As filed with the Securities and Exchange Commission on August 9, 1996
Registration No. 333-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------------
COOPER INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 5023 13-3886092
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
122 East 42nd Street
Suite 1116
New York, New York 10168
(212) 986-6190
(Address, including zip code, and telephone
number, including area code, of registrant's principal executive offices)
Douglas P. Fields
Chief Executive Officer
Cooper International Group, Inc.
122 East 42nd Street
Suite 1116
New York, New York 10168
(212) 986-6190
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
Copies to:
HENRY I. ROTHMAN, ESQ. ALAN I. ANNEX, ESQ.
Parker Chapin Flattau & Klimpl, LLP Camhy, Karlinsky & Stein LLP
1211 Avenue of the Americas 1740 Broadway
New York, New York 10036 New York, New York 10019
Tel.: (212) 704-6000 Tel.: (212) 977-6600
Fax: (212) 704-6288 Fax: (212) 977-8389
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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. [_]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price per aggregate offering Amount of
securities to be registered registered security(1) price(1) registration fee
===================================================================================================================
<S> <C> <C> <C> <C>
Units, each consisting of
one share of Common Stock
and one Warrant 1,150,000(2) $5.50 $6,325,000 $2,181.00
- -------------------------------------------------------------------------------------------------------------------
Common Stock (3) 1,150,000 $6.00 $6,900,000 $2,379.31
- -------------------------------------------------------------------------------------------------------------------
Underwriter's Unit
Purchase Option 100,000 $0.001 $100 $.00
- -------------------------------------------------------------------------------------------------------------------
Units, each consisting of
one share of Common Stock
and one Warrant (4) 100,000 $6.60 $660,000 $227.59
- -------------------------------------------------------------------------------------------------------------------
Common Stock (5) 100,000 $6.00 $600,000 $206.90
- -------------------------------------------------------------------------------------------------------------------
Bridge Warrants (6) 2,000,000 $0.10 $200,000 $68.97
- -------------------------------------------------------------------------------------------------------------------
Common Stock (7) 2,000,000 $6.00 $12,000,000 $4,137.93
- -------------------------------------------------------------------------------------------------------------------
Total $9,201.70
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 150,000 Units which the Underwriter has the option to purchase
to cover over-allotments, if any.
(3) Reserved for issuance upon exercise of the Warrants which are a part of
the Units, together with such indeterminate number of shares of Common
Stock which may be issuable as a result of anti-dilution adjustments.
<PAGE>
(4) Reserved for issuance upon exercise of the Underwriter's Unit Purchase
Option, together with such indeterminate number of shares of Common
Stock which may be issuable as a result of anti-dilution adjustments.
(5) Reserved for issuance upon the exercise of the Warrants which are a part
of the Units comprising the Underwriter's Unit Purchase Option, together
with such indeterminate number of shares of Common Stock which may be
issuable as a result of anti-dilution adjustments.
(6) Registered on behalf of certain selling securityholders.
(7) Reserved for issuance upon the exercise of the Bridge Warrants, together
with such indeterminate number of shares of Common Stock which may be
issuable as a result of anti-dilution adjustments.
-------------------------
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
-2-
<PAGE>
COOPER INTERNATIONAL GROUP, INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item of Form S-1 Location in Prospectus
---------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus............... Front Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................................. Inside Front Cover Page of Prospectus; Additional
Information; Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors.................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Risk Factors; Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution............................................. Dilution; Risk Factors
7. Selling Securityholders.............................. Outside Front Cover Page of Prospectus;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations; Certain Transactions;
Principal Stockholders; Concurrent Registration
for Selling Securityholders.
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Capital Stock to be Registered........ Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Risk Factors; Dividend Policy;
Capitalization; Unaudited Pro Forma Condensed
Consolidated Balanced Sheet; Selected Financial
Information; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business; Management; Certain Transactions;
Principal Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................................... *
</TABLE>
- ---------------------------------------
* Item is inapplicable, or the answer thereto is in the negative, and is
omitted.
<PAGE>
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 9, 1996
COOPER INTERNATIONAL GROUP, INC.
1,000,000 Units
Consisting of 1,000,000 Shares of Common Stock
and 1,000,000 Common Stock Purchase Warrants
Each unit (a "Unit") offered by Cooper International Group, Inc., a
Delaware corporation (the "Company"), consists of one share of common stock, par
value $.001 per share (the "Common Stock"), and one common stock purchase
warrant (the "Warrants"). The Common Stock and the Warrants are sometimes
referred to herein as the "Securities." The components of the Units will be
transferable separately immediately upon issuance. Each Warrant entitles the
registered holder thereof to purchase one share of Common Stock at an initial
exercise price of $6.00, subject to adjustment, for a period of three years
commencing on the second anniversary of the date of this Prospectus.
Prior to this offering, there has been no public market for any
securities of the Company. The offering price of the Units and the exercise
price and other terms of the Warrants have been arbitrarily determined by
negotiation between the Company and State Street Capital Markets, Corp., the
representative (the "Representative") of the several underwriters (the
"Underwriters'), and is not necessarily related to the Company's asset value,
net worth, financial condition or other established criteria of value. See
"Underwriting." The Company has applied for quotation of the Common Stock and
the Warrants on the Nasdaq SmallCap Market ("Nasdaq") under the proposed symbols
________ and ______. There can be no assurance that an active trading market in
the Company's securities will develop or be sustained.
The registration statement of which this Prospectus is a part also
covers an aggregate of up to 2,000,000 warrants (the "Bridge Warrants") and the
shares of Common Stock issuable upon the exercise of such Bridge Warrants which
may be offered by certain securityholders (the "Selling Securityholders").
Except for the exercise price of the Bridge Warrants, the Company will not
receive any of the proceeds from the sale of such securities. See "Risk Factors
- - Outstanding Warrants and Options; Registration Rights" and "Concurrent
Registration for Selling Securityholders." The Bridge Warrants were issued by
the Company in connection with the Company's June 1996 private placement (the
"Private Placement").
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AT PAGE 8 FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
Underwriting Discounts Proceeds to
Price to Public and Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Unit ...........$5.50 $0.55 $4.95
- --------------------------------------------------------------------------------
Total (3)...........$5,500,000 $550,000 $4,950,000
================================================================================
(1) Does not include additional compensation to be paid to the
Representative in the form of (i) a non-accountable expense allowance of
$165,000 ($189,750 if the Over-Allotment Option referred to below is
exercised in full), (ii) an option (the "Unit Purchase Option") to
purchase up to 100,000 Units (the "Option Units") at 120% of the initial
offering price per Unit, exercisable for a period of four years
commencing on the first anniversary of the date of this Prospectus, and
(iii) a financial advisory fee of $126,000. In addition, the Company has
agreed to indemnify the Underwriters against certain civil liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses of this offering estimated to be $375,000
(including $15,275 advanced by the Company's parent, TDA Industries,
Inc.) and the Representative's non-accountable expense allowance of
$165,000 ($189,750 if the Over-Allotment Option is exercised in full).
See "Underwriting."
(3) The Company has granted the Underwriters a 45-day option (the
"Over-Allotment Option") to purchase up to 150,000 additional Units upon
the same terms and conditions as set forth above, solely to cover
over-allotments, if any. If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $6,325,000, $632,500 and $5,692,500,
respectively.
<PAGE>
The Units are offered on a "firm commitment" basis by the Underwriters
when, as and if delivered to and accepted by the Underwriters, and subject to
certain conditions, including the right of the Underwriters to withdraw, cancel,
modify or reject any order in whole or in part. It is expected that delivery of
the certificates representing the shares of Common Stock and warrants comprising
the Units will be made at the offices of the Representative in New York, New
York against payment therefor on or about ____, 1996.
STATE STREET CAPITAL MARKETS, CORP.
The date of this Prospectus is _________, 1996
<PAGE>
------------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
UNITS, THE COMMON STOCK AND/OR THE WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------------------
The Company intends to furnish its stockholders and holders of
Warrants with annual reports containing audited financial statements and such
interim reports as it deems appropriate and as may be required by law.
Cooper(TM) is a trademark of Cooper Flooring International, Inc.
This Prospectus also includes trademarks, tradenames and service marks of other
companies.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this Prospectus does
not give effect to the exercise of (i) the Over-Allotment Option, (ii) the
Warrants, (iii) the Bridge Warrants, (iv) the Representative's Unit Purchase
Option, (v) options reserved for issuance under the Company's 1996 Stock Option
Plan, (vi) 250,000 shares of Common Stock issuable upon exercise of certain
warrants issued in connection with the Private Placement (the "Private
Warrants") and (vii) the Acquisition Warrant (as defined below).
THE COMPANY
Cooper International Group, Inc. (the "Company") was recently
organized to acquire, integrate and operate seasoned companies operating in the
floorcoverings industry. Simultaneously with the closing of this offering, the
Company will acquire (the "Acquisition") from TDA Industries, Inc. ("TDA") all
of the issued and outstanding capital stock of Cooper Flooring International,
Inc., a Florida corporation ("Cooper Florida"), for consideration consisting of
1,149,900 shares of Common Stock and a warrant (the "Acquisition Warrant")
exercisable to purchase 250,000 (subject to adjustment) shares of Common Stock.
Cooper Florida, founded in 1948, is engaged in the wholesale distribution of
carpet, wood, laminate, ceramic tile and vinyl floorcoverings and padding and
accessories throughout Florida, portions of Georgia and Alabama and, to a lesser
extent, the Caribbean. Upon the consummation of the Acquisition, Cooper Florida
will become a wholly-owned subsidiary of the Company and will constitute the
sole operating business of the Company until such time, if any, as the Company
consummates additional acquisitions. See "Business" and "Certain Transactions."
The Company's strategy is to acquire, integrate and operate
seasoned companies operating in the floorcoverings industry and to build an
integrated company with the ability to source products domestically and
internationally and to distribute products throughout North America and the
Caribbean on a wholesale basis and as agent for various foreign manufacturers.
The Company intends to provide expansion capital, if necessary, and
administrative and management services to acquired companies, including Cooper
Florida, in order to exploit the growth potential which management of the
Company perceives in the floorcoverings industry and to assist such acquired
companies to penetrate new markets. Although the Company does not currently have
any agreements, arrangements or commitments in place with respect to any
proposed acquisitions, other than the Acquisition, it believes that there are a
number of potential acquisition candidates that may meet its criteria. While the
Company intends to seek out prospective acquisition candidates in businesses
that complement or are otherwise related to the business of Cooper Florida, the
Company does not intend to restrict itself to any one particular industry
segment and may attempt to acquire companies in industries unrelated to the core
business of Cooper Florida. There can be no assurance that the Company will
successfully identify and complete any acquisitions or that any acquisitions, if
completed successfully, will be integrated successfully with the other
operations of the Company, will perform as expected, will not result in
significant unexpected liabilities or will ever contribute significant revenues
or profits to the Company. The Company anticipates that it will finance future
acquisitions, if any, through a combination of cash (including a substantial
portion of the net proceeds of this offering), issuances of shares of capital
stock of the Company, and additional equity or debt financings. There can be no
assurance that the Company will be able to obtain additional equity or debt
financing on terms acceptable to the Company or at all. The Company has and will
continue to identify potential acquisition candidates through the industry
contacts of the management of the Company and Cooper Florida, as well as through
TDA and general business sources. See "Business-Strategy" and "Certain
Transactions."
The Company was incorporated in Delaware on April 4, 1996. The
Company's executive office is located at 122 East 42nd Street, Suite 1116, New
York, New York 10168 and its telephone number is (212) 986-6190.
-4-
<PAGE>
The Offering
Securities offered by the Company ...... 1,000,000 Units, each Unit consisting
of one share of Common Stock and one
Warrant. See "Description of Capital
Stock."
Terms of Warrants....................... Each Warrant entitles the registered
holder thereof to purchase one share
of Common Stock at an initial exercise
price of $6.00, subject to adjustment,
for a period of three years commencing
on the second anniversary of the date
of this Prospectus. See "Description
of Capital Stock - Warrants."
Common Stock outstanding
prior to this offering.......... 100 shares (1)
after this offering ............ 2,150,000 shares (2)(3)
Warrants outstanding
prior to this offering.......... 2,000,000 Bridge Warrants
after this offering............. 3,000,000 Warrants (4)
Proposed Nasdaq symbols:
Common Stock....................
Warrants........................
Use of proceeds......................... To finance acquisitions of privately-
held companies operating in the
floorcoverings industry and for
working capital purposes, including
general corporate purposes of the
Company and for the working capital
purposes of Cooper Florida. See "Use
of Proceeds," "Capitalization" and
"Certain Transactions."
Risk Factors............................ An investment in the securities
offered hereby involves a high degree
of risk and immediate substantial
dilution to the public investors. See
"Risk Factors" and "Dilution."
- -------------------------------
(1) Does not include (i) 2,000,000 shares of Common Stock issuable upon
exercise of the Bridge Warrants at an exercise price of $6.00 per share,
(ii) 250,000 shares of Common Stock issuable upon exercise of the
Private Warrants at an exercise price of $1.00 per share, and (iii)
1,000,000 shares of Common Stock reserved for issuance upon the exercise
of options available for grant under the Company's 1996 Stock Option
Plan of which options to purchase 450,000 shares of Common Stock will be
issued upon the closing of this offering but will not be exercisable
until at least one year from the date of the closing of this offering.
See "Management - Stock Option Plan," "Description of Capital Stock,"
"Underwriting" and "Shares Eligible for Future Sale."
(2) Does not include (i) 1,000,000 shares of Common Stock issuable upon
exercise of the Warrants, (ii) 2,000,000 shares of Common Stock issuable
upon exercise of the Bridge Warrants, (iii) 250,000 shares of Common
Stock issuable upon exercise of the Private Warrants, (iv) 250,000
shares of Common Stock issuable upon exercise of the Acquisition
Warrant, (v) 100,000 shares of Common Stock and 100,000 shares of Common
Stock underlying Warrants contained in the Unit Purchase Option, (vi) up
to 150,000 shares of Common Stock reserved for issuance pursuant to the
Over-Allotment Option and (vii) 1,000,000 shares of Common Stock
reserved for issuance upon the exercise of options available for grant
under the Company's 1996 Stock Option Plan of which options to purchase
450,000 shares of Common Stock will be issued upon the closing of this
offering but will not be exercisable until at least one year from the
date of the closing of this offering. See "Management - Stock Option
Plan," "Description of Capital Stock," "Underwriting" and "Shares
Eligible for Future Sale."
-5-
<PAGE>
(3) Includes 1,149,900 shares of Common Stock to be issued to TDA
simultaneously with the closing of this offering in connection with the
Acquisition. See "Certain Transactions."
(4) Includes 2,000,000 Bridge Warrants. Upon the consummation of this
offering, the terms and conditions of the Bridge Warrants will
automatically convert to the terms and conditions of the Warrants
offered hereby. Does not include Warrants comprising a part of the
Over-Allotment Option, the Private Warrants, the Acquisition Warrant, or
the Representative's Unit Purchase Option.
-6-
<PAGE>
Summary Financial Data
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31,
------------------- ------------------
1995 1994 1993 1992 1991 1996 1995
---- ---- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA (1):
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ........................... $ 29,547 $ 28,020 $ 30,900 $ 25,391 $ 24,329 $ 22,910 $ 22,140
Gross Profit ....................... 6,207 5,582 6,271 5,105 4,830 5,070 4,645
Operating Income (Loss) ............ 55 141 495 (263) (856) 176 58
Net Income (Loss) .................. 31 316 484 (203) (632) 109 38
Pro Forma Net Income Per Share ..... $ .02 $ .07 $ .02
========== ========== ==========
Pro Forma Weighted Average Number of
Shares Outstanding(2) .............. 1,559,090 1,559,090 1,559,090
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995 March 31, 1996
--------------- -------------------------------------
Actual As Adjusted(3) Pro Forma(4)
------ -------------- ------------
<S> <C> <C> <C> <C>
Balance Sheet Data (1):
Working Capital ............................... $4,668 $4,607 $4,562 $ 9,169
Total Assets .................................. 7,195 7,739 4,562 12,301
Long-term Debt ................................ 152 374 -- 374
Stockholders' Equity .......................... 4,755 4,500 4,562 9,062
</TABLE>
- --------------------------
(1) Actual operating and balance sheet data was derived from the financial
statements of Cooper Florida, because the Company was organized in April
1996 and has conducted no business activities to date.
(2) The pro forma weighted average number of shares outstanding includes the
100 shares of Common Stock issued in connection with the Company's
initial capitalization, 1,149,900 shares to be issued to TDA in
connection with the Acquisition and the dilutive effect of the
Acquisition Warrant and the Private Warrants. See "Certain Transactions"
and the Financial Statements and the notes thereto.
(3) Reflects the issuance of the Bridge Warrants and the Private Warrants in
the Private Placement, the public offering of 1,000,000 Units at an
initial public offering price of $5.50 per Unit and the application of
the net proceeds therefrom.
(4) Reflects the issuance of the Bridge Warrants and the Private Warrants in
the Private Placement, the public offering of 1,000,000 Units at an
initial public offering price of $5.50 per Unit, the application of the
net proceeds therefrom and the completion of the Acquisition. See the
"Unaudited Pro Forma Condensed Consolidated Balance Sheet",
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Certain Transactions" and the Financial Statements and
the notes thereto.
-7-
<PAGE>
RISK FACTORS
An investment in the Units offered hereby is speculative in
nature and involves a high degree of risk. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following risk factors before purchasing the Units offered hereby.
