21
<PAGE>
the giving of such written notice as aforesaid, Monogenesis shall have the
right, in addition to all other remedies available to it, to commence legal
proceedings for the enforcement of its rights under this Agreement. Monogenesis,
at its option and with at least two days advance notice to the affected party,
may recover any such liability by set off against payments otherwise required to
be made by Monogenesis to such party pursuant to any agreement between
Monogenesis and such party.
(b) Monogenesis shall indemnify, defend and save Tice and the
Shareholder harmless from, against, for and in respect of the following: (i) any
damages, losses, obligations, liabilities, claims, actions or causes of action
sustained or suffered by Tice or the Shareholder and arising from a breach of
any representation, warranty, covenant or agreement of Monogenesis contained in
or made pursuant to this Agreement or in any certificate, instrument or
agreement delivered by it pursuant hereto or in connection with the transactions
contemplated hereby; and (ii) all reasonable costs and expenses (including,
without limitation, reasonable attorneys', accountants', and other professional
fees and expenses) incurred by Tice or the Shareholder in connection with any
action, suit, proceeding, demand, investigation, assessment or judgment incident
to any of the matters indemnified against under this Section 12.1(b). No claim,
demand, suit or cause of action shall be brought against Monogenesis under or
pursuant to this Section 12.1(b) unless such party gives Monogenesis written
notice, with reasonable specificity, of the existence of any such claim, demand,
suit or cause of action under this Agreement. Upon the giving of such written
notice as aforesaid, such party shall have the right, in addition to all other
remedies available to it, to commence legal proceedings for the enforcement of
its rights under this Agreement.
12.2 THIRD PARTY CLAIMS. With respect to claims resulting from the
assertion of liability by third parties, the obligations and liabilities of the
party responsible for indemnification (the "Indemnifying Party") hereunder with
respect to indemnification claims by the party entitled to indemnity (the
"Indemnified Party") shall be subject to the following terms and conditions: (i)
the Indemnified Party shall give prompt written notice to the Indemnifying Party
of any assertion of liability by a third party which might give rise to a claim
by the Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in Section 11.1 hereof, stating the nature and basis of
said assertion and the amount thereof, to the extent known; and (ii) the
Indemnifying Party shall not make any settlement of any claims without the
written consent of the Indemnified Party; provided, however, that if an
Indemnified Party does not consent to a
22
<PAGE>
settlement proposed by the Indemnifying Party and accepted by the adverse third
party, the liability of the Indemnifying Party shall be limited to the amount
that would have been paid in such settlement.
12.3 REMEDIES CUMULATIVE. The remedies provided for in this Article XII
shall be cumulative and shall not preclude assertion by the Indemnified Party of
any other rights or the seeking of any other remedies against the Indemnifying
Party.
12.4 RECOVERIES. In the event an Indemnified Party subsequently receives
payment (including without limitation proceeds of insurance and payments on
accounts receivable) with respect to a matter for which it has been fully
indemnified by the Indemnifying Party, the Indemnified Party shall promptly pay
the amount of such payment up to the indemnification received, to the
Indemnifying Party.
ARTICLE XIII
MISCELLANEOUS
13.1 EXPENSES; TRANSFER TAXES. All fees, costs and expenses incurred by
Tice, the Shareholder or Monogenesis in connection with, relating to or arising
out of the preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including, without
limitation, organizational costs of the Holding Company, fees of the transfer
agent and legal and accounting fees and expenses, shall be borne by Tice.
13.2 BINDING EFFECT. This Agreement shall become binding and effective
when executed by the parties hereto. This Agreement shall not be assignable by
any party without the prior written consent of the other parties, except that
without relieving Monogenesis of any of its obligations under this Agreement,
Monogenesis may assign this Agreement to any of its affiliates. Subject to the
foregoing, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors, heirs, legal representatives, and
assigns of the parties hereto. This Agreement constitutes an agreement among the
parties hereto and none of the agreements, covenants, representations or
warranties contained herein shall be for the benefit of any third party not a
party to this Agreement.
13.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the Schedules
and Exhibits attached hereto) contains the entire understanding of the parties
with respect to its subject
23
<PAGE>
matter. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof. This Agreement
may be amended only by a written instrument duly executed by the parties, and
any condition to a party's obligations hereunder may only be waived in writing
by such party.
13.4 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.5 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally, if mailed (by registered or certified mail, return receipt
requested and postage prepaid), if sent by reputable overnight courier service
for next business day delivery, or if sent by facsimile transmission, as
follows:
if to Tice, to: William A. Tice, President
Tice Engineering and Sales, Inc.
6711 Tice Plaza
Knoxville, Tennessee 37918
Telephone: (615) 922-7501
Facsimile: (615) 922-3134
with a copy to: Sarah Y. Sheppeard, Esq.
Sheppeard & Swanson
Suite 200, Main Place
P. O. Box 2149
Knoxville, Tennessee 37901
Telephone: (615) 546-3653
Facsimile: (615) 637-7300
if to Monogenesis Scot D. Walker, President
or JWSI, to: Monogenesis Corporation
Drawer 88, Walker Creek Road
Walker, West Virginia 26180-9948
Telephone: (800)543-8620
Facsimile: (800)543-8619
with a copy to: Lynn H. Wangerin, Esq.
Ogden Newell & Welch
1200 One Riverfront Plaza
Louisville, Kentucky 40202
Telephone: (502) 582-1601
Facsimile: (502) 581-9564
24
<PAGE>
if to the Shareholder, to: his address set forth on the
books of Tice.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be effective on the date of receipt (or, if received on a
non-business day, on the first business day after the date of receipt).
13.6 PUBLICITY. The parties agree that, except as otherwise required by
law, the issuance of any reports, statements or releases pertaining to this
Agreement or the transactions contemplated hereby is subject to mutual consent.
13.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware (without giving
effect to its laws regarding conflicts of law).
13.8 WAIVERS. Any provision of this Agreement may be waived only by a
written instrument executed by the party to be charged with such waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
13.9 DEFINED TERMS. Throughout this Agreement various terms have been
defined by being enclosed in quotation marks, usually in parentheses, and used
with their initial letters capitalized. Unless the context otherwise requires,
such defined terms shall have their designated meaning whenever used in this
Agreement or any attached schedules.
13.10 FEES. If there is any litigation between the parties related to
this Agreement or the transactions contemplated by this Agreement, the
prevailing party shall be entitled to recover all reasonable costs and expenses
(including, without limitation, reasonable attorneys', accountants' and other
professional fees and expenses).
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
TICE ENGINEERING AND SALES, INC.
By: ______________________________
Title: ______________________________
MONOGENESIS CORPORATION
By: ______________________________
Scot D. Walker, President
JOSEPH WALKER AND SONS, INC.
By: ______________________________
Title: ______________________________
THE SHAREHOLDER
______________________________
William A. Tice
26
<PAGE>
SCHEDULE 1.1
HOLDING COMPANY STOCK TO BE
---------------------------
ISSUED TO THE SHAREHOLDER AND JWSI
-----------------------------------
<TABLE>
<CAPTION>
RESTRICTED REGISTERED CLASS B
NAME COMMON SHARES COMMON SHARES COMMON SHARES
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
William A. Tice 3,908,813 1,302,937 750,000
- ----------------------------------------------------------------------------
Joseph Walker &
Sons, Inc. -0- 238,470 -0-
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
TOTAL 3,908,813 1,541,407 750,000
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 3(I)
------------
CERTIFICATE OF INCORPORATION
OF
TICE TECHNOLOGY, INC.
--------------------
The undersigned, acting as incorporator of a corporation under the General
Corporation Law of the State of Delaware, adopts the following certificate of
incorporation for such corporation (the "Corporation"):
1. NAME. The name of the Corporation is "Tice Technology, Inc."
2. PURPOSES. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
3. CLASSES OF STOCK. The total number of shares which the Corporation is
authorized to issue is 45,600,000 shares of which 30,000,000 shares shall be
designated "Common Shares;" 5,000,000 shall be designated "Class B Common
Shares;" 600,000 shall be designated "Class D Common Shares;" and 10,000,000
shall be designated "Preferred Shares." The number of Class D Common Shares
authorized shall not exceed 2% of the number of Common Shares authorized. All
shares of stock of the Corporation shall have a par value of $0.01 per share. No
holder of shares of any class of stock of the Corporation now or hereafter
authorized shall be entitled to cumulative voting or shall have any preferential
or preemptive right to subscribe for, purchase or receive any shares of the
Corporation of any class now or hereafter authorized, or any portions or
warrants for such shares, or any securities convertible into or exchangeable for
such shares, which may at any time be issued, sold or offered for sale by the
Corporation; except that, holders of Class B Common Shares shall have preemptive
rights with respect to the issuance of Class B Common Shares only. In addition,
the Corporation shall not sell or offer to sell any Class B Common Shares
without the prior approval of the holders of a majority of the issued and
outstanding Class B Common Shares.
4. COMMON AND CLASS B COMMON SHARES. The Common Shares and the Class B
Common Shares shall be identical in all respects and have equal rights and
privileges, except as otherwise provided in this certificate. The relative
rights, preferences and limitations of the shares of each class are as follows:
(A) DIVIDENDS. Except as provided in subparagraph 4(b), the Corporation
shall not pay any dividends during any fiscal year to the holders of Class B
Common Shares, unless and until the Corporation shall have paid the holders of
Common Shares a dividend
<PAGE>
of not less than $0.05 per share during such year, and in addition, unless the
Corporation shall also pay the holders of Common Shares a dividend per share at
least equal to the dividend per share paid to the holders of the Class B Common
Shares during such year. The Corporation may pay dividends to holders of Common
Shares in excess of dividends paid, or without paying dividends, to holders of
Class B Common Shares. The dividend preference for Common Shares shall not be
cumulative.
(B) SHARE DISTRIBUTION. The Corporation shall make a share
distribution of Class B Common Shares or Common Shares only as follows:
(i) Common Shares may only be distributed as a stock dividend on
Common Shares and Class B Common Shares may only be distributed as a stock
dividend on Class B Common Shares; except that, prior to the issuance of any
Common Shares, Common Shares may be distributed as a stock dividend on Class B
Common Shares; and
(ii) if a stock dividend is declared with respect to either
Common Shares or Class B Common Shares, a stock dividend of the same number of
shares shall be declared with respect to the other of such classes.
(C) STOCK COMBINATIONS OR SPLITS. The Corporation shall not combine
or subdivide either Common Shares or Class B Common Shares without at the same
time making a proportionate combination or subdivision of shares of the other of
such classes.
(D) VOTING. Each holder of Common Shares and Class B Common Shares
shall be entitled to one vote for each share of stock registered in such
shareholder's name, except that, the holders of Class B Common Shares shall have
exclusive voting power if no Common Shares, Class D Common Shares or voting
Preferred Shares are issued and outstanding and holders of Common Shares, Class
D Common Shares and voting Preferred Shares shall have exclusive voting power if
no shares of Class B Common Shares are issued and outstanding. In all other
cases, voting power shall be divided between such classes as follows:
(i) With respect to the election of directors, holders of Common
Shares together with the holders of Class D Common Shares and voting Preferred
Shares voting together as a separate class shall be entitled to elect that
number of directors which constitutes 25% of the authorized number of members of
the board of directors and, if such 25% is not a whole number, then the holders
of Common Shares, Class D Common Shares and voting Preferred Shares shall be
entitled to elect the nearest higher whole number of directors that is at least
25% of such membership. Holders of Class
2
<PAGE>
B Common Shares voting as a separate class shall be entitled to elect the
remaining directors.
(ii) The holders of Common Shares, Class D Common Shares and
voting Preferred Shares shall be entitled to vote together as a separate class
on the removal, with or without cause, of any director elected by such holders
and the holders of Class B Common Shares shall be entitled to vote as a separate
class on the removal, with or without cause, of any director elected by the
holders of Class B Common Shares.