LIMITED HISTORY OF THE COMPANY'S OPERATIONS;
DIVERSIFICATION OF COOPER FLORIDA'S PRODUCT MIX
Since its incorporation in April 1996, the Company has conducted
no business activities other than organizational activities, the negotiation of
the Acquisition, certain capital raising activities (including the Private
Placement) and has not generated any revenues. Additionally, the Company has not
yet commenced its proposed business plan and will consummate the Acquisition
only upon the closing of this offering. Upon the consummation of the
Acquisition, Cooper Florida will become a wholly-owned subsidiary of the Company
and will constitute the sole source of revenue for the Company until such time,
if any, as the Company consummates additional acquisitions. A significant
element of the Company's growth strategy is to acquire, integrate and operate
companies operating in the floorcoverings industry. The Company's strategy is
unproven and based upon dynamic and unpredictable events. Although the Company
perceives growth potential in the floorcoverings industry, there can be no
assurance that such potential will be realized or, even assuming such growth,
that the Company will be able to benefit therefrom. There can be no assurance
that the Company will successfully identify and complete any acquisitions or
that any acquisitions, if completed successfully, will be integrated
successfully with the other operations of the Company, will perform as expected,
will not result in significant unexpected liabilities or will ever contribute
significant revenues or profits to the Company. There can be no assurance that
the Company will not experience many of the problems, delays, expenses and
difficulties commonly encountered by early development stage companies, many of
which are beyond the Company's control. In addition, if the Company is unable to
manage growth effectively, the Company's operating results could be materially
adversely affected.
Beginning in July 1990, Cooper Florida commenced a program to
diversify and expand its product mix by adding to its carpet and vinyl
floorcovering product lines ceramic, hardwood and laminate product lines. This
diversification and expansion program is ongoing and has only a limited
operating history upon which an evaluation of Cooper Florida and its prospects
can be based. There can be no assurance that this business strategy will prove
successful.
BROAD DISCRETIONARY USE OF PROCEEDS
The Company has broad discretion with respect to the specific
application of all of the net proceeds of this offering. Such net proceeds are
intended to be applied toward consummating acquisitions in accordance with the
Company's strategy and for working capital purposes. The Company also may
determine to use all or a substantial portion of its excess working capital for
acquisitions. See "Use of Proceeds."
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO ACQUISITIONS
Management of the Company will have virtually unrestricted
flexibility in identifying and selecting prospective acquisition candidates. The
Company does not intend to seek stockholder approval for any acquisitions unless
required by applicable law or regulations, and stockholders will most likely not
have an opportunity to review financial information on an acquisition candidate
prior to consummation of an acquisition.
-8-
<PAGE>
Additionally, acquisition candidates may be in industries totally unrelated to
the core business of Cooper Florida or in industries in which current management
of the Company has no experience. Thus, purchasers of the Securities will be
entrusting their funds to the Company's management, upon whose judgment the
investors must depend, with only limited information concerning management's
specific intentions. Except for the Acquisition, the Company does not currently
have any agreements, commitments or arrangements with respect to any proposed
acquisitions, and there can be no assurance that any acquisitions will be
consummated. Although management of the Company will endeavor to evaluate the
risks inherent in any particular acquisition, there can be no assurance that the
Company will properly or accurately ascertain all such risks.
USE OF PROCEEDS TO BENEFIT INSIDERS
The Company has allocated $15,275 (plus accrued interest) of the
net proceeds of this offering to working capital in order to repay indebtedness
to TDA incurred by the Company in order to pay the expenses of the Private
Placement and a portion of the professional fees and other expenses related to
this offering. Additionally, in the event that Cooper Florida or other acquired
companies (if any) do not generate sufficient cash flow, the Company may use a
portion of the net proceeds of this offering for the working capital purposes of
Cooper Florida, including the payment of monthly management fees to TDA pursuant
to a management and administrative services agreement to be entered into between
TDA and Cooper Florida upon the consummation of this offering. Douglas P. Fields
and Frederick M. Friedman, officers and directors of the Company, are officers,
directors and principal stockholders of TDA and officers and directors of Cooper
Florida. John E. Smircina, a director nominee of the Company, is a director of
TDA. See "Certain Transactions."
POTENTIAL CONFLICTS OF INTEREST
Certain officers and directors of the Company are also officers,
directors and/or principal stockholders of TDA and its affiliates (including
Cooper Florida) and, consequently, may be able, through TDA and its affiliates,
to direct the election of the Company's directors, affect significant corporate
events and generally direct the affairs of the Company. Cooper Florida has been
dependent on TDA for various management and administrative services and
financial support. Following this offering and the consummation of the
Acquisition, TDA will continue to provide the Company with certain management
and administrative services. The Company does not intend to enter into any
material transaction with TDA or its affiliates in the future unless such
transaction is fair and reasonable to the Company and approved by a majority of
the Company's disinterested directors. Notwithstanding the foregoing, there can
be no assurance that future transactions, if any, will not result in conflicts
of interest which will be resolved in a manner favorable to the Company. See
"Management," "Principal Stockholders" and "Certain Transactions."
DEPENDENCE ON NEW CUSTOMERS AND VENDORS FOR FUTURE GROWTH
Cooper Florida is, and its growth and future revenues will be,
dependent to a large extent upon the ability of Cooper Florida to establish
relationships with new customers throughout North America and new vendors both
in North America and in certain foreign countries as it seeks to expand from its
traditional carpet distribution business into non-carpet floorcoverings, and to
maintain relationships with its existing customers and vendors. Any of Cooper
Florida's customers and most of its vendors can terminate their relationship
with Cooper Florida at any time. Although Cooper Florida is not materially
dependent upon any one of its customers, the loss of a group of customers could,
until appropriate replacements were obtained, have an adverse effect on Cooper
Florida and thus the Company. Shaw Industries, Inc. ("Shaw"), pursuant to an
exclusive distribution agreement, supplies Cooper Florida with a majority of its
carpet orders in the state of Florida and portions of Alabama and Georgia.
-9-
<PAGE>
During the nine months ended March 31, 1996, sales of the Shawmark carpet line
accounted for over 15% of the Company's revenues during such period. The loss of
Shaw as a vendor would have a materially adverse effect on the business and
prospects of Cooper Florida and therefore the Company because the management of
Cooper Florida believes that it would be difficult to replace the Shawmark line
with a product line with the same name and quality recognition. See
"Business-Products" and -"Customers, Sales and Marketing."
CREDIT FACILITY
Cooper Florida has historically financed its operations through
operating cash flow and support from its parent, TDA, or affiliates of TDA. In
December 1995, Cooper Florida negotiated, but has not yet implemented, a line of
credit with Chemical Bank in the aggregate amount of $1 million for direct
borrowing for Cooper Florida's working capital purposes. If implemented, the
credit facility will be collateralized by Cooper Florida's trade accounts
receivable and inventory and will be guaranteed by TDA. The line of credit will
terminate on December 31, 1996. If such line of credit is implemented, there can
be no assurance that Chemical Bank will extend the termination date of the line
of credit. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS
There can be no assurance that the historical level of Cooper
Florida's revenues will continue or that prior trends will be indicative of
future results of operations. Future results of operations may fluctuate
significantly based upon factors such as increases in competition, political
changes, weather conditions, macroeconomic factors, the continued availability
of products from vendors, import restrictions, tariffs, seasonal trends, Cooper
Florida's recent emphasis on non-carpet floorcoverings such as ceramic, wood and
laminates, as well as other circumstances that may not be reasonably foreseeable
at this time. See "Management's Discussion and Analysis of Financial Conditional
and Results of Operations."
COMPETITION
The floorcovering distribution business is extremely competitive.
Cooper Florida believes that the principal areas of competition are price,
customer service, quality and appearance of the products. Cooper Florida
competes with distributors of floorcovering products, as well as with those
manufacturers of floorcoverings products which sell directly to retailers. Many
of Cooper Florida's competitors have greater financial, personnel and inventory
resources than Cooper Florida. There can be no assurance that Cooper Florida
will compete effectively with such competitors or that such competitors will not
distribute products which are superior to Cooper Florida's, which have better
price or quality or performance characteristics, or which achieve greater market
penetration. See "Business-Competition."
The Company may experience competition from competitors or others
seeking to identify and consummate acquisitions of the type of companies which
the Company is seeking to acquire. Such competition could result in the loss of
an acquisition candidate or an increase in the price the Company would be
required to pay for any such acquisition. See "Business-Competition."
CONTINUING CONTROL BY CURRENT MANAGEMENT AND EXISTING STOCKHOLDERS
Upon the closing of this offering and the Acquisition, TDA will
own approximately 53.49% of the issued and outstanding shares of Common Stock of
the Company. Douglas P. Fields, the Chief Executive Officer and
-10-
<PAGE>
Chairman of the Board of Directors of the Company, is also the Chairman of the
Board of Directors, President, Chief Executive Officer and a principal
stockholder of TDA. Frederick M. Friedman, the Executive Vice President,
Treasurer, Secretary, Chief Financial Officer and a director of the Company, is
also the Executive Vice President, Treasurer, Secretary, Chief Financial
Officer, a director and a principal stockholder of TDA. Messrs. Fields and
Friedman are the sole members of the Executive Committee of the Board of
Directors of the Company. John E. Smircina, a director nominee of the Company,
is a director of TDA. Additionally, if the Acquisition Warrant were to be fully
exercised, TDA would own approximately 58.34% of the issued and outstanding
Common Stock of the Company. As a result, these officers and directors, if they
were to act in concert, would be in a position to control the composition of the
Board of Directors of the Company and therefore the business, policies and
affairs of the Company, and the outcome of issues which may be subject to a vote
of the Company's stockholders. See "Certain Transactions" and "Principal
Stockholders."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends upon the continued
contributions of its officers and the continued contributions of the officers of
Cooper Florida and other key employees. Although Cooper Florida has entered into
a three-year employment agreement with each of Jay Cooper, its Chairman, and
James C. Yeager, its President, which requires each to devote the majority of
his business time to the affairs of Cooper Florida, the loss of the services of
either such individual or the services of certain other key employees could have
a material adverse effect on Cooper Florida's business and prospects. The
Company intends to obtain "key-man" insurance on the lives of each of Jay Cooper
and Douglas P. Fields in the amount of $500,000 each prior to the consummation
of this offering. See "Management."
The Company's management currently includes two (2) officers,
Douglas P. Fields and Frederick M. Friedman, neither of whom are required to
commit a specific amount of their time to the affairs of the Company, and each
of whom has significant business interests outside of the Company. Accordingly,
such officers may have conflicts of interests in allocating management time
among various business activities. However, such officers intend to devote such
time as they deem reasonably necessary to carry out the business and affairs of
the Company, including the evaluation and negotiation of potential acquisitions.
See "Management" and "Certain Transactions."
IMMEDIATE AND SUBSTANTIAL DILUTION
This offering involves an immediate and substantial dilution of
$1.28 (23.3%) per share between the net tangible book value per share of Common
Stock and the initial public offering price. See "Dilution."
LACK OF DIVIDENDS
The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain earnings, if any, to finance the growth of
the Company. The Board of Directors of the Company will review its dividend
policy from time to time to determine the feasibility and desirability of paying
dividends, after giving consideration to the Company's earnings, financial
condition, capital requirements and such other factors as the Board of Directors
deems relevant. In addition, it is anticipated that the terms of any future
financing may prohibit or restrict the payment of cash dividends. See "Dividend
Policy" and "Certain Transactions."
-11-
<PAGE>
NEED FOR ADDITIONAL FUTURE FINANCING
The Company may require additional equity or debt financing in
order to consummate an acquisition, for additional working capital, if Cooper
Florida suffers losses or if the Company effects the acquisition of a business
that subsequently suffers significant losses. There can be no assurance that the
Company will be able to obtain additional financing on terms acceptable to the
Company or at all. In the event additional financing is unavailable to the
Company, the Company may be materially adversely affected.
LIMITED EXPERIENCE OF THE REPRESENTATIVE
The Representative, State Street Capital Markets, Corp., has
previously completed four firm commitment public offerings. The Representative
is a relatively small firm and there can be no assurance that the Representative
will be able to make a meaningful market in the Company's securities or that
another broker/dealer will make a meaningful market in the Company's securities.
Prior to September 1995, the Representative's name was White Rock Partners &
Co., Inc. In the event the Representative does not receive recognition of its
new name by its clients, the public or the investment community, it could
adversely affect the Representative's operations.
See "Underwriting."
ABSENCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING
PRICE; POSSIBLE VOLATILITY OF MARKET PRICE
Prior to this offering, there has not been a market for any of
the Securities, and, although the Company has applied to have the shares of
Common Stock and the Warrants offered hereby approved for quotation on Nasdaq,
there can be no assurance that an active trading market will develop or be
sustained after this offering. The initial public offering price of the Units
and the exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Representative and are not related to
the Company's asset value, net worth, results of operations, or any other
criteria of value, and may not be indicative of the prices that may prevail in
the public market. The market price of the Securities could also be subject to
significant fluctuations in response to variations in the Company's financial
position, operating results, developments concerning acquisitions, government
regulations, general trends in the industry and other factors. See
"Underwriting."
POSSIBLE EFFECTS OF BLANK CHECK PREFERRED STOCK; ANTITAKEOVER PROVISIONS
The Company's Certificate of Incorporation authorizes the
issuance of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the holders of the Company's Common Stock. In the event of issuance, the
preferred stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future. If the Company issues preferred stock, the issuance may have a
dilutive effect upon the holders of the Company's Common Stock, including the
purchasers of the shares of Common Stock offered hereby. In addition, the
Company is subject to Section 203 of the Delaware General Corporation Law which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any of a broad range of business combinations with an "interested stockholder"
for a period of three
-12-
<PAGE>
years following the date that such stockholder became an interested stockholder.
See "Description of Capital Stock - Section 203 of the Delaware General
Corporation Law."
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains provisions
limiting the liability of directors of the Company for monetary damages to the
fullest extent permissible under Delaware law. This is intended to eliminate the
personal liability of a director for monetary damages in an action brought by or
in the right of the Company for breach of a director's duties to the Company or
its stockholders except in certain limited circumstances. In addition, the
Certificate of Incorporation contains provisions requiring the Company to
indemnify directors, officers, employees and agents of the Company serving at
the request of the Company against expenses, judgments (including derivative
actions), fines and amounts paid in settlement. This indemnification is limited
to actions taken in good faith in the reasonable belief that the conduct was
lawful and in or not opposed to the best interests of the Company. The
Certificate of Incorporation provides for the indemnification of directors and
officers in connection with civil, criminal, administrative or investigative
proceedings when acting in their capacities as agents for the Company. The
foregoing provisions may reduce the likelihood of derivative litigation against
directors and officers and may discourage or deter stockholders or management
from suing directors or officers for breaches of their duties to the Company,
even though such an action, if successful, might otherwise benefit the Company
and its stockholders. See "Description of Capital Stock - Limitations on
Liability and Indemnification of Officers and Directors."
OUTSTANDING WARRANTS AND OPTIONS; REGISTRATION RIGHTS
Upon completion of this offering, the Company will have
outstanding (i) 1,000,000 Warrants exercisable to purchase an aggregate of
1,000,000 shares of Common Stock at an exercise price of $6.00 per share, (ii)
2,000,000 Bridge Warrants exercisable to purchase an aggregate of 2,000,000
shares of Common Stock at an exercise price of $6.00 per share, (iii) 250,000
Private Warrants exercisable to purchase an aggregate of 250,000 shares of
Common Stock at an exercise price of $1.00 per share, (iv) the Acquisition
Warrant exercisable to purchase an aggregate of 250,000 shares of Common Stock
at an exercise price of $1.00 per share, (v) warrants exercisable to purchase an
aggregate of 200,000 shares of Common Stock comprising part of the Unit Purchase
Option, and (vi) options to purchase 450,000 shares of Common Stock pursuant to
the Company's 1996 Stock Option Plan. While all of such options and warrants are
not immediately exercisable, any exercise could cause immediate and substantial
dilution. Additionally, holders of such options and warrants are likely to
exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by such options and
warrants. Further, while these options and warrants are outstanding, the
Company's ability to obtain additional financing on favorable terms may be
adversely affected. The holders of the Private Warrants and the Acquisition
Warrant and the Company's principal stockholder have certain demand and
"piggy-back" registration rights with respect to their securities. Exercise of
such rights could involve substantial expense to the Company. See "Principal
Stockholders," "Description of Capital Stock" and "Underwriting."
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS
Purchasers of the Units will be able to exercise the Warrants
only if (i) a current prospectus under the Securities Act relating to the Common
Stock underlying the Warrants is then in effect and (ii) such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states in which the various holders of the Warrants reside. Although
the Company will undertake to use its best efforts to maintain the effectiveness
of a current prospectus covering the securities underlying the Warrants, there
can be no
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<PAGE>
assurance that the Company will be able to do so. The value of the Warrants may
be greatly reduced if a current prospectus, covering the securities issuable
upon the exercise of the Warrants, is not kept effective or if such securities
are not qualified, or exempt from qualification, in the states in which the
holders of Warrants reside.
See "Description of Capital Stock - Warrants."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have an
aggregate of 2,150,000 shares of Common Stock outstanding (2,300,000 shares if
the Over-Allotment Option is exercised in full). Of these shares, the 1,000,000
shares of Common Stock included in the Units offered hereby (1,150,000 shares,
if the Over-Allotment Option is exercised in full) will be freely tradeable
without restriction or limitation under the Securities Act, except for any
shares purchased by "affiliates" of the Company, as such term is defined under
the Securities Act. The remaining 1,150,000 shares, all of which will be owned
by TDA upon the closing of this offering, will be "restricted securities" within
the meaning of Rule 144 adopted under the Securities Act. Sales of such
restricted shares in the public market, or the availability of such shares for
sale, could adversely affect the market price for the Common Stock.
Sales of the Bridge Warrants, which are being registered
concurrently herewith, or sales of the Common Stock underlying the Bridge
Warrants or even the potential for such sales at any time could adversely affect
the market price for the Common Stock and the Warrants. See "Concurrent
Registration for Selling Securityholders."
Each of the Company's directors and officers and all holders of
its securities (including TDA) have agreed not to publicly offer, sell or
otherwise dispose of any of their shares of Common Stock (including shares of
Common Stock issuable upon exercise of all outstanding warrants and options) for
a period of 24 months following the date of this Prospectus (the "Lock-up
Period") without the prior written consent of the Representative. Following the
Lock-up Period, the shares subject to such lock-up will be eligible for sale in
the public market, subject to the conditions and restrictions of Rule 144
(unless such securities are registered under the Securities Act, in which case
the conditions and restrictions of Rule 144 would be inapplicable). See
"Underwriting" and "Shares Eligible for Future Sale."
POSSIBLE DELISTING OF COMMON STOCK AND WARRANTS FROM NASDAQ; RISKS RELATED TO
LOW-PRICED STOCKS
It is anticipated that the Common Stock and the Warrants will be
quoted on Nasdaq. However, in order to continue to be listed on Nasdaq, a
company must maintain $2,000,000 in total assets, a $200,000 market value of the
public float and $1,000,000 in total capital and surplus. In addition, continued
inclusion requires two market makers and a minimum bid price of $1.00 per share;
provided, however, that if a company falls below such minimum bid price, it will
remain eligible for continued inclusion on Nasdaq if the market value of the
public float is at least $1,000,000 and the company has $2,000,000 in capital
and surplus. The failure to meet these maintenance criteria in the future may
result in the delisting of the Common Stock and Warrants from Nasdaq and
trading, if any, in the Common Stock and Warrants would thereafter be conducted
in the "pink sheets" or on the "electronic bulletin board". As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock and the
Warrants. In addition, if the Common Stock were to become delisted from trading
on Nasdaq and the trading price of the Common Stock were to fall below $5.00 per
share, trading in the Common Stock also would be subject to the requirements of
certain rules promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended, which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock (generally, any non-Nasdaq equity
security
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<PAGE>
that has a market price of less than $5.00 per share, subject to certain
exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). From these types of
transactions, the broker-dealer must make a suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage them from effecting transactions in the Common Stock
and the Warrants, which could severely limit the liquidity of the Common Stock
and Warrants and the ability of purchasers in this offering to sell the Common
Stock and Warrants in the secondary market.
-15-
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units
offered hereby, after deducting underwriting discounts and commissions and other
expenses of this offering, are estimated to be approximately $4,410,000
($5,127,750 if the Over-Allotment Option is exercised in full), and are expected
to be used as follows:
<TABLE>
Approximate
Approximate Amount Percentage of
APPLICATION of Net Proceeds Net Proceeds
- ----------- ------------------- ------------
<S> <C> <C>
Finance cash portion of potential acquisitions (1)........ $3,543,275 80%
Working capital (2)....................................... 866,725 20
------------ ---------
Total...................................... $4,410,000 100%
============ =========
</TABLE>
- ------------------------------
(1) Represents the approximate amount that may be used to fund the potential
acquisition of businesses in accordance with the Company's current
strategy, which is subject to change from time to time.
(2) The proceeds allocated to working capital will be used in the Company's
and Cooper Florida's current operations and to repay $15,275 borrowed
from TDA in order to pay the expenses of the Private Placement and a
portion of the professional fees and other expenses related to this
offering. The principal amount of such borrowing, together with interest
at 8% per annum, is due and payable upon demand. See "Certain
Transactions." Additionally, a portion of the proceeds allocated to
working capital may be used by Cooper Florida to purchase inventory.
The Company currently estimates that the net proceeds of this
offering will be sufficient to fund its and Cooper Florida's working capital
needs and planned operations, including potential acquisitions, if any, for at
least twelve (12) months from the date of this Prospectus. The net proceeds may
be sufficient for a greater or lesser period of time depending on the number of
acquisitions, if any, that the Company consummates during the next twelve (12)
months and the portion of the purchase price of such acquisitions paid in cash.
In addition, the Company may require additional financing prior to or following
such 12-month period if Cooper Florida suffers losses or negative cash flow or
if the Company effects the acquisition of a business that subsequently suffers
significant losses or negative cash flow. There can be no assurance that the
Company will be able to obtain additional financing on terms acceptable to the
Company or at all. In the event additional financing is unavailable to the
Company, the Company may be materially adversely affected.
Any additional proceeds received upon exercise of the
Over-Allotment Option will be added to the Company's working capital. Pending
utilization, the net proceeds of this offering will be invested in short-term
bank certificates of deposit, quality commercial paper, obligations backed by
the United States government or other short-term interest-bearing investments.
The foregoing represents the Company's best estimate of its
allocation of the net proceeds of this offering. Future events, as well as
changes in economic, regulatory or competitive conditions, or the Company's
business, or Cooper Florida's business, and the results of the Company's or
Cooper Florida's activities may cause shifts in the allocation of funds within
the described categories or to other purposes necessary or desirable. In order
to pursue its proposed growth strategy, the Company intends to use a significant
portion of the net proceeds of this offering for the acquisition of businesses
or assets that are consistent with the Company's current strategy, which is
subject to change from time to time. With the exception of the Acquisition, the
Company does not currently have any agreements, commitments or arrangements with
respect to any proposed acquisitions, and there can be no assurance that any
other acquisitions will be consummated.
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<PAGE>
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain earnings, if any, to finance the growth of
the Company. The Board of Directors of the Company will review its dividend
policy from time to time to determine the feasibility and desirability of paying
dividends, after giving consideration to the Company's results of operations,
financial condition, capital requirements and such other factors as the Board of
Directors deems relevant. In addition, it is anticipated that the terms of any
future financing may prohibit or restrict the payment of cash dividends. See
"Certain Transactions."
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of April 4, 1996 (i) on an actual basis, (ii) as adjusted to give effect to
the Private Placement and the public offering of 1,000,000 Units at an initial
public offering price of $5.50 per Unit and the application of the net proceeds
therefrom and (iii) on a pro forma basis, assuming the completion of the
Acquisition as of such date. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Unaudited Pro Forma Condensed Consolidated Balance Sheet",
"Certain Transactions" and the Financial Statements and the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
April 4, 1996
------------------------------------------
ACTUAL AS ADJUSTED PRO FORMA
------------ ------------ -----------
(in thousands)
------------------------------------------
<S> <C> <C> <C>
Long-Term Debt:
6% note payable to TDA Industries,
Inc., due on the first anniversary of
the closing of this offering (1) $ -- $ -- $ 374
============ ============ ===========
Stockholders' Equity:
Preferred Stock, $.001 par value,
1,000,000 shares authorized; no
shares issued and outstanding -- -- --
Common Stock, $.001 par value;
10,000,000 shares authorized; 100 shares
issued and outstanding (actual); 1,000,100
shares issued and outstanding (as adjusted);
2,150,000 shares issued and
outstanding (pro forma) (2) (3) -- 1 2
Additional Paid-In Capital --(4) 4,561 9,884
Retained Earnings -- -- (824)
------------ ------------ -----------
--(4) 4,562 9,062
Less: Stock Subscription Receivable --(4) --(4) --(4)
------------ ------------ -----------
Total Stockholders' Equity -- 4,562 9,062
------------ ------------ -----------
Total Capitalization $ -- $ 4,562 $ 9,436
============ ============ ===========
</TABLE>
- -----------
(1) Represents, as of March 31, 1996, the aggregate amount due to TDA from
Cooper Florida in payment of an historical accumulation of auditing fees
and short-term cash advances. Upon the closing of this offering, such
aggregate amount will be converted into a 6% promissory note payable on
the first anniversary of the closing of this offering. See "Certain
Transactions."
(2) Includes, in the pro forma column, 1,149,900 shares of Common Stock to
be issued to TDA simultaneously with the closing of this offering in
connection with the Acquisition. See "Certain Transactions."
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<PAGE>
(3) Does not include (i) 1,000,000 shares of Common Stock issuable upon
exercise of the Warrants, (ii) 2,000,000 shares of Common Stock issuable
upon exercise of the Bridge Warrants, (iii) 250,000 shares of Common
Stock issuable upon exercise of the Private Warrants, (iv) 250,000
shares of Common Stock issuable upon exercise of the Acquisition
Warrant, (v) 150,000 shares of Common Stock and 150,000 shares of Common
Stock reserved for issuance pursuant to the Warrants comprising part of
the Over- Allotment Option, (vi) 100,000 shares of Common Stock and
100,000 shares of Common Stock underlying warrants contained in the Unit
Purchase Option and (vii) 1,000,000 shares of Common Stock reserved for
issuance upon the exercise of options available for grant under the
Company's 1996 Stock Option Plan of which options to purchase 450,000
shares of Common Stock will be issued upon the closing of this offering
but will not be exercisable until at least one year from the date of the
closing of this offering. See "Management - Stock Option Plan,"
"Description of Capital Stock," "Underwriting" and "Shares Eligible for
Future Sale."
(4) Amounts are less than $1,000.
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<PAGE>
DILUTION
As of April 4, 1996, the Company had a net tangible book value of
$100 or approximately $1.00 per share based on 100 shares of Common Stock
outstanding. Net tangible book value per share represents the amount of the
Company's total tangible assets (total assets less intangible assets) less its
total liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the Private Placement and the sale of the
1,000,000 Units offered hereby (after deduction of underwriting discounts and
commissions and the estimated expenses of the Private Placement and this
offering) and the issuance of 1,149,900 shares of Common Stock in connection
with the Acquisition, the pro forma net tangible book value of the Company at
April 4, 1996 would have been $9,062,000, or approximately $4.22 per share,
representing an immediate increase in net tangible book value of approximately
$3.22 to existing stockholders and an immediate dilution to public investors of
approximately $1.28 per share from the $5.50 public offering price. Dilution per
share represents the difference between the initial public offering price per
share and the pro forma net tangible book value per share after the Private
Placement, this offering and the Acquisition.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C> <C>
Initial public offering price.................................................. $5.50 $5.50
-----
Net tangible book value per share before the Private Placement, this
offering and the Acquisition (1)....................................... $1.00
Increase per share attributable to new investors....................... 3.41
----
Pro forma net tangible book value per share after this offering and before
the Private Placement and the Acquisition...................................... 4.41 4.41
----- -----
Dilution per share to new investors before the Private Placement and the
Acquisition.................................................................... $1.09
=====
Decrease per share attributable to the Private Placement and the
Acquisition ................................................................... (.19)
-----
Pro forma net tangible book value per share after the Private Placement,
this offering and the Acquisition.............................................. 4.22
-----
Total dilution per share to new investors (2).................................. $1.28
=====
</TABLE>
- -----------------
(1) Net tangible book value per share is determined by dividing the
Company's net tangible book value (total tangible assets less total
liabilities) at April 4, 1996 by the number of shares of Common Stock
then outstanding.
(2) Dilution per share is determined by subtracting pro forma net tangible
book value per share after the Private Placement, this offering and the
Acquisition from the initial public offering price per share. The
foregoing table assumes no exercise of the Warrants, the Bridge
Warrants, the Private Warrants, the Acquisition Warrant, the warrants
contained in the Unit Purchase Option and the Over-Allotment Option or
450,000 shares of Common Stock reserved for issuance pursuant to options
to be granted upon the closing of this offering pursuant to the
Company's 1996 Stock Option Plan.
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<PAGE>
The following table sets forth on a pro forma basis as of April
4, 1996 the respective positions of the Company's existing stockholders and new
investors with respect to the number of shares of Common Stock purchased from
the Company, the total cash consideration paid and the average price per share
paid by the existing stockholders and by the new investors with respect to the
1,000,000 shares of Common Stock to be issued by the Company at an initial
public offering price of $5.50 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Existing Stockholders (A)..... 1,150,000 53.5% $4,500,100 45.0% $ 3.91
New investors................. 1,000,000 46.5% 5,500,000 55.0% $ 5.50
--------- ----- --------- -----
Total.......... 2,150,000 100.0% 10,000,100 100.0%
========= ====== ========== ======
</TABLE>
- -----------------
(A) Includes 1,149,900 shares of Common Stock to be issued to TDA in
connection with the Acquisition, the value of which is based on Cooper
Florida's historical book value at March 31, 1996 and includes the 100
shares of Common Stock issued in connection with the Company's initial
capitalization.
The foregoing table assumes no exercise of the Warrants, the
Bridge Warrants, the Private Warrants, the Acquisition Warrant, the Warrants
contained in the Unit Purchase Option, the Over-Allotment Option or 450,000
shares of Common Stock reserved for issuance pursuant to options to be granted
upon the closing of this offering, pursuant to the Company's 1996 Stock Option
Plan.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited pro forma condensed consolidated balance
sheet at April 4, 1996 gives effect to the Private Placement, this offering and
the Acquisition as though they occurred on that date. The pro forma condensed
consolidated balance sheet is derived from the historical audited balance sheet
of the Company at April 4, 1996 and the unaudited condensed financial statements
of Cooper Florida at March 31, 1996 included elsewhere herein and should be read
in conjunction with those financial statements and the notes thereto. The pro
forma condensed consolidated balance sheet is presented for illustrative
purposes only and, therefore, is not necessarily indicative of the financial
position of the consolidated entity had the Private Placement, this offering and
the Acquisition actually occurred on April 4, 1996.
The acquisition of Cooper Florida has been accounted for as the
combining of two entities under common control with the net assets of Cooper
Florida recorded at historical carryover values. Accordingly, this transaction
will not result in any revaluation of assets or the creation of goodwill. No
separate pro forma income statement data has been presented as the Company was
formed on April 4, 1996 and has no operations. Accordingly, Cooper Florida would
represent all of the combined historical operations.
-22-
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
Cooper
International Cooper
Group, Inc. Florida Pro Forma
ASSETS April 4, 1996 March 31, 1996 Adjustments Pro Forma
<S> <C> <C> <C> <C>
CURRENT ASSETS: $ 4,410(1)
Cash $ -- $ 77 152(2) $ 4,639
Accounts receivable - net -- 2,542 -- 2,542
Inventories -- 4,402 -- 4,402
Deferred tax asset -- 117 -- 117
Other current assets -- 307 -- 307
------- ------- ------- --------
Total current assets -- 7,445 4,562 12,007
IMPROVEMENTS AND
EQUIPMENT - Net -- 294 -- 294
------- ------- ------- --------
TOTAL $ -- $ 7,739 $ 4,562 $ 12,301
======= ======= ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 2,530 $ -- $ 2,530
Accrued expenses and other
current liabilities -- 308 -- 308
------- ------- ------- --------
Total current liabilities -- 2,838 -- 2,838
DUE TO TDA INDUSTRIES, INC
AND AFFILIATED COMPANIES
-- 374 (374)(4) --
6% NOTE PAYABLE TO TDA
INDUSTRIES, INC -- -- 374(4) 374
DEFERRED TAX LIABILITY -- 27 -- 27
------- ------- ------- --------
Total liabilities -- 3,239 -- 3,239
------- ------- ------- --------
STOCKHOLDERS' EQUITY:
Preferred shares -- -- -- --
Common shares -- 1 1(1) 2
1(3)
(1)(3)
Additional paid-in capital --(5) 5,323 4,409(1) 9,884
152(2)
Deficit -- (824) -- (824)
------- ------- ------- --------
-- 4,500 4,562 9,062
Less: stock subscription receivable --(5) -- -- --
------- ------- ------- --------
Total stockholders' equity -- 4,500 4,562 9,062
------- ------- ------- --------
TOTAL $ -- $ 7,739 $ 4,562 $ 12,301
======= ======= ======= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
-23-
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
1. Reflects the offering of 1,000,000 Units at an offering price of $5.50
per Unit, including the application of cash toward the aggregate
offering expenses of approximately $1,090,000 and the application of the
net proceeds therefrom. See "Use of Proceeds."
2. Reflects the proceeds from the Private Placement in June 1996 totaling
$200,000, net of approximately $48,000 of expenses, which is to be used
to pay a portion of the expenses related to this offering. See
"Description of Capital Stock."
3. Reflects the completion of the Acquisition. See "Certain Transactions."
4. Represents, as of March 31, 1996, the aggregate net amount due to TDA
from Cooper Florida in payment of an historical accumulation of auditing
fees and short-term cash advances. Upon the closing of this offering,
such aggregate amount will be converted into a 6% promissory note
payable on the first anniversary of the closing of this offering. See
"Certain Transactions."
5. Amounts are less than $1,000.
-24-
<PAGE>
SELECTED FINANCIAL INFORMATION
(in thousands, except share and per share data)
The following selected financial data presented below should be
read in conjunction with the Company's and Cooper Florida's Financial Statements
and the notes thereto and the unaudited pro forma condensed consolidated balance
sheet included elsewhere herein. The statement of operations data with respect
to the years ended June 30, 1995, 1994 and 1993 and the balance sheet data at
June 30, 1995 and 1994 are derived from, and are qualified by reference to,
Cooper Florida's financial statements, which have been audited by Deloitte &
Touche LLP, independent auditors, included elsewhere in this Prospectus. The
statement of operations data with respect to the years ended June 30, 1992 and
1991 and the balance sheet data at June 30, 1993, 1992 and 1991 are derived from
Cooper Florida's audited financial statements not included in this Prospectus.
The selected financial information presented below for the nine months ended
March 31, 1996 and 1995 and as of March 31, 1996 (Historical) are derived from
Cooper Florida's unaudited pro forma condensed financial statements and the
notes thereto appearing elsewhere herein, which include, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of such information for the interim periods
presented. Results of operations for the nine months ended March 31, 1996 are
not necessarily indicative of results to be expected for the year ended June 30,
1996. The selected financial information as of March 31, 1996 (Pro Forma) is
derived from the unaudited pro forma condensed consolidated balance sheet
appearing elsewhere herein. The following financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Unaudited Pro Forma Condensed Consolidated
Balance Sheet."