(iii) Any vacancy in the office of a director elected by the
holders of the Common Shares, Class D Common Shares and voting Preferred Shares
may be filled by a vote of such holders voting together as a separate class and
any vacancy in the office of a director elected by the holders of the Class B
Common Shares may be filled by a vote of such holders voting as a separate
class. In the absence of a stockholder vote, in the case of a vacancy in the
office of a director elected by either class, such vacancy may be filled by the
remaining directors as provided in the bylaws of the Corporation. Any director
elected by the board of directors to fill a vacancy shall serve until the next
annual meeting of stockholders and until a successor has been elected and has
qualified. If permitted by the bylaws, the board of directors may increase the
number of directors and any vacancy so created may be filled by the board of
directors; provided that, so long as the holders of Common Shares, Class D
Common Shares and voting Preferred Shares have the rights provided in
subparagraph 4(d) of this certificate in respect of the last preceding annual
meeting of stockholders, the board of directors may be so enlarged by the board
of directors only to the extent that at least 25% of the enlarged board consists
of directors elected by the holders of the Common Shares, Class D Common Shares
and voting Preferred Shares or by persons appointed to fill vacancies created by
the death, resignation or removal of persons elected by the holders of the
Common Shares, Class D Common Shares and voting Preferred Shares.
(iv) Notwithstanding the foregoing, holders of Common Shares,
Class D Common Shares and voting Preferred Shares shall not have the right to
elect directors as set forth above if, on the record date for any stockholders'
meeting at which directors are to be elected, the number of issued and
outstanding Common Shares, Class D Common Shares and voting Preferred Shares is
less than 10% of the aggregate number of issued and outstanding voting shares of
all classes. In such case, all directors to be elected at such meeting shall be
elected by the holders of all voting shares voting together as a single class.
3
<PAGE>
(v) The holders of the Common Shares and the holders of the
Class B Common Shares shall be entitled to vote as separate classes only when
required by law to do so irrespective of the limitations placed herein on the
voting rights of such stockholders, or when a separate class vote is required by
specific provision therefor in this certificate of incorporation or in the
bylaws of the Corporation. Holders of all voting shares shall vote as a single
class, in all other matters including, but not limited to, any amendment to this
certificate in order to increase or decrease the aggregate number of authorized
shares of Common Stock, Class D Common Stock or Preferred Stock.
(E) CONVERSION. Each holder of record of Class B Common Shares may at
any time or from time to time, in such holder's sole discretion and at such
holder's option, convert any whole number or all of such holder's Class B Common
Shares into fully paid and non-assessable Common Shares at the rate (subject to
adjustment as hereinafter provided) of one Common Share for each Class B Common
Share surrendered for conversion. Any such conversion may be effected by
surrendering the certificate or certificates for the Class B Common Shares to be
converted, duly endorsed, at the office of the Corporation, or the transfer
agent, if any, together with a written notice to the Corporation that such
holder elects to convert all or a specified number of Class B Common Shares and
stating the name or names in which the certificate or certificates for such
Common Shares are to be issued. The conversion shall be deemed to have been made
at the close of business on the date of surrender and the person or persons
entitled to receive the Common Shares issuable on conversion shall be treated
for all purposes as the record holder or holders of such Common Shares on that
date.
The Corporation shall hold in reserve the number of authorized but
unissued Common Shares as may be necessary to convert all issued and outstanding
Class B Common Shares to Common Shares without the necessity of a declaration by
the directors. No Class B Common Shares may be issued unless the number of
authorized but unissued and unreserved Common Shares is sufficient to satisfy
the conversion of such Class B Common Shares.
No fraction of a Common Share shall be issued on conversion of any
Class B Common Share. In lieu thereof, the Corporation shall pay the holder the
fair market value of any such fraction in cash. The fair market value shall be
based, in the case of publicly traded securities, on the last sale price for
such securities on the business day next prior to the date such fair market
value is to be determined (or, in the event no sale is made on that day, the
average of the closing bid and asked prices for that day on the principal stock
exchange on which Common Shares are traded or, if the Common Shares are not then
listed on any national securities exchange, the
4
<PAGE>
average of the closing bid and asked prices for the day quoted by the NASDAQ
System), or, in the case of non-publicly traded securities, the fair market
value on such day determined by a qualified independent appraiser appointed by
the board of directors of the Corporation. Any such determination of fair market
value shall be conclusive and binding on the Corporation and on each holder of
Class B Common Shares and Common Shares.
(F) LIQUIDATION. Holders of issued and outstanding Common Shares
shall have preference over the Class B Common Shares upon the voluntary or
involuntary liquidation of the Corporation, but only to the extent that the
holders of Common Shares be paid the par value of such shares prior to any
distribution being made to the holders of Class B Common Shares. In such case,
after receiving the par value of their shares, the holders of Common Shares
shall receive no further distribution unless and until each holder of Class B
Common Shares has received the par value of each share held and a sum equal to
the distribution made on each Common Share for which the holders of Class B
Common Shares have not received a like amount.
5. CLASS D COMMON SHARES. Class D Common Shares shall be identical to
Common Shares and have equal rights and privileges, except as otherwise set
forth below:
(A) ISSUANCE. The board of directors, by resolution, may authorize
the issuance of Class D Common Shares; provided that, each resolution
authorizing the issuance of Class D Common Shares shall provide a formula under
which the shares issued may be converted into Common Shares. In no case shall
the board of directors set any conversion rights which could result in the
issuance of more than 10 Common Shares for each Class D Common Share.
(B) TRANSFER. Class D Common Shares shall be non-transferable.
(C) CONVERSION. The board of directors shall decide, in its sole
discretion, if a holder of record of Class D Common Shares is deemed to have met
any conditions placed upon the conversion of the holder's Class D Common Shares
into Common Shares. At such time as a holder of record of Class D Common Shares
has received a written notice from the board of directors of the Corporation
that such holder is deemed to have met all conditions for conversion of any
Class D Common Shares into Common Shares as set forth in the resolution
authorizing the issuance of such shares, the holder may convert the Class D
Common Shares described in the notice into fully paid and non-assessable Common
Shares. Any such conversions may be effected by surrendering the certificate or
certificates for the Class D Common Shares to be converted, duly endorsed, at
the office of the Corporation, or the transfer agent, if any, together with a
5
<PAGE>
written notice to the Corporation that such holder elects to convert such Class
D Common Shares and stating the name or names in which the certificate or
certificates for Common Shares are to be issued. The conversion shall be deemed
to have been made at the close of business on the date of surrender and the
person or persons entitled to receive the Common Shares issuable on conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares on that date.
At the close of business on the fifth anniversary of the date of the
resolution authorizing the issuance of any Class D Common Shares, issued and
outstanding but unconverted Class D Common Shares shall be deemed to have been
converted at the rate of one fully paid and non-assessable Common Share for one
Class D Common Share and, commencing at the close of business on such
anniversary, the record holder of such Class D Common Shares shall be treated
for all purposes as the record holder of the Common Shares issuable on such
conversion.
The Corporation shall hold in reserve the number of authorized but
unissued Common Shares as may be necessary to convert issued and outstanding
Class D Common Shares to Common Shares without the necessity of a declaration by
the directors. No Class D Common Shares may be issued unless the number of
authorized but unissued and unreserved Common Shares is sufficient to satisfy
the conversion of such Class D Common Shares.
6. PREFERRED SHARES. The board of directors, by resolution, shall have
the authority to issue, in one or more series, Preferred Shares, having such
preferences, rights and limitations as established by the board of directors.
However, the voting rights, if any, of one Preferred Share shall not exceed the
voting rights of one Common Share.
7. DURATION. The period of duration of the Corporation shall be
perpetual.
8. POWERS OF BOARD OF DIRECTORS. The affairs of the Corporation shall be
managed and conducted by a board of directors. The board of directors shall have
the authority, without first obtaining the approval of the stockholders of the
Corporation, unless otherwise provided herein, upon such terms and conditions as
the board deems appropriate:
(a) to grant rights or options to subscribe for or purchase, and
issue, shares of authorized and unissued stock of the Corporation of any class
now or hereafter authorized, to any persons, including officers and directors of
the Corporation;
6
<PAGE>
(b) to make distributions to its stockholders out of its capital
surplus, and to purchase its own shares out of its unreserved and unrestricted
capital surplus;
(c) to the extent permitted by the applicable laws of the State of
Delaware, to guarantee or assume liability for the payment of the principal of,
or dividends or interest on, or sinking fund payments in respect to, stocks,
bonds, debentures, warrants, rights, scrip, notes, evidences of indebtedness or
other securities or obligations of any kind; and liability for the performance
of any other contract or obligation, made or issued by any domestic or foreign
corporation, partnership, association, trustee, group, individual or entity; and
(d) to make, alter and repeal the bylaws of the Corporation.
9. NUMBER OF AND INITIAL BOARD OF DIRECTORS. The number of directors
shall be fixed by, or in the manner provided in, the bylaws.
10. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot unless otherwise provided by the bylaws of the Corporation.
11. STOCKHOLDERS' MEETINGS. Meetings of stockholders may be held at the
Corporation's principal offices, or as the bylaws may provide. In order to
constitute a quorum for purposes of actions by the stockholders of the
Corporation, one-third of the shares entitled to vote must be present or
represented by proxy at the meeting.
12. BOOKS. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation.
13. CREDITORS. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the
7
<PAGE>
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or if the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
14. DIRECTOR'S 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; provided that a director's liability
shall not be limited: (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
unlawful payment of dividends or unlawful repurchase or redemption of its own
stock; or (d) for any transaction from which the director derived an improper
personal benefit.
15. INDEMNIFICATION. The Corporation shall indemnify any and all of its
directors or officers or former directors or officers or any person who may have
served at its request as a director or officer of another corporation in which
it owns shares of capital stock or of which it is a creditor against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a director or
officer of the Corporation, or of such other corporation, except in relation to
matters as to which any such director or officer or former director or officer
or person shall be adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty. Such indemnification shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled, under any bylaw, agreement, vote of stockholders, or otherwise.
16. AMENDMENTS. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
17. REGISTERED OFFICE AND AGENT. The address of the Corporation's
registered office in the County of New Castle of the State of Delaware is 902
Market Street, 13th Floor, P.O. Box 25130,
8
<PAGE>
Wilmington, Delaware 25130 and the name of its registered agent is The Delaware
Corporation Agency.
18. INCORPORATOR. The name and mailing address of the incorporator is:
Tice Engineering and Sales, Inc., 6711 Tice Plaza, Knoxville, Tennessee 37918.
The undersigned, being the incorporator of Tice Technology, Inc., for the
purpose of forming a corporation under the General Corporation Law of the State
of Delaware hereby acknowledges the foregoing to be its act and deed and that
the facts stated herein are true this _____ day of ________________, 1996.
Tice Engineering and Sales, Inc.
By:______________________________
William A. Tice, President
State of _________________ )
) SS
County of ________________ )
I, ___________________, a notary of said state and county do certify that
William A. Tice, as President of Tice Engineering and Sales, Inc., the
incorporator, whose name is signed to the writing above bearing date the ______
day of __________, 1996 has this day acknowledged the same before me. Given
under my hand this _____ day of _____________, 1996.
My commission expires:_______________________________________.
_____________________________________
[seal] Notary Public
9
<PAGE>
EXHIBIT 3(II)
-------------
BYLAWS
OF
TICE TECHNOLOGY, INC.