<TABLE>
<CAPTION>
(Part 1 of 2) Year Ended June 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- -------- --------
STATEMENT OF OPERATIONS DATA(1):
<S> <C> <C> <C> <C> <C>
Revenues ...................................... $ 29,547 $ 28,020 $ 30,900 $ 25,391 $ 24,329
Cost of goods sold ............................ 23,340 22,438 24,629 20,286 19,499
----------- ----------- ----------- -------- --------
Gross profit .................................. 6,207 5,582 6,271 5,105 4,830
Operating expenses ............................ 6,152 5,441 5,776 5,368 5,686
----------- ----------- ----------- -------- --------
Operating income (loss) ....................... 55 141 495 (263) (856)
Interest expense .............................. 10 3 9 20 36
Other income .................................. (5) (2) -- (4) (6)
----------- ----------- ----------- -------- --------
Income (loss) before provision for income taxes 50 140 486 (279) (886)
Provision (benefit) for income taxes .......... 19 (176) 182 (76) (254)
----------- ----------- ----------- -------- --------
Income (loss) before extraordinary item ....... 31 316 304 (203) (632)
Extraordinary item(4) ......................... -- -- (180) -- --
----------- ----------- ----------- -------- --------
Net income (loss) ............................. $ 31 $ 316 $ 484 $ (203) $ (632)
=========== =========== =========== ======== ========
Pro forma net income (loss) per share ......... $ .02
========
Pro forma weighted average number of shares
outstanding (2) ............................. 1,559,090
=========
</TABLE>
(Part 2 of 2)
Nine Months Ended
March 31,
------------------
1996 1995
------- --------
STATEMENT OF OPERATIONS DATA(1):
Revenues ...................................... $22,910 $ 22,140
Cost of goods sold ............................ 17,840 17,495
------- --------
Gross profit .................................. 5,070 4,645
Operating expenses ............................ 4,894 4,587
------- --------
Operating income (loss) ....................... 176 58
Interest expense .............................. -- 1
Other income .................................. -- (4)
------- --------
Income (loss) before provision for income taxes 176 61
Provision (benefit) for income taxes .......... 67 23
------- --------
Income (loss) before extraordinary item ....... 109 38
Extraordinary item(4) ......................... -- --
------- --------
Net income (loss) ............................. $ 109 $ 38
======= ========
Pro forma net income (loss) per share ......... $ .07 $ .02
======= ========
Pro forma weighted average number of shares
outstanding (2) ............................. 1,559,090 1,559,090
========= =========
<TABLE>
<CAPTION>
Year Ended June 30, March 31,
------------------------------------------ ------------------------
1995 1994 1993 1992 1991 Historical ProForma(3)
------ ------ ------ ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Working capital ......... $4,668 $4,815 $4,846 $4,343 $4,273 $4,607 $ 9,169
Total assets ............ 7,195 6,807 6,866 6,736 7,290 7,739 12,301
Long-term debt .......... 152 376 555 998 1,554 374 374
Stockholders' equity..... 4,755 4,705 4,646 3,804 3,567 4,500 9,062
</TABLE>
- ----------------------------------
(1) Historical operating and balance sheet data was derived from the
financial statements of Cooper Florida, because the Company was
organized in April 1996 and has conducted no business activities to
date.
(2) The pro forma weighted average number of shares outstanding includes the
100 shares of Common Stock issued in connection with the Company's
initial capitalization, 1,149,900 shares to be issued to TDA in
connection with the Acquisition, and the dilutive effect of the
Acquisition Warrant and the Private Warrants. See "Certain Transactions"
and the Financial Statements and the notes thereto.
(3) Reflects the issuance of the Bridge Warrants and the Private Warrants in
the Private Placement, the public offering of 1,000,000 Units at an
assumed initial public offering price of $5.50 per Unit, the application
of the net proceeds therefrom and the completion of the Acquisition. See
"Unaudited Pro Forma Condensed Consolidated Balance Sheet,"
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Certain Transactions" and the Financial Statements and
the notes thereto.
(4) Represents utilization of net operating loss carryover.
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
in this Prospectus.
INTRODUCTION
The Company was recently organized to acquire, integrate and
operate seasoned companies operating in the floorcoverings industry.
Simultaneously with the closing of this offering, the Company will acquire from
TDA all of the issued and outstanding capital stock of Cooper Florida for
consideration consisting of 1,149,900 shares of Common Stock and the Acquisition
Warrant. Cooper Florida, founded in 1948, is engaged in the wholesale
distribution of carpet, wood, laminate, ceramic and vinyl floorcoverings and
padding and accessories throughout Florida, portions of Georgia and Alabama and,
to a lesser extent, the Caribbean. Upon the consummation of the Acquisition,
Cooper Florida will become a wholly-owned subsidiary of the Company and will
constitute the sole business operations of the Company until such time, if any,
as the Company consummates additional acquisitions. See "Business" and "Certain
Transactions."
RESULTS OF OPERATIONS OF COOPER FLORIDA
Nine Month Period Ended March 31, 1996 Compared to Nine Month Period Ended March
31, 1995
Revenues of Cooper Florida increased by approximately $770,000
(3.5%) during the nine-month period ended March 31, 1996 compared to the same
period in 1995. This increase may be attributed to the continued expansion of
Cooper Florida's market areas, increased sales of its ceramic tile
(approximately $760,000, 21.9%) and wood (approximately $208,000, 14.3%)
floorcovering lines and the introduction of new product lines, offset by the
loss of the Kentile, Inc., ("Kentile") vinyl tile line. In June 1995, Cooper
Florida entered into a distribution agreement for the exclusive right to
distribute the Shawmark carpet line in Florida and portions of Alabama and
Georgia. During the nine months ended March 31, 1996, sales of the Shawmark
carpet line accounted for approximately $3.5 million (15.3%) of total revenues.
Prior to August 1995, Cooper Florida distributed vinyl tile manufactured by
Kentile. In August 1995, Kentile went out of business and Cooper Florida
discontinued distributing its products. Sales of Kentile products accounted for
approximately $2,160,000 (9.8%) of total revenues during the nine-month period
ended March 31, 1995.
Cost of goods sold increased during the nine-month period ended
March 31, 1996 as compared to the same period in 1995, but at a lesser rate than
the increase in revenues between such periods. Accordingly, cost of goods sold
as a percentage of revenues decreased to 77.9% during the nine-month period
ended March 31, 1996 from 79% during the same period in 1995, and gross profit
as a percentage of revenues increased to 22.1% during the nine-month period
ended March 31, 1996 from 21% during the same period in 1995. This increase in
gross profit margin may be attributed primarily to the increase in the 1996
period in sales of Cooper Florida's ceramic tile and wood flooring lines which
carry higher gross profit margins.
Operating expenses increased by approximately $307,000 (6.7%)
during the nine-month period ended March 31, 1996 as compared to the same period
in 1995. The principal components comprising the increase in operating expenses
were increased payroll and related costs ($148,000), rent and warehouse expenses
($67,000), insurance ($39,000), travel ($23,000) and office expense ($17,000).
Operating expenses as a percentage of
-26-
<PAGE>
revenues were 21.4% during the nine-month period ended March 31, 1996 compared
to 20.7% during the same period in 1995.
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994
Revenues of Cooper Florida increased by approximately $1,527,000
(5.4%) during the fiscal year ended June 30, 1995 compared to the fiscal year
ended June 30, 1994. This increase may be attributed primarily to the expansion
of Cooper Florida's market areas and the increase in sales of its ceramic tile
(approximately $2,214,000, 88.2%) and wood (approximately $259,000, 15.1%)
floorcovering lines offset by the decline in sales of the Congoleum Corporation
("Congoleum") vinyl sheet floorcovering line (approximately $1,960,000).
Cost of goods sold increased during the fiscal year ended June
30, 1995, as compared to the fiscal year ended June 30, 1994, but at a lesser
rate than the increase in revenues between such fiscal years. Accordingly, cost
of goods sold as a percentage of revenues decreased to 79% during the fiscal
year ended June 30, 1995 from 80.1% during the fiscal year ended June 30, 1994,
and gross profit as a percentage of revenues increased to 21% during the fiscal
year ended June 30, 1995 from 19.9% during the fiscal year ended June 30, 1994.
This increase in gross profit margin may be attributed primarily to the increase
in the 1995 period in sales of Cooper Florida's ceramic tile and wood flooring
lines which carry higher gross profit margins.
Operating expenses increased by approximately $711,000 (13.1%)
during the fiscal year ended June 30, 1995 as compared to the fiscal year ended
June 30, 1994. The principal components comprising the increase in operating
expenses were increased payroll and related costs ($357,000), rent and warehouse
expenses ($194,000), auto expense ($56,000), insurance ($9,000), travel
($27,000) and office expense ($15,000). Operating expenses as a percentage of
revenues were 20.8% during the fiscal year ended June 30, 1995, as compared to
19.4% during the same period in 1994.
The Company adopted SFAS No. 109 as of July 1, 1993. The
cumulative effect of this change in accounting for income taxes was to record a
deferred tax asset of $211,230 which amount is recorded as a reduction of the
provision for income taxes in fiscal 1994.
Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30,1993
Revenues of Cooper Florida decreased by approximately $2,880,000
(9.3%) during the fiscal year ended June 30, 1994 compared to the fiscal year
ended June 30, 1993. This decrease may be attributed to the softening of market
conditions in Cooper Florida's South Florida market area after the positive
impact of Hurricane Andrew subsequent to August 1992 and the decision in January
1994 to discontinue the distribution of the Congoleum vinyl sheet floorcovering
line. Sales of the Congoleum vinyl sheet floorcovering line accounted for
approximately $1,960,000 (7%) and $4,540,000 (14.7%) of Cooper Florida's
revenues during the fiscal years 1994 and 1993, respectively.
Cost of goods sold decreased during the fiscal year ended June
30, 1994 as compared to the fiscal year ended June 30, 1993, but at a lesser
rate than the decease in revenues between such fiscal years. Accordingly, cost
of goods sold as a percentage of revenues increased to 80.1% during the fiscal
year ended June 30, 1994 from 79.7% during the fiscal year ended June 30, 1993,
and gross profit as a percentage of revenues decreased to 19.9% during the
fiscal year ended June 30, 1994 from 20.3% during the fiscal year ended June 30,
1993.
-27-
<PAGE>
Operating expenses decreased by approximately $335,000 (5.8%)
during the fiscal year ended June 30, 1994, as compared to the fiscal year ended
June 30, 1993, but at a lesser rate than the decline in revenues. The principal
components comprising the decrease in operating expenses were a decrease in rent
($171,000) resulting primarily from an abatement of rent in fiscal 1994, reduced
payroll and administrative expenses ($51,000), insurance ($61,000), the
contribution to the profit sharing plan ($32,000), professional fees ($24,000),
shipping expenses ($17,000) and telephone ($19,000). Operating expenses as a
percentage of revenues were 19.4% during the fiscal year ended June 30 1994
compared to 18.7% during the same period in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company
Prior to the consummation of the Private Placement, the Company
borrowed $15,275 from TDA in order to pay for the expenses of the Private
Placement and a portion of the professional fees and other expenses related to
this offering.
In June 1996, the Company completed the Private Placement, which
consisted of the offer and sale of the Bridge Warrants to acquire 2,000,000
shares of Common Stock and the Private Warrants to acquire 250,000 shares of
Common Stock. The net proceeds of the Private Placement, which were
approximately $152,000, are being utilized by the Company to pay a portion of
the professional fees and other expenses related to this offering.
The Company anticipates that it will derive revenues primarily
from the operations of Cooper Florida and other operating companies which may be
acquired in the future.
The Company currently estimates that the net proceeds of this
offering will be sufficient to fund its working capital needs and planned
operations, including potential acquisitions, if any, for at least twelve (12)
months from the date of this Prospectus. The net proceeds may be sufficient for
a greater or lesser period of time depending on the number of acquisitions, if
any, that the Company consummates during the next twelve (12) months and the
portion of the purchase price of such acquisitions paid in cash. In addition,
the Company may require additional financing prior to or following such 12-month
period if Cooper Florida suffers losses, negative cash flow, or if the Company
effects the acquisition of a business that subsequently suffers significant
losses or negative cash flow. There can be no assurance that the Company will be
able to obtain additional financing on terms acceptable to the Company or at
all. In the event additional financing is unavailable to the Company, the
Company may be materially adversely affected.
Cooper Florida
Cooper Florida has historically financed its operations through
operating cash flow and support from its parent, TDA, or affiliates of TDA.
Cooper Florida's working capital was approximately $4,607,000 at
March 31, 1996 compared to $4,668,000 at June 30, 1995. At March 31, 1996,
Cooper Florida's current ratio was 2.62 to 1 compared to 3.06 to 1 at June 30,
1995.
During the fiscal year ended June 30, 1995, cash flows used in
operations approximated $79,000. Such amount consisted primarily of increased
levels of accounts receivable ($94,000), inventories ($203,000) and other
current assets ($208,000), a net reduction of amounts due to parent and
affiliated companies ($224,000), offset
-28-
<PAGE>
by increased levels of trade accounts payables ($563,000). During the nine
months ended March 31, 1996, cash flow provided by operations approximated
$287,000. Such amount consisted primarily of net income ($109,000), increased
levels of trade accounts payables ($582,000), an increase in amounts due to
parent and affiliated companies ($222,000), offset by an increase in inventories
($729,000) and accounts receivable ($93,000).
Capital expenditures approximated $36,000 and $65,000 during the
fiscal year ended June 30, 1995 and the nine months ended March 31, 1996,
respectively. The management of Cooper Florida does not anticipate a significant
increase in such expenditures in the next twelve months.
In December 1995, Cooper Florida negotiated but has not yet
implemented a line of credit with Chemical Bank in the aggregate amount of $1
million for direct borrowing for working capital purposes. If implemented, the
credit facility will be collateralized by Cooper Florida's trade accounts
receivables and inventories and will be guaranteed by TDA. Cooper Florida has
not yet borrowed any funds under this credit facility.
Cooper Florida believes that its existing sources of liquidity,
including the availability under the line of credit, anticipated cash flow and a
portion of the net proceeds of the offering will be adequate to sustain its
normal operations and satisfy its current working capital and capital
expenditure requirements.
IMPACT OF INFLATION
General inflation in the economy has driven the operating
expenses of many businesses higher, and accordingly, Cooper Florida has
increased salaries and incurred higher prices for supplies, good and services.
While Cooper Florida is subject to inflation as described above, both Cooper
Florida and the Company believe that inflation currently does not have a
material effect on Cooper Florida's operating results, but there can be no
assurance that this will continue to be so in the future.
ACCOUNTING CHANGES
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. SFAS No. 121 is effective for
financial statements for fiscal years beginning after December 15, 1995;
therefore, the Company will adopt SFAS No. 121 in the first quarter of fiscal
1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. The Company
will account for stock-based compensation awards under the provisions of
Accounting Principles Board ("APB") Opinion No. 25, as permitted by SFAS No.
123. In accordance with SFAS No. 123, beginning in the fiscal year ended 1997,
the Company will make pro forma disclosures relative to stock-based compensation
as part of the accompanying footnotes to the financial statements.
-29-
<PAGE>
BUSINESS
GENERAL
The Company was recently organized to acquire, integrate and
operate seasoned companies operating in the floorcoverings industry.
Simultaneously with the closing of this offering, the Company will acquire from
TDA all of the issued and outstanding capital stock of Cooper Florida for
consideration consisting of 1,149,900 shares of Common Stock and the Acquisition
Warrant, which is exercisable to acquire 250,000 shares of Common Stock at an
exercise price of $1.00 per share. See "Certain Transactions" and "Description
of Capital Stock - Other Outstanding Warrants." Cooper Florida, founded in 1948,
is engaged in the wholesale distribution of carpet, wood, laminate, ceramic and
vinyl floorcoverings and padding and accessories throughout Florida, portions of
Georgia and Alabama and, to a lesser extent, the Caribbean. Upon the
consummation of the Acquisition, Cooper Florida will become a wholly-owned
subsidiary of the Company and will constitute the sole operating business of the
Company until such time, if any, as the Company consummates additional
acquisitions. See "Certain Transactions."
To date, the Company's activities have consisted solely of
negotiating the Acquisition, completing the Private Placement and engaging in
organizational activities. The Company anticipates that it will derive revenues
primarily through income generated from the operations of Cooper Florida and
operating companies which may be acquired in the future.
STRATEGY
The Company's strategy is to acquire, integrate and operate
seasoned companies operating in the floorcoverings industry and to build an
integrated company with the ability to source products domestically and
internationally and to distribute products throughout North America and the
Caribbean on a wholesale basis and as agent for various foreign manufacturers.
The Company intends to provide expansion capital, if necessary, and
administrative and management services to acquired companies, including Cooper
Florida, in order to exploit the growth potential which management of the
Company perceives in the floorcoverings industry and to assist such acquired
companies to penetrate new markets. Although the Company does not currently have
any agreements, arrangements or commitments in place with respect to any
proposed acquisitions, other than the Acquisition, it believes that there are a
number of potential acquisition candidates that may meet its criteria. While the
Company intends to seek out prospective acquisition candidates in businesses
that complement or are otherwise related to the business of Cooper Florida, the
Company does not intend to restrict itself to any one particular industry
segment and may attempt to acquire companies in industries unrelated to the core
business of Cooper Florida. The Company anticipates that it will finance future
acquisitions, if any, through a combination of cash (including a substantial
portion of the net proceeds of this offering), issuances of shares of capital
stock of the Company, and additional equity or debt financings. There can be no
assurance that the Company will be able to obtain additional equity or debt
financing on terms acceptable to the Company or at all. The Company has and will
continue to identify potential acquisition candidates through the industry
contacts of the management of the Company and Cooper Florida, as well as through
TDA and general business sources. See "Certain Transactions."