__________, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I -- OFFICES......................................................... 1
1.1 Principal Office................................................... 1
1.2 Registered Office.................................................. 1
ARTICLE II -- SHAREHOLDERS................................................... 1
2.1 Annual Meetings.................................................... 1
2.2 Special Meetings................................................... 1
2.3 Place of Special Meetings.......................................... 1
2.4 Notice of Annual or Special Meetings............................... 2
2.5 Meetings by Consent of All Shareholders............................ 2
2.6 Waiver and Consent to Meetings of Less
Than All Shareholders.............................................. 2
2.7 Exception to Notice Requirements................................... 3
2.8 Fixing of a Record Date............................................ 3
2.9 Voting Record...................................................... 4
2.10 Quorum............................................................. 4
2.11 Proxies............................................................ 4
2.12 Voting of Shares................................................... 5
2.13 Voting of Shares by Certain Holders................................ 5
2.14 Voting Procedures and Inspectors of Elections...................... 6
2.15 Consent of Shareholders In Lieu of Meeting......................... 7
2.16 Shareholder Inspection of Books and Records........................ 8
ARTICLE III -- DIRECTORS..................................................... 8
3.1 General Powers..................................................... 8
3.2 Number, Tenure and Qualifications.................................. 8
3.3 Removal and Resignation............................................ 8
3.4 Regular Meetings................................................... 8
3.5 Special Meetings................................................... 9
3.6 Telephonic Meetings................................................ 9
3.7 Notice of Directors' Meetings...................................... 9
3.8 Quorum............................................................. 9
3.9 Manner of Acting...................................................10
3.10 Vacancies..........................................................10
3.11 Compensation.......................................................10
3.12 Action by Written Consent..........................................11
3.13 Chairman and Vice Chairman of the Board............................11
3.14 Conflicts of Interest..............................................11
3.15 Director Inspection of Books and Records...........................12
3.16 Committees.........................................................12
ARTICLE IV -- OFFICERS.......................................................13
4.1 Classes............................................................13
4.2 Election and Term of Office........................................13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
4.3 Removal and Resignations..........................................13
4.4 Vacancies.........................................................13
4.5 Chairman of the Board of Directors................................13
4.6 President.........................................................13
4.7 Vice President....................................................14
4.8 Treasurer.........................................................14
4.9 Secretary.........................................................15
ARTICLE V -- CONTRACTS, LOANS, CHECKS AND DEPOSITS...........................15
5.1 Contracts.........................................................15
5.2 Checks, Drafts....................................................15
5.3 Deposits..........................................................15
ARTICLE VI -- CERTIFICATES FOR SHARES AND THEIR TRANSFER.....................15
6.1 Certificates for Shares...........................................15
6.2 Lost, Stolen or Destroyed Stock Certificates......................16
6.3 Transfer of Shares................................................16
ARTICLE VII -- INDEMNIFICATION...............................................16
7.1 Indemnification...................................................16
ARTICLE VIII -- MISCELLANEOUS................................................19
8.1 Amendments........................................................19
8.2 Fiscal Year.......................................................19
8.3 Dividends.........................................................19
8.4 Seal..............................................................20
8.5 Waiver of Notice..................................................20
</TABLE>
ii
<PAGE>
BYLAWS
OF
TICE TECHNOLOGY, INC.
ARTICLE I
OFFICES
-------
1.1 Principal Office. The principal office of the Corporation shall be in
Knoxville, Tennessee. The Corporation may have such other offices, either within
or without the State of Delaware or the State of Tennessee, as the business of
the Corporation may require.
1.2 Registered Office. The registered agent and office of the Corporation
at the date of adoption of these Bylaws are The Delaware Corporation Agency, 902
Market Street, 13th Floor, P.O. Box 25130, County of New Castle, Wilmington,
Delaware 19899. The registered agent and the address of the registered office
may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
------------
2.1 Annual Meetings. The annual meeting of the shareholders shall be held
at such time, place and on such date as the Board of Directors may designate and
state in the notice of the meeting. If no place is designated, the meeting shall
be held at the principal executive office of the Corporation. The purpose of
such meeting shall be the election of directors and such other business as may
properly come before it. If the election of directors shall not be held on the
day designated for an annual meeting, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders to be held as soon thereafter as may be practicable. The failure to
hold an annual meeting does not invalidate the Corporation's existence or affect
any otherwise valid corporate act.
2.2 Special Meetings. Special meetings of the shareholders may be called
by the Chairman of the Board, President, by the Board of Directors, or by the
holders of shares entitling such holders to not less than twenty-five percent of
the possible votes at such meeting.
2.3 Place of Special Meetings. The Board of Directors may designate any
place within or without the State of Delaware or the State of Tennessee as the
place for any special meeting called by the Board of Directors. A waiver of
notice signed by all shareholders
<PAGE>
may include a designation of any place as the place for the holding of such
meeting. If no designation is properly made, or if a special meeting be
otherwise called, the place of the meeting shall be at the principal executive
office of the Corporation.
2.4 Notice of Annual or Special Meetings. Written or printed notice
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, either personally or by mail, by or at the direction of the
President or the Secretary, or the officer or persons calling the meeting, to
each shareholder entitled to vote at such meeting as of the record date
established under Section 2.8 of these Bylaws. Only business within the purpose
or purposes described in the meeting notice may be conducted at the special
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, in a sealed envelope addressed to
the shareholder at such shareholder's address as it appears in the records of
the Corporation. When a meeting is adjourned to another time or place, notice of
the adjourned meeting need not be given if the time and place are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which could have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days or, if
after adjournment a new record date is fixed, a notice of the adjourned meeting
must be given to every shareholder entitled to vote at the meeting.
2.5 Meetings by Consent of All Shareholders. If all the shareholders shall
meet at any time and place and consent in writing to the holding of a meeting,
such meeting shall be valid without call or notice, and at such meeting any
corporate action may be taken.
2.6 Waiver and Consent to Meetings of Less Than All Shareholders. If a
shareholder meeting shall occur without all shareholders in attendance, a prior
or subsequent written waiver of notice or consent to the holding of such meeting
signed by the absent shareholders shall be equivalent to the call and giving of
any requisite notice, and such meeting shall be valid without call or notice,
and corporate action may be taken at such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting need be specified in the written
waiver. Attendance of a person at a meeting constitutes waiver of notice except
when the person attends the meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened. The execution of a written consent shall
constitute a waiver of notice with respect to the actions taken
2
<PAGE>
in the consent even if the consent does not expressly contain a waiver clause.
2.7 Exception to Notice Requirements. Whenever notice is required to be
given to any person with whom communication is unlawful, the giving of such
notice is not required and the Corporation has no duty to apply to any
governmental authority or agency for a license or permit to give such notice. In
addition, whenever notice is required to be given to any shareholder to whom (a)
notice of two (2) consecutive annual meetings, and all notices of meetings or
the taking action by written consent during the period between such two (2)
consecutive annual meetings, or (b) all, and at least two (2) payments (if sent
by first class mail) of dividends or interest on securities during a twelve (12)
month period, have been mailed addressed to such person at the address shown on
the records of the Corporation and have been returned undeliverable, the giving
of notice to such persons is not required. Any action or meeting which shall be
taken or held without notice to such persons shall have the same force and
effect as if such notice had been duly given. If any such person thereafter
delivers to the Corporation a written notice setting forth such person's then
current address, the requirement that notice be given to such person shall be
reinstated.
2.8 Fixing of a Record Date.
(a) The Board of Directors of the Corporation may fix a date which
shall not precede the date of the resolution fixing the record date and which
record date is not less than ten (10) days nor more than sixty (60) days prior
to the date of any meeting of shareholders as the record date for the
determination of shareholders entitled to notice of, or to vote at, such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day which next precedes the day on which the meeting is
held. When a determination of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. The Board of Directors may fix a record date to determine the
shareholders entitled to consent to corporate action in writing without a
meeting on a date which shall not precede and is not more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed, the record date for
shareholders entitled to consent to corporate action in writing is (i) when no
prior action by the Board of Directors is required, the first date on which a
signed written consent setting forth the actions taken or proposed to be taken
is delivered, by hand or certified or registered mail, to
3
<PAGE>
the Corporation to its registered office, to its principal place of business, or
to an officer or agent of the Corporation having custody of the Corporation's
minute book; or (ii) when prior action by the Board of Directors is required, at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(b) The Board of Directors may fix a record date to determine the
shareholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the shareholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action which shall not precede the date upon which the
resolution fixing the record date is adopted and which shall not be more than
sixty (60) days prior to such action. If no record date is fixed, the record
date shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
2.9 Voting Record. The officer or agent having charge of the transfer
book for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order,
with the address of, and the number of shares held by, each shareholder. Such
list shall be available for inspection by any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to such meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list must also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder who is present
during the whole course of the meeting.
2.10 Quorum. One-third of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, unless otherwise required by Delaware
corporation law. If a quorum of shareholders is present, the affirmative vote of
a majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by the Delaware corporation law,
or by the Certificate of Incorporation or Bylaws of the Corporation.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
shares in person or by proxy. A shareholder may execute a writing authorizing
another person or persons to act as proxy or such shareholder. The shareholder
or the shareholder's authorized
4
<PAGE>
officer, director, employee or agent may sign or cause a signature to be affixed
by any reasonable means to the proxy. A telegram, cablegram or other means of
electronic transmission including information from which it can be determined
that the transmission was authorized by the shareholder, or a photographic,
photostatic, facsimile or other reliable reproduction of a writing appointing a
proxy shall be deemed to be a sufficient, signed appointment form assuming that
it is a complete reproduction of the entire original writing or transmission.
Such proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three (3) years from the date
of its execution, unless otherwise provided in the proxy. An appointment of a
proxy is revocable unless the proxy is coupled with an interest and the
appointment form conspicuously states that the proxy is irrevocable and that the
appointment is coupled with an interest. A proxy may be made irrevocable
regardless of whether the interest is an interest in the stock itself or in the
Corporation generally. Upon extinguishment of the interest the proxy becomes
revocable.
2.12 Voting of Shares. Each outstanding share of stock authorized by the
Corporation's Certificate of Incorporation to have voting power shall be
entitled to the number of votes set forth in the Certificate of Incorporation
upon each matter submitted to a vote at a meeting of shareholders.
2.13 Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted
by either that corporation's president or by proxy appointed by the president
unless another person appointed to vote the stock under a bylaw or a resolution
of the board of directors of that corporation presents a certified copy of the
bylaw or resolution, in which case such person may vote the stock.
(b) A fiduciary may vote, either in person or by proxy, stock
registered in such person's name as fiduciary. If the stock is not registered in
the fiduciary's name, the fiduciary may vote the stock, either in person or by
proxy, upon providing proof of the fact that such fiduciary has legal title to
the stock in a fiduciary capacity and is qualified to act in that capacity.
(c) Where shares stand of record in the names of two (2) or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or if two (2) or more persons
have the same fiduciary relationship respecting the same shares, unless the
Secretary of the Corporation is given written notice to the contrary, and is
furnished with a copy of the instrument or order appointing them or creating the
5
<PAGE>
relationship wherein it is so provided, their acts with respect to voting have
the following effect:
(i) if only one (1) votes, such act binds all;
(ii) if more than one (1) vote, the act of the majority so
voting binds all; or
(iii) if more than one (1) vote, but the vote is evenly split on
any particular matter each faction may vote the securities in question
proportionately, or any person voting the shares or a beneficiary, if any, may
apply to any court of competent jurisdiction to appoint an additional person to
act with the persons so voting the shares which shall then be voted as
determined by a majority of such persons and the person appointed by the court
(if the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even split shall be a majority or even split in
interest).
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares unless the transfer by the pledgor on the books of the Corporation
expressly empowered the pledgee to vote thereon, in which case only the pledgee
shall be entitled to vote the shares so transferred.
(e) The Corporation shall be entitled to reject a vote, consent,
waiver or proxy appointment if the Secretary or other officer or agent
authorized to tabulate votes, acting in good faith has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
2.14 Voting Procedures and Inspectors of Elections. At any time at which
the Corporation has a class of voting securities listed on a national securities
exchange, authorized for quotation on an inter-dealer quotation system thereof,
or held of record by more than two thousand (2,000) shareholders, in advance of
any meeting of shareholders, the Corporation must appoint one (1) or more
inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one (1) or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of shareholders, the person presiding at the meeting shall
appoint one (1) or more inspectors to act at the meeting. Each inspector, before
beginning, must take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors must: (a) ascertain the number of shares outstanding and
the voting power of each; (b) determine the shares represented at a meeting and
the validity of proxies and ballots; (c) count all votes and ballots; (d)
determine and retain
6
<PAGE>
for a reasonable period a record of the disposition of any challenges made to
any determination by the inspectors; and (e) certify the determination of the
number of shares represented at the meeting and the count of all votes and
ballots. The inspectors may appoint or retain other persons or entities to
assist in the performance of such duties. The date and time of the opening and
the closing of the polls for each matter upon which the shareholders will vote
at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor
any revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless a court of competent jurisdiction upon
application by a shareholder shall determine otherwise. In determining the
validity and counting of proxies and ballots, the inspectors are limited to an
examination of the proxies, any envelopes submitted with those proxies, any
other information provided in accordance with Section 2.11 hereof, ballots and
the regular books and records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the shareholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors, at the time they make the
certification, must specify the precise information considered including, the
person or persons from whom the inspectors obtained the information, when the
information was obtained, the means by which the information was obtained, and
the basis for the inspectors' belief that such information is accurate and
reliable.
2.15 Consent of Shareholders In Lieu of Meeting. Any action required to be
taken, or which may be taken, at a meeting of the shareholders may be taken
without a meeting, without prior notice and without a vote, if one (1) or more
consents in writing, setting forth the action so taken, are (a) signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shareholders entitled to vote thereon were present and voted and (b)
delivered to the Corporation by delivery to the Corporation's registered office,
its principal place of business, or an officer or agent having custody of its
minute book. Delivery made to the Corporation's registered office must be made
by hand or by certified or registered mail, return receipt requested. A written
consent must bear the date of signature of each shareholder who signs the
consent. No written consent is effective, unless within sixty (60) days of the
earliest date a consent is delivered, written consents signed by a sufficient
number of holders are delivered as required. Prompt notice of the taking of the
actions without a meeting by less than unanimous written consent must be given
to those shareholders who have not consented in writing.
7
<PAGE>
2.16 Shareholder Inspection of Books and Records. As used in this section,
"shareholder" means a shareholder of record. Any shareholder, in person or by
attorney or other agent, upon written demand under oath stating the purpose
thereof, has the right during the usual hours for business to inspect for any
proper purpose the Corporation's stock ledger, a list of its shareholders and
its other books and records, and to make copies of extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such person's interest as a
shareholder. In every instance where an attorney or other agent shall be the
person who seeks the right to inspection, the demand under oath must be
accompanied by a power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the shareholder. The demand under
oath shall be directed to the Corporation at its registered office in Delaware
or at its principal place of business.
ARTICLE III
DIRECTORS
---------
3.1 General Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors.
3.2 Number, Tenure and Qualifications. The number of directors on the date
of adoption of these Bylaws shall be five (5). The number of directors of the
Corporation may be increased or decreased by resolution of the Board of
Directors. All directors shall hold office for the term for which they are
elected or until their successors shall have been elected and qualified,
whichever period is longer. The directors need not be residents of the State of
Delaware, nor need they hold any shares of stock of the Corporation.
3.3 Removal and Resignation. Holders of Common Stock, Class D Common Stock
and voting Preferred Stock, if any, may remove, with or without cause, any or
all directors elected by them by a majority of shares voting together as a
separate class. Holders of Class B Common Stock may remove, with or without
cause, any or all directors elected by them by a majority of shares voting
together as a separate class. Any member of the Board of Directors may resign
from the Board of Directors at any time by giving written notice to the
President or Secretary of the Corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
3.4 Regular Meetings. A regular meeting of the Board of Directors shall be
held without other notice than this Bylaw immediately after, and at the same
place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Delaware or the
8
<PAGE>
State of Tennessee, for the holding of additional regular meetings without other
notice than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
called by, or at the request of, the Chairman of the Board, the President or a
majority of the total number of directors of the Corporation and shall be
preceded by at least two (2) days notice of the date, time and place of the
meeting.
3.6 Telephonic Meetings. Members of the Board of Directors or a committee
of the board may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
3.7 Notice of Directors' Meetings. No notice need be given of any regular
meeting of the Board of Directors. Notice of a special meeting of the Board of
Directors shall contain the date, time and place of the meeting and may be
communicated in person; by telephone, telegraph, facsimile or other form of wire
or wireless communication; or by mail or private carrier. Oral or telephonic
notice shall be effective when communicated, provided that it is promptly
confirmed in writing. Written notice is effective at the earliest of the
following: (a) when received; (b) five (5) days after deposit in the United
States mail as evidenced by the postmark, if mailed postpaid and correctly
addressed; or (c) on the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by, or on
behalf of, the addressee. Any director may waive notice of any meeting before or
after the meeting. The waiver shall be in writing and signed by the director
entitled to the notice and filed with the minutes of the meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except when 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. The execution of a written consent shall constitute a waiver
of notice with respect to the actions taken in the consent even if the consent
does not expressly contain a waiver clause. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
3.8 Quorum. A majority of the number of directors fixed by, or determined
in accordance with, Section 3.2 hereof shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors; provided that,
if less than a majority of the directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
9
<PAGE>
3.9 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 otherwise required by the Certificate of Incorporation of the
Corporation or these Bylaws. A director who is present at a meeting of the Board
of Directors, or a committee of the Board of Directors when corporate action is
taken, shall be deemed to have assented to the action taken unless the director:
(a) objects at the beginning of the meeting (or promptly upon
arrival) to holding it or transacting business at the meeting;
(b) dissents or abstains from the action taken and such dissent or
abstention is entered in the minutes of the meeting; or
(c) delivers written notice of dissent or abstention to the presiding
officer of the meeting before its adjournment or to the Corporation immediately
after adjournment of the meeting. The right of dissent or abstention shall not
be available to a director who votes in favor of the action taken.
3.10 Vacancies. A vacancy occurring in the office of a director elected by
the holders of the Common Stock, Class D Common Stock and voting Preferred Stock
may be filled by the affirmative vote of a majority of the holders of such
classes of stock or a majority of the remaining directors elected by the holders
of such classes of stock, if at least one (1) such director remains. A vacancy
occurring in the office of a director elected by the holders of Class B Common
Stock may be filled by the affirmative vote of a majority of the holders of such
class of stock or a majority of the remaining directors elected by the holders
of such class of stock, if at least one (1) such director remains. A director
elected to fill a vacancy shall be elected for the unexpired term of the
predecessor in office. If at any time, by reason of death, resignation or other
cause, the Corporation has no directors in office, then any officer,
shareholder, personal representative of a shareholder or other like fiduciary,
may call a special meeting of shareholders or may apply to a court of competent
jurisdiction for a decree ordering an election. Subject to the restrictions
described above relating to directors elected by holders of certain classes of
stock, if one (1) or more directors resign from the board effective at a future
date, a majority of the directors then in office, including those who have so
resigned, have the power to fill such vacancy or vacancies, the vote thereon to
take effect when the resignations become effective.
3.11 Compensation. By resolution of the Board of Directors, each director
may be paid expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated stipend as director or a fixed sum for
attendance at each meeting of the Board of Directors, or both. No such payment
shall preclude any
10
<PAGE>
director from serving the Corporation in any other capacity and receiving
compensation therefor.
3.12 Action by Written Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors of any committee thereof may be
taken without a meeting if all members of the board or the committee, as the
case may be, consent to such action in writing, and the writing or writings are
filed with the minutes of the proceedings of the board or committee.
3.13 Chairman and Vice Chairman of the Board. The Board of Directors may
appoint one of its members Chairman of the Board of Directors. The Board of
Directors may also appoint one of its members as Vice Chairman of the Board of
Directors, and such individual shall serve in the absence of the Chairman and
perform such additional duties as may be assigned by the Board of Directors.
3.14 Conflicts of Interest. No contract or transaction between the
Corporation and one (1) or more of its directors or officers, or between the
Corporation and any other corporation, partnership, trust, firm, association or
entity in which one (1) or more of the directors or officers of the Corporation
is a director, officer, partner, shareholder, member, employee or agent or is
financially interested, shall be void or voidable solely for this reason, or
solely because the director or officer is present at, or participants in, the
meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction or solely because their votes
are counted for such purposes, if:
(a) the material facts of the contract or transaction and the
director's interest or relationship are disclosed or known to the Board of
Directors or committee of the Board of Directors and the Board of Directors or
the committee in good faith authorizes, approves, or ratifies the contract or
transaction by the affirmative vote (or consent) of a majority of the
disinterested directors even though the number of disinterested directors may be
less than a quorum;
(b) the material facts of the contract or transaction and the
director's interest or relationship are disclosed or known to the shareholders
entitled to vote thereon and they specifically authorize, approve or ratify in
good faith such contract or transaction by vote or written consent sufficient
for the purpose; or
(c) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the shareholders.
11
<PAGE>
Such interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction.
3.15 Director Inspection of Books and Records. Any director shall have the
right to examine the Corporation's stock ledger, a list of its shareholders and
its other books and records for a purpose reasonably related to such person's
position as a director.
3.16 Committees.
(a) The Board of Directors may appoint an Executive Committee, which
shall consist of two (2) or more members of the Board of Directors and shall
serve at the pleasure of the Board of Directors. The Chairman of any Executive
Committee shall be designated by the Board of Directors. Meetings of the
Executive Committee shall be held from time to time as called by the Chairman of
the Executive Committee or any two (2) members thereof by notice to the other
members of the committee. Notice of any such meeting shall be given by oral,
telegraphic or written notice not less than twenty-four (24) hours prior to such
meeting. In order to take action, a majority of the members of such committee
must be present and shall constitute a quorum. During the intervals between the
meeting of the Board of Directors, the Executive Committee, if such committee is
established, shall possess and may exercise all of the powers of the Board of
Directors of the Corporation in the management of the business, affairs and
properties of the Corporation, as are not prohibited by statute, the Certificate
of Incorporation of the Corporation or these Bylaws. All action taken the
Executive Committee shall be deemed to be action of the Board of Directors of
the Corporation.
(b) The Board of Director may also designate one (1) or more other
committees, each committee to consist of two (2) or more members of the Board of
Directors of the Corporation. Such committees shall have and may exercise the
powers of the Board of Directors of the Corporation which are delegated to the
committee by the Board of Directors.
(c) Each committee shall keep regular minutes of its meetings and
report same to the Board of Directors of the Corporation when required.
12
<PAGE>
ARTICLE IV
OFFICERS
4.1 Classes. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two (2) or
more offices may be held by the same person. A person who holds more than one
(1) office may not act in more than one (1) capacity to execute, acknowledge or
verify an instrument if required by law to be executed, acknowledged or verified
by more than one (1) officer.
4.2 Election and Term of Office. The officers of the Corporation shall be
elected by the Board of Directors at the first and, thereafter, at each annual
meeting of the Board of Directors. If the election of officers shall not be held
at any such meeting, such election shall be held as soon thereafter as is
convenient. Vacancies may be filled or new offices created and filled at any
meeting of the Board of Directors. Officers shall hold office until their
successors shall have been duly elected and shall have qualified or until death,
resignation or removal.
4.3 Removal and Resignations. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of Directors whenever, in its
judgment, the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any officer of the Corporation may resign at any
time by giving written notice to the President or Secretary of the Corporation,
and unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
4.4 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.
4.5 Chairman of the Board of Directors. The Chairman of the Board of
Directors, if that office be created and filled, may, at the discretion of the
Board of Directors, be the chief executive officer of the Corporation and, if
such, shall, in general, supervise and control the affairs and business of the
Corporation, subject to control by the Board of Directors. The Chairman of the
Board shall preside at all meetings of the shareholders and Board of Directors.
4.6 President. The President, unless a chairman is appointed and designated
chief executive officer pursuant to Section 4.5
13
<PAGE>
hereof, shall be the chief executive officer of the Corporation. If no chairman
has been appointed or, in the absence of the chairman, the President shall
preside at all meetings of the shareholders and of the Board of Directors. The
President may sign, with the Secretary or any other proper officer of the
Corporation thereunto authorized by the Board of Directors, certificates for
shares of the Corporation, any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed;
and, in general, shall perform all duties incident to the office of President
and such other duties as may be prescribed by the Board of Directors from time
to time. Unless otherwise ordered by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meetings of shareholders of any corporation in which the
Corporation may hold stock, and at such meeting, shall hold and may exercise all
rights incident to the ownership of such stock which the Corporation, as owner,
might have had and exercised if present. The Board of Directors may confer like
powers on any other person or persons.
4.7 Vice President. In the absence of the President, or in the event of
inability or refusal to act, the Vice President (or, in the event there be more
than one Vice President, the Vice Presidents in order designated at the time of
their election, or in the absence of any designation, then, in the order of
their election), if that office be created and filled, shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may
sign, with the Secretary or an assistant secretary, certificates for shares of
the Corporation; and shall perform such other duties as from time to time may be
assigned by the Chairman of the Board, President or the Board of Directors.