-30-
<PAGE>
BUSINESS OF COOPER FLORIDA
General
Cooper Florida, founded in 1948, is engaged in the wholesale
distribution of carpet, wood, ceramic tile and vinyl floorcoverings and padding
and accessories throughout Florida, portions of Georgia and Alabama and, to a
lesser extent, the Caribbean. Cooper Florida operates from distribution
facilities in Miami, Orlando, Jacksonville and Tampa, Florida, and sells to more
than 2,000 customers, primarily floorcovering retailers. Cooper Florida
distributes brand name products such as the Shaw and Shawmark lines of carpets,
Mohawk carpets and hardwood floorcoverings manufactured by the Anderson division
of Standard Plywood, Inc. ("Anderson"). Cooper Florida has its own direct sales
force and uses its own fleet of vehicles to deliver its products to customers.
In recent years, in response to the growing practice of the major carpet
manufacturers of bypassing the traditional wholesaler/distributor to sell
directly to the floorcovering retailer, Cooper Florida has diversified its
product mix in order to become less dependent on carpet sales. As part of this
diversification strategy, the Company added ceramic tile, hardwood flooring and
laminate flooring products to its product line. Cooper Florida recently
established the Cooper International division which acts as an agent for ceramic
tile manufacturers located in Italy and other foreign countries and creates
marketing programs and develops wholesale distribution networks through which
such foreign manufacturers' ceramic tile lines are sold to some of the larger
wholesale floorcoverings distributors in the United States and Canada.
Industry Overview
The floorcovering industry includes carpet (indoor and outdoor),
resilient floorcoverings, including vinyl tile and vinyl sheet products, wood,
laminate, and ceramic floorcoverings and stone (i.e. marble, granite and
others). Cooper Florida distributes all of these types of floorcoverings, except
for stone, as well as padding and accessories. Trends in the floorcoverings
industry are directly related to the trends of the construction and home
improvement industries. According to the Home Improvement Research Institute,
sales of home improvement products to consumers and professional builders are
rising and were expected to reach $131 billion in the United States during
calendar year 1995 and are expected to reach $138.6 billion in 1996 and $161.3
billion by 1999.
According to Floor Covering Weekly, a trade newspaper, sales of
floorcoverings in the United States reached approximately $14.5 billion during
1995. Of this amount, approximately $9.9 billion was for carpet, approximately
$951.3 million was for hardwood, approximately $1.3 billion was for ceramic
(including both floor and wall tiles) and approximately $2.3 billion was for
resilient floorcoverings.
Strategy
Beginning in July 1990, Cooper Florida commenced a program to
diversify and expand its product mix by adding to its carpet and vinyl
floorcovering product lines ceramic, hardwood and laminate product lines.
Cooper's strategic plan is to aggressively expand its non-carpet product lines
and to maximize the results of operations of its carpet business and augment its
offerings as opportunities arise. The key elements of Cooper's strategy are as
follows:
* Realign and Diversify Product Mix. During Cooper
Florida's fiscal year ended June 30, 1995, 60.8% of its
revenues consisted of sales of carpet, padding and
related accessories and 39.2% consisted of other
floorcoverings sales. Cooper Florida intends to continue
to diversify its product mix by attempting to sell
non-carpet floorcoverings to its current base of
customers. Additionally, Cooper Florida intends to
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<PAGE>
aggressively seek out non-carpet floorcovering lines,
which are economical, well designed, durable and easy to
install.
* Expand Product Offerings and Maintain and Expand
Relationships with Manufacturers. Cooper Florida intends
to expand its product offerings by aggressively seeking
out relationships with manufacturers of floorcoverings.
For instance, in June 1995, Cooper Florida entered into
a distribution agreement with Shaw, pursuant to which
Cooper Florida was granted the exclusive right to
distribute Shaw's Shawmark carpet line in Florida and
portions of Alabama and Georgia, and in March 1996
Cooper Florida entered into a distribution agreement
with ABET, Inc., the manufacturer of Parqcolor laminate
floorcovering pursuant to which Cooper Florida was
granted the exclusive right to distribute Parqcolor
laminate floorcovering throughout Florida and in
portions of Georgia and Alabama. By closely aligning
itself with manufacturers, Cooper Florida believes that
it can maximize its ability to purchase such
manufacturers' products on more favorable terms by
seeking and obtaining cost concessions for advertising
and marketing promotions, product samples and expanded
and more flexible credit terms.
* Improve Profit Margin. Through internal growth and
potential acquisitions, Cooper Florida will seek to
expand its sales volume, particularly with certain
manufacturers, in order to benefit from periodic as well
as annual manufacturers' volume discounts which are
based on quantity purchases which can favorably impact
Cooper Florida's profit margins. In addition, Cooper
Florida will seek to increase its sales of ceramic,
laminate and hardwood floorcoverings, which Cooper
Florida believes carry a higher margin of profit than
carpet and vinyl floorcoverings.
* Upgrade Technology. Cooper Florida intends to continue
to upgrade and improve its internal inventory systems
and procedures, materials handling and distribution
systems to provide continuing improved services to its
customers and achieve greater efficiencies in its
operations.
Products
Carpet and Related Accessories. Although Cooper Florida is
currently diversifying its product mix, carpet, padding and related accessories
still account for a major portion of Cooper Florida's sales. For the fiscal year
ended June 30, 1995 and for the nine month period ended March 31, 1996, sales of
carpet, padding and related accessories accounted for approximately $18 million
(60.8%) and $15.1 million (66%), respectively, of Cooper Florida's total
revenues during such periods. Cooper Florida believes that the wholesale carpet
distribution segment of its business will continue to constitute a major portion
of total revenues for the near future.
The Cooper Florida's carpet product lines include Shaw, Shawmark
and Mohawk carpeting. In June 1995, Cooper Florida entered into a distribution
agreement with Shaw pursuant to which Cooper Florida was granted the exclusive
right to distribute Shaw's Shawmark carpet line in Florida and portions of
Alabama and Georgia. The agreement is of unspecified duration and is terminable
upon sixty days notice by either party thereto. During the nine months ended
March 31, 1996, sales of the Shawmark carpet line accounted for $3.5 million
(15.3%) of total revenues of Cooper Florida.
Ceramic Tile. In order to diversify its product mix, Cooper
Florida began offering ceramic tile in fiscal 1991. Ceramic tile is Cooper's
fastest growing product line. For the fiscal year ended June 30, 1995 and for
the nine month period ended March 31, 1996, ceramic tile accounted for
approximately $4.7 million (16%) and $4.2
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<PAGE>
million (18.3%), respectively, of total revenues. Cooper Florida offers over
forty styles of ceramic tile. During fiscal year 1995, Sears Roebuck and Company
selected Cooper Florida's ceramic tile line to be offered, on an experimental
basis, in approximately 35 of its stores located in Florida. Presently, Cooper
Florida is the only distributor of ceramic tile to such stores. The level of
sales of Cooper Florida's ceramic tile to Sears is currently insignificant.
Cooper Florida recently established the Cooper International
division which acts as an agent for ceramic tile manufacturers located in Italy
and other foreign countries and creates marketing programs and develops
wholesale distribution networks through which such foreign manufacturers'
ceramic tile lines are sold to some of the larger wholesale floorcoverings
distributors in the United States and Canada.
Vinyl Floorcoverings. Cooper Florida distributes vinyl sheet
floorcovering manufactured by Colmar, Inc. ("Colmar"). Prior to August 1995,
Cooper Florida distributed vinyl tile manufactured by Kentile. Sales of Kentile
products accounted for approximately $3 million (10.2%) of total revenues during
the fiscal year ended June 30, 1995. In August 1995, Kentile went out of
business and Cooper Florida discontinued distributing its products. Although
vinyl floorcovering does not currently constitute a major portion of Cooper
Florida's sales, Cooper Florida is aggressively seeking a new supplier of vinyl
floorcovering. Sales of vinyl floorcoverings accounted for approximately $4.1
million (13.9%) and $1.6 million (7.0%), respectively, of total revenues during
the fiscal year ended June 30, 1995 and during the nine month period ended March
31, 1996.
Cooper Florida distributed vinyl sheet floorcoverings
manufactured by Congoleum, the second largest manufacturer of vinyl flooring in
the United States, until January 1994. Sales of Congoleum's products accounted
for $2 million (7.0%) of total revenues during the fiscal year ended June 30,
1994. In January 1994, Cooper Florida discontinued its distribution of the
Congoleum vinyl sheet line and replaced it with the Colmar line. Cooper Florida
is the exclusive distributor in Florida and portions of Georgia and Alabama for
Colmar, a relatively new manufacturer of vinyl sheet floorcoverings. Sales of
Colmar products accounted for approximately $1.1 million of total revenues
during fiscal year 1995 and $900,000 of total revenues during the nine months
ended March 31, 1996.
Hardwood Floorcoverings. Cooper Florida distributes lines of
hardwood flooring manufactured by Anderson and, on an exclusive basis in Florida
and portions of Georgia and Alabama, Trimex, Inc., the manufacturer of Trevo
hardwood floorcoverings. Hardwood flooring sales accounted for $2 million (6.7%)
and $1.7 million (7.3%), respectively, of total revenues during Cooper's fiscal
year ended June 30, 1995 and during the nine months ended March 31, 1996.
High Density Laminate. In April 1996, Cooper Florida entered into
an agreement with ABET, Inc. to distribute, on an exclusive basis throughout
Florida and portions of Georgia and Alabama, high density laminate
floorcovering. High density laminate is a floorcovering product that looks like
wood but is a laminate product which is more durable than wood and is a
relatively new addition to the floorcoverings industry in the United States.
Cooper Florida believes that sales of high density laminate will be a product
category which will grow in the future.
Miscellaneous Products. Cooper Florida also sells accessories and
certain supplies necessary to install carpet, ceramic tile, vinyl and hardwood
floorcoverings, such as adhesives, tack strip and tools. During the fiscal year
ended June 30, 1995 and the nine month period ended March 31, 1996, sales of
such products accounted for approximately $800,000 (2.7%) and $300,000 (1.3%) of
total revenues, respectively.
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<PAGE>
Customers, Sales and Marketing
As of March 31, 1996, Cooper Florida had more than 2,000
customers located primarily throughout Florida as well as in southern Georgia,
Alabama and parts of the Caribbean. Such customers generally purchase Cooper
Florida's products for resale to the household consumer end-user. Cooper
Florida's customers have traditionally included small to medium size
floorcovering retailers, as well as multi-store floorcovering chains, which sell
to and install products for their retail customers. Cooper Florida's sales are
not concentrated with a small number of customers. As of March 31, 1996, no
single customer accounted for more than 5% of Cooper Florida's total sales.
In addition to Cooper Florida's traditional retail store customer
base, Cooper Florida's Cooper International division, acting as an agent for
certain foreign ceramic tile manufacturers, has, within the last year, entered
into sales and marketing programs to market ceramic tile products to some of the
larger wholesale floorcovering distributors throughout the United States and
Canada.
Recently, larger chain stores have begun carrying products
offered by Cooper Florida. During fiscal year 1995, Sears Roebuck and Company
selected Cooper Florida's ceramic tile line to be offered in approximately 35 of
its stores in Florida. Presently, Cooper Florida is the only distributor of
ceramic tile to such stores.
Backlog
Cooper Florida's operations are conducted primarily through
short-term order and shipment schedules. Immediate delivery requirements and the
nature of Cooper Florida's business generally preclude any significant backlog.
Backlog consists only of products on back order from a manufacturer or a
customer order not scheduled for immediate delivery, and is not material.
COMPETITION
The floorcovering distribution business is extremely competitive.
Cooper Florida believes that the principal areas of competition are price,
customer service, quality and beauty of the products. Cooper Florida competes
with other distributors of floorcovering products, as well as with those
manufacturers of floorcoverings products which sell directly to retailers as
well as to wholesale distributors. Certain of Cooper Florida's competitors have
greater financial, personnel and inventory resources than Cooper Florida. There
can be no assurance that Cooper Florida will compete effectively with such
competitors or that such competitors will not distribute products which are
superior to Cooper Florida's, have better price or quality or performance
characteristics, or which achieve greater market penetration.
With respect to its acquisition strategy, the Company may
encounter competition from other entities having a business acquisition strategy
similar to that of the Company. Many of these entities, including venture
capital partnerships and corporations, blind pool companies, large industrial
and financial institutions, small business investment companies and wealthy
individuals, are well-established and have extensive experience in connection
with identifying and effecting acquisitions directly or through affiliates. Many
of these entities possess greater financial, technical, personnel and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. The Company's financial resources will
be limited in comparison to those of many of its potential competitors.
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<PAGE>
EMPLOYEES
As of July 1, 1996, Cooper Florida employed 121 full-time
persons, of which 6 were management personnel, 35 were in sales, 35 were in
customer service, and 45 were truck drivers and warehouse personnel. None of
Cooper Florida's employees are represented by a union. Cooper Florida considers
it employee relations to be satisfactory.
FACILITIES
Cooper Florida's corporate headquarters are maintained at its
facility in Orlando, Florida. Cooper Florida leases four facilities located in
Florida, which are described below:
APPROXIMATE ANNUAL
LOCATIONS SQUARE FOOTAGE BASE RENT PRINCIPAL USE
- --------- -------------- --------- -------------
Miami 44,000 $165,000 Warehouse and distribution facility;
showroom
Orlando 98,000 $225,500 Corporate headquarters; warehouse and
distribution facility; showroom
Jacksonville 27,000 $49,900 Warehouse and distribution facility;
showroom
Tampa 13,000 $39,600 Warehouse and distribution facility
Prior to this offering, the facilities located in Orlando (the
"Orlando Facility") and Jacksonville (the "Jacksonville Facility") were leased
by Cooper Florida from Jay Cooper, the President of the Company and the Chairman
of Cooper Florida, on a month-to-month basis. Rent expense for the Orlando
Facility and the Jacksonville Facility aggregated approximately $291,000 and
$288,000 in the fiscal years ended June 30, 1995 and 1994, respectively. Upon
the closing of this offering, Cooper Florida will enter into two five-year
leases with Mr. Cooper pursuant to which it will rent the Orlando Facility and
the Jacksonville Facility from Mr. Cooper at base rents of $225,500 and $49,900
per year, respectively, which Cooper Florida and the Company believe are at or
less than market rate rents for such facilities. Such leases will continue at
such base rents until January 1, 1999, at which time a fair market rental rate
will be determined and, based on such determination, the base rent will be
increased to such fair market rate but not to exceed an increase of ten (10)
percent. Such leases will be terminable by Cooper Florida upon six (6) months
prior written notice. See "Certain Transactions."
The facility located in Miami (the "Miami Facility") is leased by
Cooper Florida from N.W. 74th Avenue Associates, a partnership which is equally
owned by Jay Cooper and by Cooper Holding, Inc., a wholly-owned subsidiary of
TDA. The lease is a fifteen year lease which terminates in December 2008. Rent
expense for the Miami Facility aggregated approximately $197,000 (net of
sublease income of approximately $70,000) during the fiscal year ended June 30,
1995. Cooper Florida and the Company believe that the rent for the Miami
Facility is market rate rent. See "Certain Transactions."
LEGAL PROCEEDINGS
Neither the Company nor Cooper Florida are subject to any
material legal proceedings.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's and Cooper Florida's executive officers, directors
and director nominees are as follows:
NAME AGE POSITION
- ---- --- --------
Douglas P. Fields 54 Chief Executive Officer and Chairman of the Board
of Directors of the Company and Chief Executive
Officer and a Director of Cooper Florida
Frederick M. Friedman 55 Executive Vice President, Chief Financial Officer,
Treasurer, Secretary and Director of the Company
and Vice President, Treasurer and Secretary of
Cooper Florida
Jay Cooper 57 President and Director Nominee* of the Company and
Chairman of the Board of Directors of Cooper
Florida
James C. Yeager 39 Executive Vice President of the Company and
President of Cooper Florida
Paul D. Finkelstein 53 Director Nominee of the Company*
George Skakel III 45 Director Nominee of the Company*
John E. Smircina 65 Director Nominee of the Company*
- -------------
* Messrs. Cooper, Finkelstein, Skakel and Smircina have been elected and
have agreed to serve as directors of the Company commencing upon the
closing of this offering.
Douglas P. Fields, a co-founder of the Company, has been Chairman
of the Board of Directors and Chief Executive Officer of the Company since
inception. For more than the past five (5) years, Mr. Fields has been the
Chairman of the Board of Directors, President and Chief Executive Officer of TDA
and Chief Executive Officer and a director of each of its subsidiaries
(including Cooper Florida). TDA is a holding company whose operating
subsidiaries are primarily engaged in the wholesale distribution of building
supplies and home furnishings products, the manufacture and distribution of a
variety of electrical devices, the operation of an indoor tennis facility and
the management of real estate. Mr. Fields received a Master's degree in Business
Administration from the Harvard University Graduate School of Business
Administration in 1966 and a B.S. degree from Fordham University in 1964.
Frederick M. Friedman, a co-founder of the Company, has been
Executive Vice President, Chief Financial Officer, Treasurer, Secretary and a
director of the Company since inception. For more than the past five (5) years,
Mr. Friedman has been Executive Vice President, Treasurer, Secretary and a
director of TDA and
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<PAGE>
Vice President, Treasurer, Secretary and a director of each of its subsidiaries
(including Cooper Florida). Mr. Friedman received a B.S. degree in Economics
from The Wharton School of the University of Pennsylvania in 1962.
Jay Cooper, has been the President of the Company since June
1996. Mr. Cooper has been the Chairman of the Board of Directors of Cooper
Florida since March 1996. Prior thereto, since 1967, Mr. Cooper was the
President of Cooper Florida.