4.8 Treasurer. The Treasurer shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies and other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and, in general, perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned by the Chairman of the Board, the President or the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of duties in such sum and with such
surety as the Board of Directors shall determine.
14
<PAGE>
4.9 Secretary. The Secretary shall keep the minutes of the shareholders'
meetings, Board of Directors' meetings and meetings of committees of the Board
of Directors in one (1) or more books provided for that purpose; see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; be custodian of the corporate records and of the seal, if any,
of the Corporation; keep a register of the post office address of each
shareholder; sign with the President or Vice President certificates for shares
of stock of the Corporation; have general charge of the stock transfer books of
the Corporation; and, in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
Chairman of the Board, the President or the Board of Directors.
ARTICLE V
CONTRACTS, LOANS,
CHECKS AND DEPOSITS
5.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract and execute and deliver
any instruments in the name of and on behalf of the Corporation. Such authority
may be general or confined to specific instances.
5.2 Checks, Drafts. 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 such officer or officers, or agent or agents, of
the Corporation and in such manner as shall, from time to time, be determined by
resolution of the Board of Directors.
5.3 Deposits. All funds of the Corporation not otherwise employed shall be
deposited, from time to time, to the credit of the Corporation in such banks,
trust companies and other depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
6.1 Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of Directors
and by the laws of the State of Delaware. Each certificate shall have noted
conspicuously thereon any applicable restrictions on sale or transfer. Such
certificates shall be signed by the President and by the Secretary or such other
officers as may be designated by the Board of Directors. All certificates for
shares
15
<PAGE>
shall be consecutively numbered within each class of stock in the order in which
they are issued. The name of the person owning the shares represented thereby,
with the number of shares and date of issue, shall be entered on the books of
the Corporation. All certificates surrendered to the Corporation or its agent
for transfer shall be canceled and no new certificates shall be issued until the
former certificates for a like number of shares shall have been surrendered and
canceled, except that, in case of a lost, destroyed or mutilated certificate, a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe.
6.2 Lost, Stolen or Destroyed Stock Certificates. The Corporation may issue
a new certificate of stock in place of any certificate issued by it and alleged
to have been lost, stolen or destroyed, if the person claiming the certificate
to be lost, stolen or destroyed shall make an affidavit of that fact. In
addition, the Corporation may require the owner of the lost, stolen or destroyed
certificate, or such person's legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction.
6.3 Transfer of Shares. Transfer of shares of the Corporation shall be made
only on the books of the Corporation by the registered holders thereof, or by
their legal representatives who shall furnish proper evidence of authority to
transfer, or by their attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or the transfer agent of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) The Corporation shall indemnify any person 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 such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against
16
<PAGE>
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if such person acted in good faith and in a manner 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 the conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner 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 reasonable cause to believe that this
conduct was unlawful.
(b) The Corporation shall 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 to procure a judgment in
its favor by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation and 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
Delaware 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 Delaware Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee
17
<PAGE>
or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made: (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred in any such capacity, or arising out of such person's status
as such, whether or not the Corporation would have the power to indemnify
against such liability under this section.
(h) For purposes of this section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
18
<PAGE>
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to any employee benefit plan or its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Amendments. The Board of Directors shall have the power and authority
to alter, amend or repeal Bylaws of the Corporation at any regular or special
meeting at which a quorum is present by the vote of a majority of the entire
Board of Directors, subject always to the power of the shareholders under
Delaware law to adopt, alter or repeal such Bylaws.
8.2 Fiscal Year. The Board of Directors shall have the power to fix, and
from time to time change, the fiscal year of the Corporation. Unless otherwise
fixed by the Board, the fiscal year of the Corporation shall end on March 31.
8.3 Dividends. The Board of Directors may, from time to time, declare, and
the Corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its Certificate of
Incorporation.
19
<PAGE>
8.4 Seal. The Board of Directors of the Corporation may adopt a seal on
behalf of the Corporation.
8.5 Waiver of Notice. Whenever any notice is required to be given under
the provisions of these Bylaws, or under the provisions of the Corporation's
Certificate of Incorporation, or under the provisions of the corporation laws of
the State of Delaware, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.
The above Bylaws were adopted by the
Board of Directors of Tice Technology,
Inc. on _________________, 1996.
---------------------------------------
Secretary
20
<PAGE>
EXHIBIT 4
COMMON STOCK PURCHASE WARRANT AGREEMENT
This Common Stock Purchase Warrant Agreement is made as of
______________________, 1996, by and between Tice Technology, Inc., a Delaware
corporation (the "Company"), and Mid-America Bank of Louisville and Trust
Company, a Kentucky banking corporation (the "Warrant Agent").
WHEREAS, the Company has determined to issue and deliver Common Stock
Purchase Warrants (the "Warrants") entitling the holders of the Warrants to
purchase an aggregate of 1,000,000 Common Shares of the Company;
WHEREAS, the Company desires to provide for the form and provisions of the
Warrants, the terms upon which they will be issued and may be exercised, and the
respective rights, limitations and immunities of the Company, the Warrant Agent
and the holders of the Warrants; and
WHEREAS, all acts and things necessary have been done and performed to make
the Warrant, when executed on behalf of the Company and countersigned by or on
behalf of the Warrant Agent, as provided in this Agreement, the valid, binding
and legal obligation of the Company, and to authorize the execution and
delivery of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
Article I
Execution and Countersignature of Warrants
1.01. Execution and Countersignature of Warrants.
(a) Each Warrant, whenever issued, shall be dated
____________________________, 1996, shall be substantially in the form of
Exhibit A attached hereto and incorporated hereby, and shall be signed by, or
bear the facsimile signature of, the President or a Vice President and of the
Secretary or an Assistant Secretary of the Company. If any officer whose
facsimile signature has been placed upon any Warrant ceases to be that officer
before the Warrant is issued, the Warrant may be issued with the same effect as
if the officer had not ceased to be that officer on the date of issuance.
(b) No Warrant may be exercised until it has been countersigned by the
Warrant Agent. The Warrant Agent shall countersign a Warrant only if:
(i) the Warrant is to be issued in exchange or substitution for one or
more previously countersigned Warrants, as provided in this Agreement, or
(ii) the Company instructs the Warrant Agent to do so.
<PAGE>
(c) Unless and until countersigned by the Warrant Agent pursuant to this
Agreement, a Warrant is invalid and of no effect.
Article II
Warrant Price, Duration and Exercise of Warrants
2.01. Warrant Price. Each Warrant, when countersigned by the Warrant
Agent, shall entitle the holder of the Warrant, subject to the provisions of
this Agreement, to purchase from the Company the number of Common Shares stated
in the Warrant at the price of $8.00 per share, subject to the adjustments
provided in Article III of this Agreement. The Warrant Price as used herein
shall refer to the price per share at which Common Shares may be purchased at
the time a Warrant is exercised.
2.02. Duration of Warrants. Warrants may be exercised only on or before a
date that is 24 months after the date of the Warrants (the "Expiration Date").
Notwithstanding the foregoing, if notice has been given as provided in Article
III hereof in connection with the liquidation, dissolution or winding up of the
Company, the Warrants shall expire at the close of business on the third full
business day before the date specified in the notice as the record date for
determining holders of stock entitled to receive any distribution upon the
liquidation, dissolution or winding up; provided, however, that such date is at
least 5 business days after the date of the notice.
2.03. Exercise of Warrants.
(a) A Warrant, when countersigned by the Warrant Agent, may be exercised by
surrendering it at the office of the Warrant Agent in Louisville, Kentucky, or
at the office of its successor as warrant agent, prior to the close of business
of the Warrant Agent on the Expiration Date or such earlier date as may be
applicable with the exercise form set forth in the Warrant duly completed and
executed, and by paying in full, in lawful money of the United States, the
Warrant Price for each full Common Share as to which the Warrant is exercised,
and any applicable taxes. Notwithstanding the foregoing, the Company is only
required to use reasonable efforts which will permit the purchase and sale of
the Common Shares underlying the Warrants and is not required to qualify the
Warrants or the Common Shares underlying the Warrants in any state.
(b) As soon as practicable after the exercise of any Warrant, the Company
shall issue to, or upon the order of, the holder or holders of the Warrant, in
whatever name or names the Warrant holder may direct, a certificate or
certificates for the number of full Common Shares to which the holder or holders
are entitled, registered in the name or names specified by the holder or
holders, and, if the Warrant is not exercised in full (except with respect to a
remaining fraction of a share), a new countersigned Warrant for the number of
shares (including fractional shares) as to which the Warrant has not been
exercised. All Warrants surrendered shall be canceled by the Company.
(c) If the same holder of one or more Warrants exercises the purchase
rights under the Warrants in the same transaction in a manner that leaves the
right to purchase a fraction
2
<PAGE>
of a share unexercised, the Company shall pay a cash adjustment with respect to
that final fraction in an amount equal to the same fraction of the current
market price of one Common Share on the business day that next precedes the day
of exercise reduced by the same fraction of the Warrant Price of one Common
Share on that day. For this purpose, the current market price shall be the
price of one Common Share on the principal stock exchange on which the Common
Shares is traded on the next preceding business day, or, if no sales take place
on that day or if the Common Shares are not then listed on a stock exchange, the
average of the reported bid and asked prices on that day in the over-the-counter
market.
(d) All Common Shares issued upon the exercise of a Warrant shall be duly
and validly issued, fully paid and nonassessable, and the Company shall pay all
taxes in connection with the issuance of such shares. The Company shall not be
required to pay any tax imposed in connection with any transfer involved in the
issuance of a certificate for Common Shares in any name other than that of the
holder or holders of the Warrant surrendered in connection with the purchase of
the shares. In this case the Company shall not be required to issue or deliver
any stock certificate until the tax has been paid.
(e) Each person in whose name any certificate for Common Shares is issued
shall be deemed to have become the holder of record of the shares on the date on
which the Warrant was surrendered and payment of the Warrant Price and any
applicable taxes was made, irrespective of the date of delivery of the
certificate, except that, if the date of surrender and payment is a date when
the stock transfer books of the Company are closed, a person shall be deemed to
have become the holder of shares at the close of business on the next succeeding
date on which the stock transfer books are open. Except as otherwise provided
in Article III, each person holding any shares received upon exercise of
Warrants shall be entitled to receive only dividends or distributions which are
payable to holders of record on or after the date on which the person is deemed
to become the holder of record of such shares.
Article III
Adjustments
3.01. Stock Dividends - Split-Ups. If after the date of this Agreement,
and subject to the provisions of Section 3.07 hereof, the number of outstanding
Common Shares of the Company is increased by a stock dividend payable in Common
Shares or by a split-up of Common Shares, then, on the day following the date
fixed for the determination of holders of Common Shares entitled to receive the
stock dividend or split-up, the number of shares issuable on exercise of each
Warrant shall be increased in proportion to the increase in outstanding shares
and the then applicable Warrant Price shall be correspondingly decreased.
3.02. Aggregation of Shares. If after the date of this Agreement, and
subject to the provisions of Section 3.07 hereof, the number of outstanding
Common Shares of the Company is decreased by a combination or reclassification
of Common Shares, then, after the effective date of the combination or
reclassification, the number of Common Shares issuable on exercise of each
3
<PAGE>
Warrant shall be decreased in proportion to the decrease in outstanding Common
Shares and the then applicable Warrant Price shall be correspondingly increased.
3.03. Special Stock Dividends. If after the date of this Agreement, and
subject to the provisions of Section 3.07 hereof, shares of any class of stock
of the Company (other than Common Shares) are issued by way of a stock dividend
on outstanding Common Shares, then, commencing with the day following the date
fixed for the determination of holders of Common Shares entitled to receive the
stock dividend, in addition to any Common Share receivable upon exercise of the
Warrants, the Warrant holders upon exercise of the Warrants shall be entitled to
receive, as nearly as practicable, the same number of shares of dividend stock,
plus any shares issued upon any subsequent change, replacement, subdivision or
combination of the stock dividend, to which the holders would have been entitled
if their Warrants would have been exercised immediately prior to the stock
dividend. No adjustment in the Warrant Price shall be made merely by virtue of
the happening of any event specified in this Section 3.03.
3.04. Reorganization, Etc. If after the date of this Agreement any
capital reorganization or reclassification of the Common Shares of the Company,
or consolidation or merger of the Company with another corporation, or sale of
all or substantially all of its assets to another corporation is effective,
then, as a condition of the reorganization, reclassification, consolidation,
merger or sale, lawful and fair provision shall be made whereby the Warrant
holders after the transaction shall have the right to purchase and receive, upon
the basis and upon the terms and conditions specified in the Warrants and in
lieu of the Common Shares of the Company purchasable and receivable immediately
prior to the transaction upon the exercise of the rights represented by the
Warrants, the shares of stock, securities or assets that may be issued or
payable with respect to or in exchange for a number of outstanding Common Shares
equal to the number of Common Shares purchasable and receivable immediately
prior to the transaction upon the exercise of the rights represented by the
Warrants if the reorganization, reclassification, consolidation, merger or sale
had not taken place. Appropriate provisions shall be made in connection with a
reorganization, reclassification, consolidation, merger or sale with respect to
the rights and interests of the Warrant holders to the end that the provision of
this Agreement (including, without limitation, provisions for adjustments of the
Warrant Price and of the number of shares purchasable upon exercise of the
Warrants) shall immediately after the transaction be applicable as nearly as
possible to any shares of stock, securities or assets deliverable immediately
after the transaction upon the exercise of the Warrants. The Company shall not
effect any consolidation, merger or sale unless, prior to the consummation of
the transaction, the successor corporation (if other than the Company) resulting
from the consolidation or merger, or the corporation purchasing the assets,
assumes by written instrument executed and delivered to the Warrant Agent the
obligation to deliver to the Warrant holders the shares of stock, securities or
assets in accordance with the foregoing provisions that the holders may be
entitled to purchase.
3.05. Notice of Change in Warrant. Upon any adjustment of the Warrant
Price or the number of shares issuable on exercise of a Warrant, then and in
each case the Company shall give written notice of the adjustment to the Warrant
Agent. The notice shall state the Warrant Price resulting from the adjustment
and the increase or decrease, if any, in the number of shares
4
<PAGE>
purchasable at that price upon exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The Company shall mail or cause to be mailed to each
holder of Warrants at the address registered with the Company, a notice setting
forth such change or adjustment. Failure to file a statement or to give notice,
or any defect in a statement or notice, shall not affect the legality or
validity of the changes or adjustments.
3.06. Other Notices. In case at any time:
(a) the Company pays any dividends payable in stock upon its Common Shares
or makes any distributions (other than regular cash dividends) to the holders of
its Common Shares;
(b) the Company offers for subscription pro rata to the holders of its
Common Shares any additional shares of stock of any class or any other rights;
(c) there is a capital reorganization, a classification of the capital
stock of the Company or a consolidation or merger of the Company with, or a sale
of all or substantially all of its assets to, another corporation; or
(d) there is a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of these cases, the Company shall give written notice
in the manner set forth in Section 3.05 of this Agreement of the date on which
(i) the books of the Company close or a record is taken for the dividend,
distribution or subscription rights, or (ii) the reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up takes place. The notice also shall specify the date as of which the
holders of record of Common Shares shall participate in dividend, distribution
or subscription rights, or shall be entitled to exchange their Common Shares for
securities or other property deliverable upon the reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up. The notice shall be given and published at least 20 days prior to
the transaction in question and not less than 20 days prior to the record date
or the date on which the Company's transfer books are closed with respect to the
transaction. Failure to give or publish the notice, or any defect in the
notice, shall not affect the legality or validity of any transaction covered or
to be covered in the notice.
3.07. Limitation on Fractions. Notwithstanding anything in Sections 3.01
or 3.02 hereof to the contrary, cumulative adjustments in the number of shares
issuable upon exercise of Warrants shall be made only to the nearest multiple of
one-tenth of a share, i.e., fractions of less than five-hundredths of a share
shall be disregarded and fractions of five-hundredths of a share or more shall
be treated as being one-tenth of a share.
3.08. Form of Warrant. The form of Warrant need not be changed due to any
change pursuant to this article, and Warrants issued after a change may state
the same Warrant Price and the same number of shares as is stated in the
Warrants initially issued pursuant hereto. However, at any time in its sole
discretion, the Company may make any change in the form of Warrant that
5
<PAGE>
it may deem appropriate and that does not affect the substance of the Warrants.
Any Warrant subsequently issued and countersigned, whether in exchange or
substitution for an outstanding Warrant or otherwise, may be in the form as so
changed.
Article IV
Other Provisions Relating to Rights of Holders of Warrants
4.01. No Rights as Stockholder Conferred by Warrants. A Warrant does not
entitle its holder to any of the rights of a stockholder of the Company.
4.02. Lost, Stolen, Mutilated or Destroyed Warrants. If any Warrant is
lost, stolen, mutilated or destroyed, the Company and the Warrant Agent may
issue a new Warrant of like denomination, tenor and date as the Warrant so lost,
stolen, mutilated or destroyed. Any such issuance of a new Warrant shall be on
whatever terms and conditions with respect to indemnity or otherwise that the
Company and Warrant Agent may in their sole discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender of the Warrant). Any new
Warrant shall constitute an original contractual obligation of the Company,
regardless of whether the allegedly lost, stolen, mutilated or destroyed Warrant
is at any time enforceable by anyone.
4.03. Reservation of Common Shares. The Company shall at all times
reserve and keep available the number of its authorized but unissued Common
Shares which is sufficient to permit the exercise in full of all outstanding
Warrants. If at any time the number of authorized but unissued Common Shares is
not sufficient for these purposes, the Company shall take such corporate action
as, in the opinion of counsel, may be necessary to increase its authorized but
unissued shares to the number of shares sufficient for these purposes. The
Warrants, and the Common Shares issuable upon exercise of the Warrants, are
registered under the Securities Act of 1933, as amended.
Article V
Ownership and Transfer of Warrants
5.01. Ownership of Warrants. Warrants issued pursuant to this Agreement
shall be treated as owned only by the holder of record as determined by the
Warrant Agent.
5.02. Transfer of Warrants. After countersignature by the Warrant Agent
in accordance with the provisions of this Agreement, one or more Warrants may be
surrendered to the Warrant Agent for transfer and, upon their cancellation, the
Warrant Agent shall countersign and deliver in exchange one or more new
Warrants, as requested by the holder of the canceled Warrant or Warrants, for
purchase of the same aggregate number of shares as were evidenced by or
applicable to the Warrant or Warrants so canceled. The Company shall give
notice to the registered holders of the Warrants of any change in the address,
or in the designation, of the Warrant Agent.
6
<PAGE>
Article VI
Warrant Agent
6.01. Resignation, Consolidation or Merger of Warrant Agent.
(a) The Warrant Agent, or any successor, may resign its duties and be
discharged from all further duties and liabilities hereunder after giving one
month's notice in writing to the Company, except that shorter notice may be
given if the Company, in writing, accepts such shorter notice as sufficient. If
the office of Warrant Agent becomes vacant by resignation or incapacity to act
or otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent.
(b) If the Company fails to make an appointment within 30 days after
it has been notified in writing of a resignation or an incapacity by the
resigning or incapacitated Warrant Agent or by the holder of a Warrant (who
must, with any notice, submit the Warrant for inspection by the Company), then
the holder of any Warrant may apply to any court of competent jurisdiction for
the appointment of a successor Warrant Agent. Any successor Warrant Agent,
whether appointed by the Company or by a court, must be a corporation organized,
doing business and in good standing under the laws of the United States of
America or of any State, authorized under the laws under which it is governed to
exercise corporate trust powers, be subject to supervision or examination by
federal or state authorities, and have a combined capital and surplus of not
less than $5,000,000. The combined capital and surplus of any successor Warrant
Agent shall be deemed to be the combined capital and surplus set forth in the
most recent report of its condition published prior to its appointment, provided
that these reports are published at least annually pursuant to law or to the
requirements of a federal or state supervision or examining authority.
(c) After appointment, any successor Warrant Agent shall be vested
with all the authorities, powers, rights, immunities, duties and obligations of
its predecessor Warrant Agent with like effect as if originally named as Warrant
Agent under this Agreement without any further act or deed. However, if for any
reason it becomes necessary or appropriate, the predecessor Warrant Agent shall
execute and deliver, at the Company's expense, an instrument transferring to a
successor Warrant Agent all the authority, powers, rights, immunities, duties
and obligations of a Warrant Agent hereunder. Not later than the effective date
of any appointment the Company shall give notice of the appointment to the
predecessor Warrant Agent to each transfer agent for its Common Shares and to
the registered holders of the Warrants. Failure to give notice, or any defect
in a notice, shall not affect the validity of the appointment of a successor
Warrant Agent.
(d) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated or any corporation resulting from any merger or
consolidation to which the Warrant Agent is a party shall be the successor
Warrant Agent under this Agreement without any further act.
6.02. Fees and Expenses of Warrant Agent. The Company shall (a) pay the
Warrant Agent reasonable remuneration for its services as Warrant Agent
hereunder and reimburse the Warrant
7
<PAGE>
Agent upon demand for all expenditures that it may reasonably incur in the
execution of its duties hereunder, for example and not by way of limitation,
including the cost of legal counsel utilized by Warrant Agent pursuant to
Section 6.03(a) hereof; and (b) perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all further and
other acts, instruments and assurances that reasonably may be required by the
Warrant Agent to carry out or perform this Agreement.
6.03. Additional Provisions.
(a) The Warrant Agent may consult with legal counsel (who may be legal
counsel for the Company) and the opinion of legal counsel shall be full and
complete authorization and protection to the Warrant Agent with respect to any
action taken or omitted by it in good faith and in accordance with the opinion.
(b) Whenever in the performance of its duties under this Agreement the
Warrant Agent deems it necessary or desirable that any fact or matter be proved
or established by the Company prior to taking or suffering any action hereunder,
the fact or matter (unless other evidence with respect thereto is specifically
prescribed in this Agreement) may be deemed to be conclusively proved and
established by a statement signed by the President or a Vice President or the
Treasurer or an Assistant Treasurer or the Controller or the Secretary of the
Company and delivered to the Warrant Agent. However, in its discretion, the
Warrant Agent may in lieu of a signed statement accept other evidence of a fact
or matter or may require further or additional evidence that to it may seem
reasonable.
(c) The Warrant Agent shall be liable hereunder only for its own
negligence or willful misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recital contained in this Agreement or in the Warrants
(except its countersignature of the Warrants) or be required to verify the
statements or recitals, and all of these statements and recitals are and shall
be deemed to have been made only by the Company.
(e) The Warrant Agent shall not be responsible for (i) the validity of
this Agreement, (ii) the execution and delivery of this Agreement or the
validity and execution of any Warrants (except its countersignature or execution
of the Warrants), (iii) any breach by the Company of any covenant or condition
contained herein or in any Warrant, (iv) the making of any adjustment required
by Article III of this Agreement or (v) the manner, method or amount of any
adjustment or the ascertaining of the existence of facts that would require any
adjustment. The Warrant Agent also, by any act under or pursuant hereto, shall
not be deemed to make any representation or warranty as to the authorization or
reservation of any Common Shares to be issued pursuant hereto, as to any Warrant
or as to whether, when issued, Common Shares shall be duly and validly issued,
fully paid and nonassessable.
8
<PAGE>
6.04. Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform this Agreement upon
the terms and conditions set forth herein. Among other things, the Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently pay to the Company all moneys received by it for the purchase
of Common Shares through the exercise of Warrants.
Article VII
Other Matters
7.01. Payment of Taxes. The Company shall from time to time promptly
pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in connection with the issuance or delivery of Common Shares upon the
exercise of Warrants, but the Company shall not be required to pay any transfer
taxes in connection with the Warrants or shares.
7.02. Modification of Agreement. Without the consent or concurrence
of the holders of the Warrants, the Warrant Agent may by supplemental agreement
or otherwise concur with the Company in making any changes or corrections in
this Agreement that it is advised by counsel (who may be counsel for the
Company) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error
contained herein.