James C. Yeager has been an Executive Vice President of the
Company since June 1996. Mr. Yeager has been the President of Cooper Florida
since March, 1996. From March 1995 to March 1996, Mr. Yeager was Vice President
of Cooper Florida. Prior thereto, from July 1990 to March 1995, he was a
Corporate Manager/Branch Manager of Cooper Florida. Prior to 1990, Mr. Yeager
was a Territory Manager for J.J. Haines Company Inc., a floorcoverings
wholesaler.
Paul D. Finkelstein has been the President and a director of the
Regis Corporation, an operator of beauty salons and a cosmetic sales company,
since 1987. Mr. Finkelstein received a Master's degree in Business
Administration from the Harvard University Graduate School of Business
Administration in 1966 and a B.S. degree in Economics from The Wharton School of
the University of Pennsylvania in 1964.
George Skakel III has been the President and sole stockholder of
ABP Acquisition Corp. since 1986. ABP Acquisition Corp. invests in securities of
companies. Mr. Skakel received a Master's degree in Business Administration from
the Harvard University Graduate School of Business Administration in 1978 and a
B.A. degree in Economics from The University of Delaware in 1973.
John E. Smircina has been a partner in the law firm of Wade,
Hughes and Smircina, P.C. since April 1993. Prior thereto, from 1985 to March
1993, Mr. Smircina was self-employed as a business and financial consultant.
Since 1968, Mr. Smircina has been a Director of TDA. Mr. Smircina received a
Master's degree in Industrial Management from Ohio University in 1954 and a B.A.
degree in Political Science from Ohio University in 1953.
In 1976, in connection with certain transactions which occurred
in 1971 and 1973, Messrs. Fields and Friedman and TDA, then a public company,
without admitting or denying the allegations set forth in a civil action
commenced by the Commission, consented to a final judgment of permanent
injunction which, in summary, provided that Messrs. Fields and Friedman and TDA
were permanently enjoined from violating the registration, reporting, proxy and
the anti-fraud provisions of the federal securities laws and rules.
Additionally, Messrs Fields and Friedman agreed to certain ancillary relief
which included their agreements, for a period of two years, to resign as
directors of TDA and a publicly held subsidiary of TDA and not to vote any
securities of TDA and the subsidiary owned or controlled by them. Based upon
facts related to the injunctive action, in 1979, Messrs. Fields and Friedman
were found guilty of conspiring to violate the federal securities laws and
making false statements in filings made with the Commission. Messrs. Fields and
Friedman were sentenced to six and three months incarceration, respectively, and
both were fined. Also, on facts related to the injunctive action, Mr. Friedman
was found guilty of mail and wire frauds. Mr. Friedman was sentenced to one
month incarceration on each of three counts.
Directors of the Company serve until the next annual meeting of
stockholders of the Company and until their successors are elected and duly
qualified. Officers of the Company will be elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.
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<PAGE>
The Board of Directors has established an Executive Committee
which is composed of Douglas P. Fields and Frederick M. Friedman. The Board of
Directors of the Company can delegate to the Executive Committee all of the
powers and authority (other than those reserved by statute to the full Board of
Directors) of the full Board of Directors in the management of the business and
affairs of the Company.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive compensation for their
services as directors; however, the Board of Directors may authorize the payment
of compensation to directors for their attendance at regular and special
meetings of the Board and for attendance at meetings of committees of the Board
as is customary for similar companies. Directors will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
the Company. Upon the closing of this offering, Paul D. Finkelstein, George
Skakel III and John E. Smircina, director nominees of the Company, will each be
granted options to purchase 10,000 shares of Common Stock pursuant to the
Company's 1996 Stock Option Plan. Such options will have a term of ten years and
will be exercisable at the initial public offering price of the Units. All of
such options will vest on the first anniversary of the date of grant. See " --
Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
compensation of Jay Cooper, Cooper Florida's Chairman of the Board of Directors,
and James C. Yeager, Cooper Florida's President, for Cooper Florida's fiscal
year ended June 30, 1995. Upon the closing of this offering, Cooper Florida will
be a wholly-owned subsidiary of the Company. No officer of Cooper Florida was
paid compensation in excess of $100,000 during Cooper Florida's fiscal year
ended June 30, 1995.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Fiscal -------------------
Position Year Salary Bonus
-------- ---- ------ -----
Jay Cooper 1995 $71,340 $ 0
Chairman of Cooper Florida
James C. Yeager 1995 $71,154 $3,500
President of Cooper Florida
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company and Cooper Florida have entered into an employment
agreement, effective as of the closing of this offering, with Jay Cooper
pursuant to which he is employed as the President of the Company and the
Chairman of Cooper Florida. The agreement provides that Mr. Cooper devote the
majority of his business time to the affairs of the Company and Cooper Florida.
The agreement expires on the third anniversary of the closing of this offering,
provided that the agreement may be renewed by the Company and Cooper Florida for
successive one-year periods unless, within thirty days of the expiration of the
agreement, the Company notifies Mr. Cooper of its election not to renew the
agreement. The agreement provides for an annual salary of $100,000, commencing
on the closing of this offering. Mr. Cooper's employment agreement contains a
confidentiality provision and a covenant not to compete with the Company or
Cooper Florida for a period of two years following termination of employment
under certain circumstances. In addition, upon the closing of this offering, the
Company will grant to Mr. Cooper options to purchase an aggregate of 120,000
shares of Common Stock at an exercise price equal to the initial public offering
price of the Units. All of such options will have a term of ten years. Of such
amount granted to Mr. Cooper, options to purchase 80,000 shares of Common Stock
will be exercisable as to one-fifth of the shares covered thereby on the first
anniversary of the date of grant and as to an additional one-fifth of the shares
covered thereby on each of the second, third, fourth and fifth anniversaries of
the date of the grant. Options to purchase 40,000 shares of Common Stock will
become exercisable as to one-third of the shares covered thereby on each of the
seventh, eighth and ninth anniversaries of the date of grant, unless there is a
$300,000 increase in operating income for Cooper Florida between the fiscal
years ending June 30, 1996 and June 30, 1997, in which case the vesting of such
options will be accelerated. Such acceleration will allow such options to vest
beginning in 1997 and every year thereafter such that the total amount of all
options granted to Mr. Cooper and vesting in any single year does not exceed
$100,000 at the exercise price.
The Company and Cooper Florida have entered into an employment
agreement, effective as of the closing of this offering, with James C. Yeager
pursuant to which he is employed as the Executive Vice President of the Company
and the President of Cooper Florida. The agreement provides that Mr. Yeager
devote the majority of his business time to the affairs of the Company and
Cooper Florida. The agreement expires on the third anniversary of the date of
the closing of this offering, provided that the agreement may be renewed by the
Company and Cooper Florida for successive one-year periods unless, within thirty
days of the expiration of the agreement, the Company notifies Mr. Yeager of its
election not to renew the agreement. The agreement provides for an annual salary
of $100,000, commencing on the closing of this offering. Mr. Yeager's employment
agreement contains a confidentiality provision and a covenant not to compete
with the Company or Cooper Florida for a period of two years following
termination of employment under certain circumstances. In addition, the Company
will grant to Mr. Yeager options to purchase an aggregate of 100,000 shares of
Common Stock at an exercise price equal to the initial public offering price of
the Units. All of such options will have a term of ten years. Of such amount
granted to Mr. Yeager, options to purchase 60,000 shares of Common Stock will be
exercisable as to one-fifth of the shares covered thereby on the first
anniversary of the date of grant and as to an additional one-fifth of the shares
covered thereby on each of the second, third, fourth and fifth anniversaries of
the date of the grant. Options to purchase 40,000 shares of Common Stock will
become exercisable as to one-third of the shares covered thereby on each of the
seventh, eighth and ninth anniversaries of the date of grant, unless there is a
$300,000 increase in operating income for Cooper Florida between the fiscal
years ending June 30, 1996 and June 30, 1997, in which case the vesting of such
options will be accelerated. Such acceleration will allow such options to vest
beginning in 1997 and every year thereafter such that the total amount of all
options granted to Mr. Yeager and vesting in any single year does not exceed
$100,000 at the exercise price.
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<PAGE>
STOCK OPTION PLAN
In June 1996, the Board of Directors adopted and the stockholders
approved the Company's 1996 Stock Option Plan. The 1996 Stock Option Plan
provides for the grant of (i) options that are intended to qualify as incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to employees and
(ii) options not intended to so qualify ("Nonqualified Stock Options") to
employees (including directors and officers who are employees of the Company),
directors and consultants. The total number of shares of Common Stock for which
options may be granted under the 1996 Stock Option Plan is 1,000,000 shares.
Upon the closing of this offering, the Company intends to grant options
exercisable to purchase 450,000 shares of Common Stock to various of its
employees and non-employee directors. All of such options will have a term of
ten years. The exercise price per share of these options will be equal to the
initial public offering price of the Units. Of the options to purchase 450,000
shares of Common Stock which the Company intends to grant upon the closing of
this offering, the Company will grant options to purchase 120,000, 100,000,
50,000 and 50,000 to Messrs. Cooper, Yeager, Fields and Friedman, respectively.
Of such amount granted to Mr. Cooper, options to purchase 80,000 shares of
Common Stock will be exercisable as to one-fifth of the shares covered thereby
on the first anniversary of the date of grant and as to an additional one-fifth
of the shares covered thereby on each of the second, third, fourth and fifth
anniversaries of the date of the grant. Options to purchase 40,000 shares of
Common Stock will become exercisable as to one-third of the shares covered
thereby on each of the seventh, eighth and ninth anniversaries of the date of
grant, unless there is a $300,000 increase in operating income for Cooper
Florida between the fiscal years ending June 30, 1996 and June 30, 1997, in
which case the vesting of such options will be accelerated. Such acceleration
will allow such options to vest beginning in 1997 and every year thereafter such
that the total amount of all options granted to Mr. Cooper and vesting in any
single year does not exceed $100,000 at the exercise price. Of such amount
granted to Mr. Yeager, options to purchase 60,000 shares of Common Stock will be
exercisable as to one-fifth of the shares covered thereby on the first
anniversary of the date of grant and as to an additional one-fifth of the shares
covered thereby on each of the second, third, fourth and fifth anniversaries of
the date of the grant. Options to purchase 40,000 shares of Common Stock will
become exercisable as to one-third of the shares covered thereby on each of the
seventh, eighth and ninth anniversaries of the date of grant, unless there is a
$300,000 increase in operating income for Cooper Florida between the fiscal
years ending June 30, 1996 and June 30, 1997, in which case the vesting of such
options will be accelerated. Such acceleration will allow such options to vest
beginning in 1997 and every year thereafter such that the total amount of all
options granted to Mr. Yeager and vesting in any single year does not exceed
$100,000 at the exercise price. The options exercisable to purchase 50,000
shares of Common Stock granted to each of Messrs. Fields and Friedman will be
Nonqualified Stock Options with a term of ten years and will vest as to
one-fifth of the shares covered thereby on the first anniversary of the date of
grant and as to an additional one-fifth of the shares covered thereby on each of
the second, third, fourth and fifth anniversaries of the date of grant.
Upon the closing of this offering and upon becoming directors of
the Company, Paul D. Finkelstein, George Skakel III and John E. Smircina,
director nominees of the Company, will each be granted options to purchase
10,000 shares of Common Stock pursuant to the Company's 1996 Stock Option Plan.
Such options will have a term of ten years and will have an exercise price per
share equal to the initial public offering price of the Units. All of such
options will vest on the first anniversary of the date of grant.
The 1996 Stock Option Plan is to be administered by the Board or
a committee of the Board of Directors, which will determine the terms of options
granted, including the exercise price, the number of shares subject to the
option and the terms and conditions of exercise. No option granted under the
1996 Stock Option Plan is
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<PAGE>
transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable during the lifetime of the optionee
only by such optionee.
The exercise price of all stock options granted under the 1996
Stock Option Plan must be at least equal to the fair market value of such shares
on the date of grant (110% of fair market value in the case of an Incentive
Stock Option granted to an optionee who owns or is deemed to own more than 10%
of the Common Stock). The term of each option granted pursuant to the 1996 Stock
Option Plan may be established by the Board, or a committee of the Board, in its
sole discretion; provided, however, that the maximum term of each Incentive
Stock Option granted pursuant to the 1996 Stock Option Plan is ten years (five
years if the optionee owns or is deemed to own more than 10% of the Common
Stock). Options shall become exercisable at such times and in such installments
as the Board, or a committee of the Board, shall provide in the terms of each
individual option.
Holders of all of the currently outstanding securities of the
Company have agreed not to publicly sell, transfer or assign any of their shares
of Common Stock, options or warrants without the prior written consent of the
Representative for a period of 24 months from the closing date of this offering.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock prior to this offering and as adjusted
to give effect to this offering and to the Acquisition, based upon the most
recent information available to the Company for (i) each person known by the
Company who owns beneficially more than five percent of the Common Stock, (ii)
each of the Company's executive officers, directors and director nominees and
(iii) all officers, directors and director nominees of the Company as a group.
Unless otherwise indicated, each stockholder's address is c/o the Company, 122
East 42nd Street, New York, New York 10168.
<TABLE>
<CAPTION>
Number of Shares Percentage Ownership
Beneficially Owned of Common Stock
------------------ ---------------
After Offering After Offering
Before Offering and Acquisition(1) Before Offering and Acquisition(1)
--------------- ------------------ --------------- ------------------
Names and Address of
- --------------------
Beneficial Owner
- ----------------
<S> <C> <C> <C> <C> <C>
Douglas P. Fields............................ 100(2) 1,150,000(3)(4) 100% 53.49%
Frederick M. Friedman........................ 100(2) 1,150,000(3)(4) 100% 53.49%
John E. Smircina*............................ 100(2) 1,150,000(3)(4)(5) 100% 53.49%
TDA Industries, Inc.......................... 100(2) 1,150,000(3)(4) 100% 53.49%
George Skakel III*........................... 0 0(5) 0% 0%
115 Maple Avenue
Greenwich, CT 06830
Paul D. Finkelstein*......................... 0 0(5) 0% 0%
c/o Regis Corporation
1814 Lincoln Avenue
Minneapolis, MN 55403
Jay Cooper*.................................. 0 0(6) 0% 0%
c/o Cooper Flooring
International, Inc.
7122 N.W. 74th Avenue
Miami, FL 33166
James C. Yeager.............................. 0 0(7) 0% 0%
c/o Cooper Flooring
International, Inc.
2700 Hazelhurst Street
Orlando, FL 32804
All officers and directors
as a group (7 persons)...................... 100(2) 1,150,000(3)(4)(5)(6)(7) 100% 53.49%
* Director nominee.
</TABLE>
- -------------------------------
-42-
<PAGE>
(1) The Acquisition will be consummated simultaneously with the closing of
this offering.
(2) Includes 100 shares of Common Stock owned by TDA. Douglas P. Fields and
Frederick M. Friedman are officers, directors and principal stockholders
of TDA, and John E. Smircina is a director of TDA. Each of Douglas P.
Fields, Frederick M. Friedman and John E. Smircina may be deemed to
exercise voting control over securities of the Company owned by TDA.
Such individuals disclaim any beneficial interest in the shares of
Common Stock owned by TDA.
(3) Includes (i) 100 shares of Common Stock owned by TDA and (ii) 1,149,900
shares of Common Stock to be issued to TDA upon the consummation of the
Acquisition. Douglas P. Fields and Frederick M. Friedman are officers,
directors and principal stockholders of TDA, and John E. Smircina is a
director of TDA. Each of Douglas P. Fields, Frederick M. Friedman and
John E. Smircina may be deemed to exercise voting control over
securities of the Company owned by TDA. Such individuals disclaim any
beneficial interest in the shares of Common Stock owned by TDA.
(4) Does not include options to be issued to Messrs. Fields and Friedman
upon the closing of this offering, pursuant to the Company's 1996 Stock
Option Plan, exercisable to purchase, in the aggregate, 100,000 shares
of Common Stock. Such options are not exercisable within 60 days of the
date hereof. Also does not include shares of Common Stock issuable upon
exercise of the Acquisition Warrant, because such warrant is not
exercisable within 60 days of the date hereof.
(5) Does not include options to be issued to each of Messrs. Finkelstein,
Skakel and Smircina upon the closing of this offering, pursuant to the
Company's 1996 Stock Option Plan, exercisable to purchase an aggregate
of 30,000 shares of Common Stock. Such options are not exercisable
within 60 days of the date hereof.
(6) Does not include 120,000 shares of Common Stock issuable upon the
exercise of options to be granted to Mr. Cooper upon the closing of this
offering, pursuant to the Company's 1996 Stock Option Plan, which are
not exercisable within 60 days of the date hereof.
(7) Does not include 100,000 shares of Common Stock issuable upon the
exercise of options to be granted to Mr. Yeager upon the closing of this
offering, pursuant to the Company's 1996 Stock Option Plan, which are
not exercisable within 60 days of the date hereof.
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<PAGE>
CONCURRENT REGISTRATION FOR SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part
also relates to the 2,000,000 Bridge Warrants issued in connection with the
Private Placement and to the shares of Common Stock underlying such Bridge
Warrants. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resources." Upon the consummation of
this offering, the terms and conditions of the Bridge Warrants will
automatically convert to the terms and conditions of the Warrants offered
hereby. It is likely that sales of Bridge Warrants or the underlying Common
Stock or even the potential of such sales at any time would have an adverse
effect on the market prices of the Common Stock and the Warrants. See "Risk
Factors --Need for Additional Financing" and "Risk Factors -- Outstanding
Warrants and Options; Registration Rights."
Subject to the restriction described in the succeeding sentence,
an aggregate of up to 2,000,000 Bridge Warrants and up to 2,000,000 shares of
Common Stock underlying such Bridge Warrants may be offered by certain
securityholders who received their Bridge Warrants in connection with the
Private Placement. Each holder of Bridge Warrants has agreed not to sell or
otherwise transfer such securities for a period of 24 months from the date
hereof without the Representative's prior approval. The Representative may grant
such approval without notice. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The following table sets forth certain information with respect
to each Selling Securityholder for whom the Company is registering the Bridge
Warrants (and the underlying shares of Common Stock) for resale to the public.