7.03. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
7.04. Notices and Demands to Company and Warrant Agent. Any notice
or demand authorized by this Agreement to be given or made by the Company, the
Warrant Agent or by the holder of any Warrant shall be sufficiently given or
made if sent by certified or registered mail, postage prepaid, addressed (until
another address is filed in writing), as follows:
To the Company: Tice Technology, Inc.
6711 Tice Plaza
Knoxville, Tennessee 37918
Attn: William A. Tice
To the Warrant Agent: Mid-America Bank of Louisville and Trust Company
500 West Broadway
Louisville, Kentucky 40202
Attn: _______________________
7.05. Applicable Law. The validity, interpretation and performance
of this Agreement and of the Warrants shall be governed by the laws of the State
of Delaware.
7.06. Persons Having Rights Under This Agreement. Nothing expressed
in this Agreement and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed,
9
<PAGE>
to confer upon, or give to, any person or corporation other than the parties to
this Agreement and the holders of the Warrants any right, remedy or claim under
or by reason of this Agreement or of any covenant, conditions, stipulation,
promise or agreement contained herein, and all covenants, conditions,
stipulations, promises and agreements contained herein shall be for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns and of the holders of the Warrants.
7.07. Examination of Agreement. A copy of this Agreement shall be
available at all reasonable times at the office of the Warrant Agent for
inspection by the holder of any Warrant. The Warrant Agent may require the
holder seeking inspection to submit the Warrant for inspection by it.
7.08. Effect of Headings. The article and section headings in this
Agreement are for convenience only and are not part of this Agreement and shall
not affect the interpretation hereof.
WITNESS the signatures of the parties to this Agreement as of the day first
above written.
Tice Technology, Inc.
By:
----------------------------------------------
Title:
-------------------------------------------
Mid-America Bank of Louisville and Trust Company
By:
----------------------------------------------
Title:
-------------------------------------------
<PAGE>
EXHIBIT 5
---------
[Form of Counsel Opinion]
______________, 1996
Tice Technology, Inc.
6711 Tice Plaza
Knoxville, Tennessee 37918
RE: REGISTRATION STATEMENT ON FORM S-1
OUR FILE NO.: 28021/1
Members of the Board of Directors:
This letter is in response to your request for our opinion in connection
with the Registration Statement on Form S-1 under the Securities Act of 1933, as
amended, of Tice Technology, Inc. (the "Corporation"). We have examined the
following documents of the Corporation:
1. Certificate of Incorporation of the Corporation filed June 21, 1996;
2. Bylaws of the Corporation;
3. Resolutions of the Corporation reflecting various actions by the Board
of Directors and Shareholders thereof; and
4. Such other documents, papers, statutes and authorities as we deem
necessary to form the basis of the opinion hereinafter expressed.
We have assumed the genuineness of the signatures on all documents renewed
and the authenticity of such documents and that the documents submitted to us as
copies conform to the originals. We have relied on certificates of public
officials and upon certificates of the officers and directors of the
Corporation.
Based on the foregoing, we are of the opinion that the Common Shares of the
Corporation to be registered under the registration statement described above,
if issued in accordance therewith and the documents listed herein, will be
legally issued, fully paid and non-assessable under Delaware law.
<PAGE>
Tice Technology, Inc.
___________, 1996
Page 2
We give you our permission to file this opinion with the Securities and
Exchange Commission as an exhibit to the registration statement referred to
above.
Sincerely yours,
Ogden Newell & Welch
LHW/dgj
<PAGE>
EXHIBIT 10
----------
SECURITIES TRANSFER AND REGISTRAR AGREEMENT
BETWEEN
MID-AMERICA BANK OF LOUISVILLE
AND TRUST COMPANY
AND
TICE TECHNOLOGY, INC.
<PAGE>
This Securities Transfer and Registrar Agreement is made in Louisville,
Kentucky as of the _____ day of __________, 1996 by and between Mid-America Bank
of Louisville and Trust Company ("Bank of Louisville"), 500 West Broadway,
Louisville, Kentucky 40202 and Tice Technology, Inc. ("Corporation") at 6711
Tice Plaza, Knoxville, Tennessee 37918.
THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. Appointment of transfer agent. Corporation hereby appoints Bank of
Louisville as Transfer Agent of certificates representing all shares of the
following class of stock of the Corporation, now or hereafter authorized by its
Certificate of Incorporation and all Common Stock Purchase Warrants (the
"Warrants") to be registered in the initial registration:
<TABLE>
<CAPTION>
Authorized
Shares for
Authorized Issuance by
by Board of
Par Certificate of Number Directors
Class Value Incorporation Outstanding But Unissued
- ----- ----- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Common $0.01 30,000,000 -0- 5,840,220
Warrants n/a n/a -0- 1,000,000
</TABLE>
2. Duties of transfer agent. For the purpose of the original issue of the
certificates representing shares of stock now or hereafter authorized for
issuance by the Corporation but unissued and the Warrants, Bank of Louisville is
hereby directed:
(a) To record and countersign certificates signed by or bearing the
facsimile signatures of the officers of the Corporation authorized by its Bylaws
to sign stock certificates, in such names and in such amounts as the Corporation
may direct in writing signed by the President and Secretary of the Corporation.
(b) To present such certificates for registration and countersignature and
when so countersigned to deliver the certificates to or upon the written order
of any officer of the Corporation.
3. Issuance and recording of stock and warrant certificates. Bank of
Louisville is authorized and directed to make transfers, from time to time, upon
the records of the Corporation of any outstanding certificates representing
shares of such stock and Warrants of the Corporation heretofore issued and of
certificates representing shares of such stock and Warrants of the Corporation
which may hereafter be issued, and of certificates issued in exchange therefore,
signed by or bearing the facsimile signatures of the officers of the Corporation
authorized by its Bylaws to sign stock certificates and countersigned by Bank of
Louisville as the Transfer Agent and Registrar upon surrender thereof for
transfer properly endorsed and duly stamped as may be required by pertinent
state statutes, and upon cancellation of such certificates to record and
countersign new certificates, duly signed as herein provided, for an equal
number of shares of such stock or Warrants and present such certificates for
<PAGE>
registration and countersignature and when so countersigned to deliver such
certificates to or upon the order of the person entitled thereto.
Bank of Louisville is authorized and directed to maintain the original
stock ledger and transfer book containing the name, address and number of shares
and Warrants issued to each shareholder. These records are available for
inspection by the Corporation at any time. A shareholder and Warrant holder
listing providing names, addresses, and outstanding shares and Warrants will be
provided by Bank of Louisville upon the request of the Corporation or as
otherwise may be required by applicable law. Shareholders and Warrant holders
must notify the Bank of Louisville of any changes in the address of record.
4. Custody of facsimile signature devices. Certified specimen signatures
of the officers of the Corporation and certified specimen certificates of the
stock and Warrants of the Corporation in the form duly approved by it shall be
lodged with Bank of Louisville. When any officer shall no longer be vested with
authority to sign for the Corporation, written notice thereof shall immediately
by given to Bank of Louisville and until receipt of such notice Bank of
Louisville shall be fully protected and held harmless in recognizing and acting
upon the signature of such officer. Bank of Louisville, however, is authorized
and directed, until otherwise instructed in writing by the Corporation, to issue
and countersign in the course of its duties certificates bearing the signatures
of officers of the Corporation who no longer bear the title of the office over
which their signatures on the stock certificates appear, or who have died or
have severed their connection with the Corporation. All such certificates,
whether issued prior or subsequent to the change of status of such officers,
shall be recognized by the Corporation from the date of issuance thereof as
valid and binding certificates of stock or Warrants of the Corporation for all
purposes and in all respects.
5. Indemnity for replacement certificates. In the event that any such
certificate shall become lost, stolen, or destroyed, no new certificate or
certificates shall be issued in lieu thereof until an indemnity bond in such
form as may be approved by the Corporation shall have been furnished. The bond
shall be in form satisfactory to Bank of Louisville and Bank of Louisville shall
be named as an obligee therein.
6. Dividend agent. Bank of Louisville is hereby appointed Dividend
Disbursing Agent for the Capital Stock of the Corporation for which it now or
hereafter may be acting as Transfer Agent, and it hereby is authorized to pay
such dividends as may hereafter be declared by the Board of Directors of the
Corporation upon being furnished with collected funds sufficient for the payment
of such dividends by noon the business day prior to the payable date and a
resolution of the Corporation signed by the Secretary of the Corporation
notifying it of the declaration of any such dividend, the date upon which such
dividend is payable, and the record date of such dividend.
7. Appointment of Registrar. Bank of Louisville is hereby appointed
Registrar for the registration of certificates for all shares of the following
class of stock now or hereafter authorized by the Certificate of Incorporation
of the Corporation and for the Warrants:
2
<PAGE>
Class of Stock Par Value
-------------- ---------
Common $0.01
Bank of Louisville is authorized upon direction of the Corporation to
register for original issue certificates for such shares of such stock, not
exceeding the number of unissued shares at the time authorized to be issued by
the Certificate of Incorporation of the Corporation.
Bank of Louisville is authorized and directed, upon the surrender for
cancellation of certificates for shares of such stock now outstanding or
hereafter issued and the Warrants, to register new certificates for the number
of shares or Warrants represented by the certificates so canceled when such new
certificates shall have been countersigned. Bank of Louisville is authorized to
maintain such records as it may deem necessary or advisable in connection with
its duties as Registrar.
Bank of Louisville shall be immediately advised in writing (1) of the
appointment of any other registrar, (2) of all original issues and cancellations
by way of retirement of shares of such stock or Warrants made or effected by the
Corporation or registered by any other registrar, and (3) unless an officer of
the Corporation shall have notified Bank of Louisville in writing to the
contrary, of all registrations of certificates for shares of such stock or
Warrants made or effected by the Corporation or any other registrar, and that
the Corporation agrees to indemnify and hold harmless Bank of Louisville from
and against all losses, costs, claims, and liability which Bank of Louisville
may suffer or incur by reason of its registering or failing or declining to
register any certificate for shares of such stock or Warrants upon transfer or
exchange of any certificate for shares of such stock or Warrants (i) registered
by any other registrar or agent of the Corporation of whose appointment Bank of
Louisville shall not have been advised in writing, or (ii) of the registration
of which Bank of Louisville shall not have been so advised, and that Bank of
Louisville shall not be liable for, and shall be protected by the Corporation
against, any losses, costs, claims, and liability based upon any act or omission
of the Corporation or any other registrar or any other agent of the Corporation.
Bank of Louisville may rely conclusively and act, without further
investigation, upon any list, instruction, certification, authorization,
certificate, or other instrument or paper believed by it in good faith to be
genuine and to have been signed, countersigned, or executed by any duly
authorized person or persons, or upon the instruction of any officer of the
Corporation; and further that Bank of Louisville may register any certificate
for shares of such stock or the Warrants which is believed by it in good faith
to have been duly authorized, or may refuse to register any certificate for
shares of such stock or Warrants if in good faith Bank of Louisville deems such
refusal necessary in order to avoid any liability on the part of either the
Corporation or itself, and that the Corporation agrees to indemnify and hold
harmless Bank of Louisville from and against any and all losses, costs, claims,
and liability for so relying or acting or refusing to act.
3
<PAGE>
In case any of the officers of the Corporation whose manual or facsimile
signature appears on any certificate to be registered shall cease to be such
officer prior to the registration of such certificate, Bank of Louisville is
directed nevertheless to register such certificate as though the person signing
the same or whose facsimile signature appears thereon had not ceased to be such
officer, unless written instructions of the Corporation to the contrary are
received by Bank of Louisville.
8. Certification. The Secretary of the Corporation shall certify copies
of this agreement and of the Bylaws of the Corporation and of all amendments
thereto under the seal of the Corporation, if any, and lodge such copies thereof
with Bank of Louisville, together with a copy of the Certificate of
Incorporation, and all amendments thereto, properly certified by the Secretary
of State, and from time to time furnish Bank of Louisville similarly certified
copies of any amendments that may be made to the Certificate of Incorporation or
Bylaws.