The Company will not receive any of the proceeds from the sale of the Bridge
Warrants, but will receive proceeds upon any exercise of the Bridge Warrants.
<TABLE>
<CAPTION>
Maximum Percentage
Amount of Amount of Amount of Beneficial
Bridge Warrants Bridge Warrants Bridge Warrants Ownership of
Owned Prior to be Registered Owned After Bridge Warrants
Selling Stockholder to this Offering in this Offering Offering After Offering
- ------------------- ---------------- ---------------- -------- --------------
<S> <C> <C> <C> <C>
Ora Torledano........................... 200,000 200,000 200,000 0*
Abraham Chanukah........................ 200,000 200,000 200,000 0*
Richmond Investments Ltd................ 200,000 200,000 200,000 0*
Stamford Investments Ltd................ 200,000 200,000 200,000 0*
Gary A. Lyons........................... 100,000 100,000 100,000 0*
Walter T. Toombs........................ 50,000 50,000 50,000 0*
Robert J. Reardon....................... 100,000 100,000 100,000 0*
Chaim Malovicki......................... 12,500 12,500 12,500 0*
Dennis J. Lewis......................... 50,000 50,000 50,000 0*
Quillos Corp............................ 50,000 50,000 50,000 0*
White Rock of Tucson, LLC............... 60,000 60,000 60,000 0*
E.W. Boland............................. 100,000 100,000 100,000 0*
Daisy Shaw Enterprises Ltd.............. 209,300 209,300 209,300 0*
Jeffrey Muhlgeier....................... 34,000 34,000 34,000 0*
Elliott Y. Braun........................ 34,000 34,000 34,000 0*
Robert Gordon........................... 16,700 16,700 16,700 0*
Mark P. Schlefer........................ 83,400 83,400 83,400 0*
Timothy Martin.......................... 83,400 83,400 83,400 0*
Dwight Babcock IRA...................... 16,700 16,700 16,700 0*
Nelly Abramov........................... 200,000 200,000 200,000 0*
</TABLE>
- --------------------
* The Bridge Warrants are not exercisable until the second anniversary of the
date of this Prospectus.
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<PAGE>
To the extent that the Representative releases any Selling
Securityholders from their agreements not to sell the Company's securities which
they owned prior to the consummation of this offering for a period of 24 months
from the date hereof, such sales of the securities by the Selling
Securityholders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling Securityholders)
in the over-the-counter market or in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale, or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices. Any sale of
these registered Bridge Warrants may adversely affect the market price of the
Warrants.
Selling Securityholders may effect such transactions by selling
their securities directly to a purchaser, through broker-dealers acting as
agents for the Selling Securityholders or to broker-dealers who may purchase the
securities as principals and thereafter sell the securities from time to time in
the over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the purchaser
for whom such broker-dealers may act as agents or to whom they may sell as
principals (which compensation as to a particular broker-dealer may be in excess
of customary commissions).
The Selling Securityholders and broker-dealers, if any, acting in
connection with any such sale might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
-45-
<PAGE>
CERTAIN TRANSACTIONS
Simultaneously with the closing of this offering, pursuant to a
stock purchase agreement, the Company will acquire all of the issued and
outstanding capital stock of Cooper Florida from TDA for 1,149,900 shares of
Common Stock and the Acquisition Warrant, which is exercisable to purchase
250,000 shares of Common Stock at an exercise price of $1.00 per share. As a
condition to the closing of the Acquisition, at the time of the Acquisition,
Cooper Florida will have a tangible net worth equal to at least $4,500,000. If
Cooper Florida's tangible net worth is in excess of $4,500,000, then such
excess, if any, shall be paid to TDA out of Cooper Florida's working capital in
the form of a dividend which will be payable on the first anniversary of the
closing of this offering. Upon the consummation of the Acquisition, Cooper
Florida will become a wholly-owned subsidiary of the Company and will constitute
the sole operating business and source of revenue of the Company until such
time, if any, as the Company consummates additional acquisitions.
In June 1996, the Company issued 100 shares of Common Stock to TDA
in consideration of $100. Such stock was previously subscribed for when the
Company was organized in April 1996. Through June 1996, the Company borrowed an
aggregate of $15,275 from TDA in order to pay the expenses of the Private
Placement and a portion of the professional fees and other expenses related to
this offering. The Company intends to execute a promissory note in the principal
amount of $15,275 in favor of TDA. The principal amount of this note, together
with interest at the rate of 8% per annum, is due and payable upon demand and,
in any event, will be repaid out of the proceeds of this offering.
Douglas P. Fields and Frederick M. Friedman, officers and directors
of the Company, are both officers, directors and principal stockholders of TDA
and officers and directors of Cooper Florida. John E. Smircina, a director
nominee of the Company, is a director of TDA. Prior to the closing of this
offering and the Acquisition, Cooper Florida was a wholly-owned subsidiary of
TDA.
Prior to this offering, Cooper Florida has been dependent on TDA
for various administrative services and financial support. Following this
offering, TDA will provide office space and certain management and
administrative services to the Company at its offices in New York City pursuant
to a management and administrative services agreement to be entered into by the
Company and TDA upon the closing of this offering. The term of such agreement
will be for two (2) years. The fee payable by the Company to TDA for such
services will be $5,000 per month.
Prior to the closing of this offering, the Company utilized office
space and secretarial services provided by TDA free of charge.
During Cooper Florida's fiscal years ended June 30, 1995 and June
30, 1994, fees for auditing services of $50,000 and $50,000, respectively, were
charged to Cooper Florida. For the nine month period ended March 31, 1996, fees
charged to Cooper Florida for such auditing services were $37,500. Upon the
closing of this offering, amounts due from Cooper Florida to TDA and affiliated
companies of approximately $374,100 in payment of an historical accumulation of
auditing fees and short-term cash advances will be converted into a 6%
promissory note payable on the first anniversary of the closing of this
offering.
The Company's management currently includes two (2) officers,
Douglas P. Fields and Frederick M. Friedman, neither of whom are required to
commit a specific amount of their time to the affairs of the Company and each of
whom has significant business interests outside of the Company. Accordingly,
such officers may have conflicts of interests in allocating management time
among various business activities. However, such officers intend to devote such
time as they deem reasonably necessary to carry out the business and affairs of
the Company, including the evaluation and negotiation of potential acquisitions.
The Company shall not pay a cash or stock bonus to any officer, director, or
principal stockholder of the Company (to include any subsidiary thereof) for a
period of three (3) years after the effective date of this offering, without the
Representative's written
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<PAGE>
consent, except for (i) such bonuses pursuant to employment agreements in effect
on the effective date of this offering, (ii) stock option grants under the
Company's 1996 Stock Option Plan, or (iii) cash bonuses to principals of any
entities acquired by the Company after the closing of this offering provided
that such cash bonuses are paid solely from earnings in excess of average
historical earnings of such acquired entities during the three year period prior
to any such acquisition. Additionally, the Company will not pay a finder's fee
to any officer, director or principal stockholder of either TDA or the Company
in connection with any acquisition by the Company for a period of three (3)
years after the closing of the offering, without the Representative's written
consent, except for any such fee paid to a so-called "outside director" of
either TDA or the Company.
Prior to this offering, the Orlando Facility and the Jacksonville
Facility were leased by Cooper Florida from Jay Cooper, President of the Company
and the Chairman of Cooper Florida, on a month-to-month basis. Rent expense for
the Orlando Facility and the Jacksonville Facility aggregated approximately
$291,000 and $288,000 in the fiscal years ended June 30, 1995 and 1994,
respectively. Upon the closing of this offering, Cooper Florida will enter into
two five-year leases with Mr. Cooper pursuant to which it will rent the Orlando
Facility and the Jacksonville Facility from Mr. Cooper at base rents of $225,500
and $49,900 per year, respectively, which Cooper Florida and the Company believe
are at or less than market rate rents for such facilities. Such leases will
continue at such base rents until January 1, 1999, at which time a fair market
rental rate will be determined and, based on such determination, the base rent
will be increased to such fair market rate but not to exceed an increase of ten
(10) percent. Such leases will be terminable by Cooper Florida upon six (6)
months prior written notice.
The Miami Facility is leased by Cooper Florida from N.W. 74th
Avenue Associates, a partnership which is equally owned by Jay Cooper and by
Cooper Holdings, Inc., a wholly-owned subsidiary of TDA. The lease is a fifteen
year lease, which terminates in December 2008. Rent expense for the Miami
Facility aggregated approximately $197,000 (net of sublease income of
approximately $70,000) during the fiscal year ended June 30, 1995. Cooper
Florida and the Company believe that the rent for the Miami Facility is market
rate rent.
From time to time, TDA and affiliates of TDA have made cash
advances to Cooper Florida, and Cooper Florida has, from time to time, made cash
advances to TDA and affiliates of TDA.
In December 1995, Cooper Florida negotiated but has not yet
implemented a line of credit with Chemical Bank in the aggregate amount of $1
million for direct borrowing for working capital purposes. If implemented, the
credit facility will be guaranteed by TDA. Cooper Florida has not yet borrowed
any funds under this credit facility.
Upon the closing of this offering and the Acquisition, TDA will own
approximately 53.49% of the issued and outstanding shares of Common Stock of the
Company. Douglas P. Fields, the Chief Executive Officer and Chairman of the
Board of Directors of the Company, is also the Chairman of the Board of
Directors, President, the Chief Executive Officer and a principal stockholder of
TDA. Frederick M. Friedman, the Executive Vice President, Treasurer, Secretary,
Chief Financial Officer and a director of the Company, is also the Executive
Vice President, Treasurer, Secretary, Chief Financial Officer, a director and
principal stockholder of TDA. Messrs. Fields and Friedman are the sole members
of the Executive Committee of the Board of Directors of the Company. John E.
Smircina is a director nominee of the Company and a director of TDA.
Additionally, if the Acquisition Warrant were to be fully exercised, TDA would
own approximately 58.34% of the issued and outstanding Common Stock of the
Company. As a result, these officers and directors, if they were to act in
concert, would be in a position to control the composition of the Board of
Directors of the Company and therefore the business, policies and affairs of the
Company, and the outcome of issues which may be subject to a vote of the
Company's stockholders. Following this offering, the Company does not intend to
enter into any transactions with TDA and its affiliates in the future without
the Representative's written consent and unless such transaction is fair and
reasonable to the Company and approved by a majority of the Company's
disinterested directors, except for (i) transactions with affiliates of the
Company as described in this Prospectus, (ii) real estate transactions with
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<PAGE>
affiliates of the Company provided that the terms of such transactions are no
less favorable to the Company as the Company would be able to obtain from an
independent third party, and (iii) such transactions which are deemed to be
"non-material."
Upon the closing of this offering, the Company intends to grant
options exercisable to purchase 450,000 shares of Common Stock to various of its
employees and non-employee directors. All of such options will have a term of
ten years. The exercise price per share of these options will be equal to the
initial public offering price of the Units. Of the options to purchase 450,000
shares of Common Stock which the Company intends to grant upon the closing of
this offering, the Company will grant options to purchase 120,000, 100,000,
50,000 and 50,000 to Messrs. Cooper, Yeager, Fields and Friedman, respectively.
Of such amount granted to Mr. Cooper, options to purchase 80,000 shares of
Common Stock will be exercisable as to one-fifth of the shares covered thereby
on the first anniversary of the date of grant and as to an additional one-fifth
of the shares covered thereby on each of the second, third, fourth and fifth
anniversaries of the date of the grant. Options to purchase 40,000 shares of
Common Stock will become exercisable as to one-third of the shares covered
thereby on each of the seventh, eighth and ninth anniversaries of the date of
grant, unless there is a $300,000 increase in operating income for Cooper
Florida between the fiscal years ending June 30, 1996 and June 30, 1997, in
which case the vesting of such options will be accelerated. Such acceleration
will allow such options to vest beginning in 1997 and every year thereafter such
that the total amount of all options vesting in any single year does not exceed
$100,000 at the exercise price. Of such amount granted to Mr. Yeager, options to
purchase 60,000 shares of Common Stock will be exercisable as to one-fifth of
the shares covered thereby on the first anniversary of the date of grant and as
to an additional one-fifth of the shares covered thereby on each of the second,
third, fourth and fifth anniversaries of the date of the grant. Options to
purchase 40,000 shares of Common Stock will become exercisable as to one-third
of the shares covered thereby on each of the seventh, eighth and ninth
anniversaries of the date of grant, unless there is a $300,000 increase in
operating income for Cooper Florida between the fiscal years ending June 30,
1996 and June 30, 1997, in which case the vesting of such options will be
accelerated. Such acceleration will allow such options to vest beginning in 1997
and every year thereafter such that the total amount of all options granted to
Mr. Yeager and vesting in any single year does not exceed $100,000 at the
exercise price. The options exercisable to purchase 50,000 shares of Common
Stock granted to each of Messrs. Fields and Friedman will be Nonqualified Stock
Options and will vest as to one-fifth of the shares covered thereby on the first
anniversary of the date of grant and as to an additional one-fifth of the shares
covered thereby on each of the second, third, fourth and fifth anniversaries of
the date of grant.
Upon the closing of this offering and upon becoming directors of
the Company, Paul D. Finkelstein, George Skakel III and John E. Smircina,
director nominees of the Company, will each be granted options to purchase
10,000 shares of Common Stock pursuant to the Company's 1996 Stock Option Plan.
Such options will have a term of ten years and will have an exercise price per
share equal to the initial public offering price of the Units. All of such
options will vest on the first anniversary of the date of grant.
-48-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a summary description of the Company's capital
stock and certain provisions of the Company's Certificate of Incorporation and
Bylaws, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The following discussion is
qualified in its entirety by reference to such exhibits.
UNITS
Each Unit consists of one share of Common Stock and one Warrant.
Each Warrant entitles the holder to purchase one share of Common Stock. The
Common Stock and Warrants are immediately separately transferable.
COMMON STOCK
The Company is authorized to issue up to 10,000,000 shares of
Common Stock, par value $.001 per share. Prior to this offering, there were
issued and outstanding 100 shares of Common Stock held of record by TDA.
Holders of Common Stock are entitled to one vote for each share
held of record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may from time to time be outstanding, if any,
holders of Common Stock are entitled to receive dividends when, as, and if
declared by the Board of Directors out of funds legally available therefor and,
upon the liquidation, dissolution or winding up of the Company, are entitled to
share ratably in all assets remaining after payment of liabilities and payment
of accrued dividends and liquidation preferences on the preferred stock, if any.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is,
and the Common Stock to be outstanding upon completion of this offering will be,
duly authorized and validly issued, fully paid and nonassessable.
Upon the closing of this offering and the Acquisition, TDA will
beneficially own 1,150,000 shares of Common Stock, or approximately 53.49% of
the then outstanding Common Stock. Because of such stock ownership, TDA would
be, as a practical matter, in a position to control the composition of the Board
of Directors of the Company, and therefore the business, policies and affairs of
the Company, and the outcome of issues which may be subject to a vote of the
Company's stockholders. Commencing two years after the consummation of this
offering, TDA shall be entitled to one demand registration of the shares of
Common Stock owned by TDA. In addition, commencing two years after the
consummation of this offering, TDA shall have the right to participate, on a
"piggyback" basis, in a registration by the Company of its securities under the
Securities Act.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of
preferred stock, par value $.001 per share. The preferred stock may be issued in
one or more series, the terms of which may be determined at the time of issuance
by the Board of Directors, without further action by stockholders, and may
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights and sinking fund provisions.
No shares of preferred stock will be outstanding as of the closing
of this offering, and the Company has no present plans for the issuance thereof.
The issuance of any such preferred stock could adversely affect the
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<PAGE>
rights of the holders of Common Stock and, therefore, reduce the value of the
Common Stock. The ability of the Board of Directors to issue preferred stock
could discourage, delay, or prevent a takeover of the Company.
WARRANTS
Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an initial exercise price of $6.00 per share for a
period of three years commencing on the second anniversary of the date of this
Prospectus, provided that during such time a current prospectus relating to the
Common Stock is then in effect and the Common Stock is qualified for sale or
exempt from qualification under applicable state securities laws. The Warrants
included in the Units offered hereby are transferable separately from the Common
Stock.
The Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") among the Company, the Representative and Continental Stock
Transfer & Trust Company, as warrant agent (the "Warrant Agent") and will be
evidenced by warrant certificates in registered form. The initial exercise price
of the Warrants were determined by negotiations between the Company and the
Representative and should not be construed to predict, or to imply that, any
price increases will occur in the Company's securities. The exercise price of
the Warrants and the number and kind of shares of Common Stock or other
securities and property to be obtained upon exercise of the Warrants are subject
to adjustment in certain circumstances including a stock split of, or stock
dividend on, or a subdivision, combination or recapitalization of, the Common
Stock. Additionally, an adjustment would be made upon the sale of all or
substantially all of the assets of the Company, a merger or other unusual events
(other than share issuances pursuant to employee benefit and stock incentive
plans for directors, officers and employees of the Company and certain other
share issuances) so as to enable holders of Warrants to purchase the kind and
number of shares or other securities or property (including cash) receivable in
such event by a holder of the kind and number of shares of Common Stock that
might otherwise have been purchased upon exercise of such Warrant. No adjustment
for previously paid cash dividends, if any, would be made upon exercise of the
Warrants. The Company is not required to issue fractional shares of Common
Stock.
The Warrants may be exercised upon surrender of the certificate
representing such Warrants on or prior to the expiration date (or earlier
redemption date) of such Warrants at the offices of the Warrant Agent with the
form of "Election of Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price (by certified or bank check payable to the order of the Company) for the
number of Warrants being exercised. Shares of Common Stock issued upon exercise
of Warrants for which payment has been received in accordance with the terms of
the Warrants will be fully paid and non-assessable.