9. Fee Schedule. In consideration of Bank of Louisville performing the
duties as herein set forth, the Corporation agrees to pay Bank of Louisville
according to the fee schedule which is attached hereto as Exhibit A and
incorporated by reference as if fully set forth herein. Said fee schedule is
subject to change upon sixty (60) days written notice by Bank of Louisville. A
monthly minimum fee of $300 shall be paid by the Corporation, whether or not
services are rendered by Bank of Louisville totaling that amount.
10. Termination. Bank of Louisville and the Corporation agree that either
party may terminate this agreement upon six (6) months prior written notice.
This agreement will terminate immediately at the election of Bank of Louisville
upon the occurrence of any of the following events:
(i) failure to pay any fee required by this agreement or the fee schedule
then in effect which is not paid within fifteen (15) days from the date it is
due;
(ii) the dissolution, merger, consolidation or liquidation of the
Corporation or any sale of all or any substantial part of its assets (except in
the ordinary course of business);
(iii) the Corporation makes an assignment for the benefit of creditors, or
a voluntary or an involuntary petition is filed by or against the Corporation
under any law having for its purpose the adjudication of the Corporation as
bankrupt or the reorganization of the Corporation.
No delay or failure of Bank of Louisville in the exercise of any right or
power under this agreement shall act as a waiver of such right or power, nor
will it preclude the future exercise of the right or power, or of any remedy
which Bank of Louisville may have outside this agreement.
11. Choice of Law. This agreement shall be governed by the laws of the
Commonwealth of Kentucky.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their duly authorized officers as of the date first above written:
Tice Technology, Inc. ("Corporation")
By: ________________________________
Title: ______________________________
Mid-America Bank of Louisville and Trust Company
("Bank of Louisville")
By: ________________________________
H. Steve Niesse, Vice President
Securities Transfer Department
5
<PAGE>
EXHIBIT A
---------
MID-AMERICA BANK OF LOUISVILLE
STOCK & BOND FEE SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
I. PRIMARY SERVICES
A. RECURRING BASE FEE
Monthly Transfer Agent Fee..................................... 100.00
Monthly Account Fee Per Open Account........................... .07
Annual Stop Maintenance Per Certificate........................ 1.00
B. STOCK/BOND CERTIFICATE ISSUANCE, CANCELLATION, AND REGISTRATION
New Account (with one cert/transfer sheet)..................... 3.50
New Account (when originally issued by Co-Transfer Agent)...... 1.50
Issue of each additional certificate........................... 2.00
Cancellation of Each Certificate/Posting
of Co-Agent................................................... .40
Encashment of Bond (check, printing,
stuffing)..................................................... 1.50
C. REVIEW AND PROCESSING OF TRANSFERS
Each Non-Routine Transfer Item (legal,
original issue)............................................... 6.00
Each Routine Exchange/Transfer Item............................ 2.00
Preparation of Each Check for Exchange
Items......................................................... 1.50
Each Pending Item.............................................. 7.50
Rush Transfer Fee (same day service)........................... 35.00
D. FILE MAINTENANCE TRANSACTIONS
Each Address or Other File Change.............................. .55
Each Stop (placed or removed).................................. 4.00
E. RESEARCH AND CORRESPONDENCE
Research w/Dictated Letter..................................... 7.50
Research w/Form Letter......................................... 6.50
Each Add'l Research/Phone Inquiry.............................. 2.50
Preparation of Replacement Check (stop
payment)...................................................... 6.00
Each Enclosure................................................. 2.00
Each Stock Power............................................... 2.00
Each Photocopy/Fax............................................. 1.00
Monthly Document Storage Per Box............................... 1.00
F. GENERATION OF REPORTS AND LABELS
Printing Labels:
Minimum Charge - (Printing for 1,000 accts. Or
less)...................................................... 40.00
1,001 - 3,500 accounts...................................... 122.50
3,501 - 6,000 accounts...................................... 180.00
6,001 - 10,000 accounts..................................... 250.00
10,001 - 15,000 accounts.................................... 300.00
15,001 - 21,000 accounts.................................... 315.00
21,001 and over accounts.................................... 500.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Printing on Continuous Form Inserts (each).......................... .10
Printing List:
Minimum Charge - (Printing for 1,000 accts. Or
less)........................................................... 40.00
1,001 - 3,500 accounts........................................... 122.50
3,501 - 6,000 accounts........................................... 180.00
6,001 - 10,000 accounts.......................................... 250.00
10,001 - 15,000 accounts......................................... 300.00
15,001 - 21,000 accounts......................................... 315.00
21,001 and over accounts......................................... 500.00
Generation of Magnetic Tape (Acct Info)............................. 175.00
G. DIVIDEND DISBURSEMENT
Fee Per Dividend.................................................... 500.00
Printing & Inserting Each Dividend Check &
1 Enclosure........................................................ .35
Withholding Federal or Foreign Tax (per
account)........................................................... .50
Wire Transfers...................................................... 10.00
Computer Generated FORM 1099 and FORM W9............................ .55
Note: For all cash dividends, collected funds must be on deposit with the
Bank by Noon the business day prior to the payable date. Overdrafts
in accounts established for the payment of dividend on unexchanged
shares will not be permitted. Dividend accounts for unexchanged
shares must be adequately funded on a routine basis. Collected funds
must be on deposit before checks will be mailed.
H. INTEREST DISBURSEMENT
Fee Per Interest Payment Period..................................... 500.00
Interest Check Issuance (stuffing, one
insert)............................................................ .35
Withholding Federal or Foreign Tax (per
account)........................................................... .50
Wire Transfers...................................................... 10.00
Computer Generated FORM 1099 and FORM W9............................ .55
I. DIVIDEND REINVESTMENT
Fee Per Dividend.................................................... 500.00
Printing & Inserting Each "DR" Statement &
1 Enclosure........................................................ 1.00
Withholding Federal or Foreign Tax (per
account)........................................................... .50
Computer Generated FORM 1099 and FORM W9............................ .55
J. EMPLOYEE STOCK PURCHASE PLAN
Fee Per Quarter..................................................... 250.00
Monthly Cash Contribution Service................................... 25.00
Withholding Federal or Foreign Tax (per
account)........................................................... .50
Computer Generated FORM 1099 and FORM W9............................ .55
K. STOCK SPLIT/DIVIDEND
Fee Per Dividend....................................................500.000
Printing and Inserting Each Certificate............................. .55
Printing and Inserting Each Fractional Share Check.................. .35
</TABLE>
<PAGE>
Computer Generated FORM 1099..................................... .55
Note: Overdrafts in accounts established for the payment of
fractional shares will not be permitted. Functional share
accounts must be adequately funded on a routine basis.
Collected funds must be on deposit before checks will be
mailed.
L. PROXY SERVICE
Coordination Fee:
Minimum Charge - (1 - 2,500)............................. 500.00
2,501 - 10,000 accounts.................................. 1,000.00
10,001 - 20,000 accounts................................. 1,500.00
20,001 and over accounts................................. 2,000.00
Printing Each Proxy Card (continuous form).................. .10
Tabulating First Proposal (per card)........................ .15
Tabulating Each Additional Proposal (per
card)...................................................... .05
Each Tabulation Run Requested............................... 40.00
Certification of Proxy Tabulation........................... 50.00
Preparation of Check for Each Broker Bill................... 1.50
Preparation of Broker Solicitation
Information................................................ 2.00
M. ADDITIONAL INSERTING AND MAILING SERVICES
Matching Enclosures to Name and Address
(per account).............................................. .40
Applying Pressure-Sensitive Labels (each)................... .15
Inserting First Chargeable Enclosure........................ .02
Inserting Each Additional Enclosure......................... .01
Note: The fee for printing and inserting a dividend check includes
the check and one enclosure unless match mailing is involved.
N. ESCHEATMENT (per account)................................... 1.50
II. MINIMUM MONTHLY SERVICE FEE....................................... 300.00
(Plus Reimbursable Out-of-Pocket Expenses)
III. REIMBURSABLE OUT-OF-POCKET EXPENSES
Out-of-pocket expenses incurred in the administration of an account will be
charged to the company and added to the statement for fees. Some of these
expenses include:
. Postage
. Insured and Registered Mail Premiums
. Supplies (envelopes, labels, binders)
. Dividend Checks
. Stock Certificates
. Contracted Printing Expenses
<PAGE>
IV. SPECIAL RESEARCH
Research and other work performed by the Bank to correct out-of-balance
situations created by a previous transfer agent; to make the documents and
information provided by such agent usable by the Bank; to respond to the
company's special requests; and to verify source documents involved in
research will be billable at a rate of $35.00 per hour.
V. SPECIAL SERVICES
Fees determined based upon service requested.
VI. LATE PAYMENT FEE
Payments for services rendered are due 120 days from date of invoice.
Payments not received within 30 days will accrue late charge equal to 1
1/2% per month. The Bank reserves the right to resign as transfer agent for
any company whose invoices remain unpaid for 60 days.
VII. TERMINATION FEE
Since the termination of a transfer agent involves extraordinary
administrative and clerical work, a charge will be billable in the event of
termination equal to 10% of the total invoices for the last twelve months.
In addition, any out-of-pocket expenses for items such as postage, computer
tapes and other supplies associated with the transfer of the agency will be
billable.
For computerized records, a magnetic tape with all account records will be
provided. All source documents in the possession of the Bank will be turned
over to the successor agent where records are not automated. Interpretation
of the documents supplied to the successor transfer agent will be limited
to file layouts.
Revised February 28, 1992
Effective April 1, 1992
<PAGE>
EXHIBIT 21
----------
TICE TECHNOLOGY, INC.
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21 TO FORM S-1
Tice Engineering and Sales, Inc.
<PAGE>
EXHIBIT 23
----------
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
We consent to the reference to our firm under the captions "Experts" and
"Financial Statements" and to the use of our reports dated May 23, 1996, June 1,
1995 and May 20, 1994 in the Form S-1 Registration Statement filed on behalf of
Tice Technology, Inc. for the registration of 2,931,407 Common Shares and
1,000,000 Common Stock Purchase Warrants of Tice Technology, Inc. under Section
8(a) of the Securities Act of 1933.
Dated : August 23, 1996 Boring & Goins, P.C.
By: \s\ Roger L. Goins
---------------------
Title: Vice President
------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Financial Statements of Tice Engineering and Sales, Inc. Fiscal Year ended March
31, 1996 and Three Months Period ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> APR-01-1995 APR-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 2,822 10,280
<SECURITIES> 0 0
<RECEIVABLES> 119,060 102,585
<ALLOWANCES> 0 0
<INVENTORY> 464,997 476,986
<CURRENT-ASSETS> 711,172 731,197
<PP&E> 1,438,015 1,441,840
<DEPRECIATION> 875,404 886,454
<TOTAL-ASSETS> 1,497,688 1,558,693
<CURRENT-LIABILITIES> 628,124 792,737
<BONDS> 661,325 651,491
<COMMON> 8,634 8,634
0 0
0 0
<OTHER-SE> 199,605 105,831
<TOTAL-LIABILITY-AND-EQUITY> 1,497,688 1,558,693
<SALES> 1,392,558 166,065
<TOTAL-REVENUES> 1,442,133 178,640
<CGS> 450,937 59,285
<TOTAL-COSTS> 1,419,697 265,169
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 110,863 27,830
<INCOME-PRETAX> 24,617 (114,359)
<INCOME-TAX> 10,318 (20,585)<F1>
<INCOME-CONTINUING> 14,299 (93,774)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,299 (93,774)
<EPS-PRIMARY> 19.07 (125.03)<F2>
<EPS-DILUTED> 0.00 (0.01)<F3>
<FN>
<F1> Income tax benefit.
<F2> Earnings per share are calculated based upon the number of shares of Tice
Engineering and Sales, Inc. issued and outstanding (750) during the periods
reflected in the applicable financial statements.
<F3> Earnings per share - fully diluted are the earnings per share adjusted to
reflect the number of shares of Tice Technology, Inc. (which owns all
shares of Tice Engineering and Sales, Inc.) issued and outstanding as of
the effective date of the registration statement (6,590,220).
</FN>
</TABLE>