The Warrants are redeemable by the Company commencing two years
from the date of issuance, upon thirty (30) days written notice, for $0.25 per
Warrant if the closing bid price per share of the Common Stock, as reported on
Nasdaq, equals or exceeds 200% of the Warrant exercise price for 20 consecutive
trading days immediately preceding the date notice of redemption is given.
The Warrants do not confer upon the holders thereof any voting or
other rights of a stockholder of the Company. Upon notice to the holders of
Warrants, the Company has the right to reduce the exercise price or extend the
expiration date of the Warrants. Although this right is intended to benefit the
holders of Warrants, to the extent the Company exercises this right when the
Warrants would otherwise be exercisable at a price higher than the prevailing
market price of the Common Stock, the likelihood of exercise, and resultant
increase in the number of shares outstanding, may result in making more costly,
or impeding, a change in control in the Company.
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<PAGE>
OTHER OUTSTANDING WARRANTS
In June 1996, upon the closing of the Private Placement, the
Company issued to subscribers to the Private Placement, in consideration of an
aggregate of $200,000, Bridge Warrants to acquire up to 2,000,000 shares of
Common Stock at an exercise price of $3.00 per share and Private Warrants to
acquire up to 250,000 shares of Common Stock at an exercise price of $1.00 per
share. The Bridge Warrants are exercisable commencing two years following the
consummation of this offering and shall expire five years following the
consummation of this offering. Upon the consummation of this offering, the terms
and conditions of the Bridge Warrants, including the exercise price per share
thereof, will automatically convert to the terms and conditions of the Warrants
offered hereby. The Private Warrants are exercisable commencing two years
following the consummation of this offering and shall expire five years
following the consummation of this offering.
Commencing two years after the consummation of this offering, the
holders of the Private Warrants shall be entitled to one demand registration of
the Private Warrants and/or the shares of Common Stock underlying such Private
Warrants. In addition, commencing two years after the consummation of this
offering, the holders of the Private Warrants and/or the shares of Common Stock
underlying such Private Warrants shall have the right to participate, on a
"piggyback" basis, in a registration by the Company of its securities under the
Securities Act.
The Bridge Warrants and the shares of Common Stock underlying the
Bridge Warrants are registered for public sale in the Registration Statement of
which this Prospectus forms a part. Holders of the Bridge Warrants and the
Private Warrants have agreed not to publicly sell, assign or otherwise transfer
any of the Bridge Warrants or the Common Stock underlying the Bridge Warrants or
the Private Warrants or the Common Stock underlying the Private Warrants for a
period of 24 months following the consummation of this offering, except with the
prior approval of the Representative.
The initial exercise price of, and the number of shares of Common
Stock underlying, the Bridge Warrants and the Private Warrants are subject to
adjustment in the event of stock splits, stock dividends, or other similar
events. In the event of any reclassification, or other similar change in the
outstanding Common Stock, any consolidation or merger involving the Company
(other than a consolidation or merger which does not result in any
reclassification, or other similar change in the outstanding Common Stock), or a
sale, lease, or conveyance to another corporation of all or substantially all of
the property of the Company, such warrants will thereupon become exercisable
only for the kind and number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares of Common Stock issuable (at the
time of such reclassification, consolidation, merger or sale) upon exercise of
the warrants would have been entitled upon such reclassification, consolidation,
merger or sale.
The Private Warrants may not be redeemed by the Company without the
prior written consent of the holders thereof; provided, however, that in the
event that the offering is not consummated pursuant to the terms set forth
herein, or in the event that this offering is consummated and the acquisition of
Cooper Florida is not consummated pursuant to the terms set forth herein, due to
any act or omission within the control of Cooper Florida or the Company or TDA
(including, without limitation, any material breach or material failure of
performance under the proposed acquisition agreement between the Company and
Cooper Florida), TDA has agreed to purchase the Bridge Warrants and the Private
Warrants for an aggregate purchase price of $200,000 from the holders thereof.
In connection with the Acquisition, the Company will issue to TDA
1,149,900 shares of Common Stock and the Acquisition Warrant to acquire 250,000
shares of Common Stock. The terms of the Acquisition Warrant (including the
exercise price of $1.00 per share and registration rights) are identical to the
terms of the Private Warrants.
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<PAGE>
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law ("DGCL"). In general, this statute prohibits a
publicly held Delaware corporation from engaging, under certain circumstances,
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder unless (i) prior to the date at which the stockholder
became an interested stockholder, the Board of Directors approved either the
business combination or the transaction in which the person became an interested
stockholder; (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of the
transaction in which the stockholder became an interested stockholder; or (iii)
the business combination is approved by the Board of Directors and by at least
66-2/3% of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder) at a meeting of stockholders (and not by
written consent) held on or subsequent to the date such stockholder became an
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset-based transactions and other transactions
resulting in a financial benefit to the interested stockholder.
LIMITATION ON DIRECTOR'S LIABILITY
In accordance with the DGCL, the Certificate of Incorporation
provides that the directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of duty as a
director except (i) for any breach of the director's duty of loyalty to the
Company and its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct, or knowing violation of law; (iii) under
Section 174 of the DGCL, which relates to unlawful payments of dividends and
unlawful stock repurchases and redemptions; or (iv) for any transaction from
which the director derived an improper personal benefit. This provision does not
eliminate a director's fiduciary duties; it merely eliminates the possibility of
damage awards against a director personally which may be occasioned by certain
unintentional breaches (including situations that may involve grossly negligent
business decisions) by the director of those duties. The provision has no effect
on the availability of equitable remedies, such as injunctive relief or
rescission, which might be necessitated by a director's breach of his or her
fiduciary duties. However, equitable remedies may not be available as a
practical matter where transactions (such as merger transactions) have already
been consummated. The inclusion of this provision in the Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefited
the Company and its stockholders.
INDEMNIFICATION
The Certificate of Incorporation provides that the Company shall
indemnify its officers, directors, employees and agents to the fullest extent
permitted by the DGCL. Section 145 of the DGCL provides that the Company may
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than a "derivative"
action by or in the right of the Company) by reason of the fact that such person
is or was a director, officer, employee or agent of the Company, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe was unlawful.
A similar standard of care is applicable in the case of derivative actions,
except that no indemnification shall be made where the person is adjudged to be
liable to the Company, unless and only to the extent that the
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<PAGE>
Court of Chancery of the State of Delaware or the court in which such action was
brought determines that such person is fairly and reasonably entitled to such
indemnity and such expenses.
TRANSFER AGENT AND REGISTRAR
The Company has appointed Continental Stock Transfer & Trust
Company as transfer agent and registrar for the Common Stock and as Warrant
Agent for the Warrants.
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<PAGE>
UNDERWRITING
State Street Capital Markets, Corp. (the "Representative") has
agreed, subject to the terms and conditions of an Underwriting Agreement, to
purchase the 1,000,000 Units offered hereby from the Company at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The Representative is committed to purchase all
of the Units on a "firm commitment" basis, if any are purchased.
The Representative has advised the Company that it proposes to
offer the Units to the public at the public offering price set forth on the
cover page of this Prospectus and that it may allow to selected dealers who are
members of the National Association of Securities Dealers, Inc. ("NASD"),
concessions not in excess of $__ per Unit, of which not more than $__ may be
reallowed to certain other dealers who are members of the NASD. After the
initial public offering, the public offering price, concessions and reallowances
may be changed by the Representative.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Representative against certain liabilities,
including liabilities under the Securities Act. The Company has agreed to pay
the Representative a non-accountable expense allowance representing 3% of the
aggregate offering price of the Units offered hereby (plus 3% of the aggregate
offering price of any Units purchased pursuant to the Representative's
Over-Allotment Option), $25,000 of which has been paid to date.
The Company has granted an option to the Representative exercisable
during the 45-day period from the date of this Prospectus to purchase up to a
maximum of 150,000 additional Units at the offering price, less the underwriting
discount and non-accountable expense allowance, solely to cover over-allotments
in the sale of the Units.
The Company has agreed to sell to the Representative and its
designees, upon the closing of this offering, for $100, the Unit Purchase Option
exercisable to purchase up to 100,000 Units at an exercise price of $6.60 per
Unit during the four-year period commencing one year from the date hereof. The
Unit Purchase Option is not exercisable or transferrable, and the underlying
securities may not be sold, assigned or transferred for one year from the date
of issuance except to officers and directors of the Representative or to any
NASD member participating in this offering. The warrants comprising part of the
Unit Purchase Option contain anti-dilution provisions providing for appropriate
adjustment under certain circumstances. The holders of the warrants comprising
part of the Unit Purchase Option have no voting, dividend or other rights as
stockholders of the Company with respect to shares underlying the warrants
comprising part of the Unit Purchase Option until the warrants comprising part
of the Unit Purchase Option have been exercised. In the event the Representative
exercises its registration rights to effect the distribution of the Common Stock
and/or warrants underlying the warrants comprising part of the Unit Purchase
Option, the Representative and any holder of such securities who is a market
maker in the Company's securities, prior to such distribution, will be unable to
make a market in the Company's securities for up to a period of nine days prior
to the commencement of such distribution and until such distribution is
completed. If the Representative ceases making a market, the market and market
prices for the Securities may be adversely affected, and the holders thereof may
be unable to sell such securities. The Company has agreed, for a period of seven
years following the date of this Prospectus, to give advance notice to the
holders of the warrants comprising part of the Unit Purchase Option or
underlying securities of its intention to file a registration statement, and in
such case the holders of the warrants comprising part of the Unit Purchase
Option and underlying securities shall have the right to require the Company to
include the warrants comprising part of the Unit Purchase Option and underlying
securities in such registration statement at the Company's expense. In addition,
at any time during the five year period following the date of this Prospectus,
holders of 50% of the warrants comprising part of the Unit Purchase Option or
the underlying securities will have the right to require the Company to prepare
and file two registration statements (one at the Company's expense and one at
the holders' expense), so as to permit the public offering of the warrants
comprising part of the Unit Purchase Option and the underlying securities.
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<PAGE>
Additionally, pursuant to the terms of an Underwriting Agreement
between the Underwriters and the Company, the Underwriters have been engaged as
its warrant solicitation agent and pursuant thereto may participate in the
solicitation of the exercise of the Warrants. Upon the exercise of the Warrants,
the Company will pay any Underwriter a commission of 5% of the aggregate
exercise price of the Warrants exercised. In accordance with the NASD Notice to
Members 92-98, no fee shall be paid: (i) upon the exercise of warrants where the
market price of the underlying Common Stock is lower than the exercise price;
(ii) upon the exercise of any Warrants not solicited by such Underwriter; (iii)
for the exercise of Warrants held in any discretionary account; or (iv) upon the
exercise of Warrants where disclosure of compensation arrangements has not been
made and documents have not been provided to customers both as part of the
original offering and at the time of exercise. Further, the exercise of any
Warrant shall be presumed unsolicited unless the holder of such Warrant states
in writing that the transaction was solicited by the Representative.
In connection with the solicitation of Warrant exercises, unless
granted an exemption by the Commission from Rule 10b-6, the Underwriters and any
other soliciting broker-dealer will be prohibited from engaging in any
market-making activities with respect to the Securities for the period
commencing either two or nine business days (depending on the market price of
the Company's shares of Common Stock) prior to any solicitation activity with
respect to the exercise of Warrants until the later of (i) the termination of
such solicitation activity or (ii) the termination (by waiver or otherwise) of
any rights which the Underwriters or any other soliciting broker-dealer may have
to receive a fee for the exercise of Warrants following such solicitation. As a
result, the Underwriters or other soliciting broker-dealers may be unable to
provide a market for the Company's securities, should it desire to do so, during
certain periods in which the Warrants are exercisable.
Subject to certain exceptions, including any equity securities
issued in connection with an acquisition, the Company has agreed not to issue
equity securities for a period of three years from the date hereof without the
prior consent of the Representative. Additionally, holders of all of the
currently outstanding securities of the Company have agreed not to publicly
sell, transfer or assign any of their shares of Common Stock, options or
warrants without the prior written consent of the Representative for a period of
24 months from the closing date of this offering.
In addition, the Company has agreed to enter into a financial
advisory agreement with the Representative, which will act as a management and
financial consultant for the Company for a period of three years, commencing
upon the consummation of this offering, at a monthly fee of $3,500, entirely
payable in advance at the closing of this offering. Pursuant to such agreement,
in the event that the Company during the term thereof (i) sells a controlling
interest of its capital stock, (ii) sells all or substantially all of its assets
or (iii) enters into an acquisition that requires disclosure on Form 8-K (or any
successor form thereto), the Company shall pay to the Representative an
additional investment banking fee equal to five (5%) percent of the
consideration received by the seller(s) in such transaction.
Although the Underwriting Agreement will provide that the
Representative may designate for election one person to the Company's Board of
Directors, the Representative has advised the Company that it has not selected
such individual and has no immediate plans to do so. If the Representative
elects not to assert such right, then it may designate one person to attend all
board of directors meetings as an observer. In the event that such an individual
is designated, such individual shall receive reimbursement of expenses for
attending the meetings of the board of directors.
The Company also agreed to engage the Representative as managing
underwriter in connection with any public offering of the Company's debt or
equity securities which occurs within thirty-six (36) months after the closing
of this offering.
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<PAGE>
Prior to this offering there has been no public market for any
securities of the Company. The initial public offering price of the Units and
the exercise prices and other terms of the Warrants have been determined by
negotiation between the Company and the Representative and are not necessarily
related to the Company's asset value, net worth or other established criteria of
value. Factors considered in determining the offering price of the Units and the
exercise price and other terms of the Warrants include the present state of the
Company's development and financial condition, the future prospects of the
Company, an assessment of management, the general condition of the securities
markets and other factors deemed relevant.
The Underwriters do not expect sales of Units to be made to
discretionary accounts in excess of 2% of the total number of Units offered by
this Prospectus.
The foregoing does not purport to be a complete statement of the
terms and conditions of the Underwriting Agreement, copies of which are filed at
the offices of the Company and the Representative and may be examined there
during regular business hours.
The Representative, State Street Capital Markets, Corp., has
previously completed four firm commitment public offerings. The Representative
is a relatively small firm and there can be no assurance that the Representative
will be able to make a meaningful market in the Company's securities or that
another broker/dealer will make a meaningful market in the Company's securities.
Prior to September 1995, the Representative's name was White Rock Partners &
Co., Inc. In the event the Representative does not receive recognition of its
new name by its clients, the public or the investment community, it could
adversely affect the Representative's operations.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have an
aggregate of 2,150,000 shares of Common Stock outstanding (2,300,000 shares if
the Over-Allotment Option is exercised in full). Of these shares, the 1,000,000
shares of Common Stock included in the Units offered hereby (1,150,000 shares if
the Over-Allotment Option is exercised in full) will be freely tradeable without
restriction or limitation under the Securities Act, except to the extent such
shares are subject to the agreement with the Representative described below, and
except for any shares purchased by "affiliates" of the Company, as such term is
defined under the Securities Act. The remaining 1,150,000 shares, all of which
will be owned by TDA upon the closing of this offering, will be "restricted
securities" within the meaning of Rule 144 adopted under the Securities Act.
Sales of such restricted shares in the public market, or the availability of
such shares for sale, could adversely affect the market price for the Common
Stock.
In general, under Rule 144 as currently in effect, any person (or
persons whose shares are aggregated), including a person who may be deemed to be
an "affiliate" of the Company, who has beneficially owned shares for at least a
two-year period (as computed under Rule 144) is entitled to sell within any
three-month period a number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock, or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and the availability of current public information about
the Company. A person, however, who is not deemed to have been an affiliate of
the Company during the 90 days preceding a sale by such person and who has
beneficially owned shares of Common Stock for at least three years may sell such
shares without regard to the volume, manner of sale or notice requirements of
Rule 144. The foregoing summary of Rule 144 is not intended to be a complete
description thereof.
Each of the Company's directors and officers and all holders of its
securities (including TDA) have agreed not to publicly offer, sell or otherwise
dispose of any of their securities (including shares of Common Stock issuable
upon exercise of all outstanding warrants and options) for a period of 24 months
following the date of
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<PAGE>
this Prospectus (the "Lock-up Period") without the prior written consent of the
Representative. Following the Lock-up Period, the shares subject to such lock-up
will be eligible for sale in the public market, subject to the conditions and
restrictions of Rule 144 (unless such securities are registered under the
Securities Act, in which case the conditions and restrictions of Rule 144 would
be inapplicable).
The Company has granted certain registration rights with respect to
the Private Warrants and the Acquisition Warrant and the underlying securities
and has included in the registration statement of which this Prospectus forms a
part the Bridge Warrants and the shares issuable upon exercise of the Bridge
Warrants issued in the Private Placement. See "Description of Capital Stock -
Other Outstanding Warrants" and "Concurrent Registration for Selling
Securityholders." Sales of the Private Warrants, the Acquisition Warrant or the
Bridge Warrants or sales of the underlying securities or even the potential for
such sales at any time could adversely affect the market price for the Common
Stock and the Warrants.
Prior to this offering, there has been no public market for the
Company's securities. Following this offering, the Company cannot predict the
effect, if any, that sales of Common Stock pursuant to Rule 144 or otherwise, or
the availability of such shares for sale, will have on the market price
prevailing from time to time.
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<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon for the Company by Parker Chapin Flattau & Klimpl, LLP, New York,
New York. Camhy Karlinsky & Stein LLP, New York, New York, has served as counsel
to the Representative in connection with this offering.
EXPERTS
The balance sheets of Cooper Florida as of June 30, 1995 and 1994
and the statements of operations, shareholder's equity and cash flows for each
of the three years in the period ended June 30, 1995 appearing in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The balance sheet of the Company as of April 4, 1996 appearing in
this Prospectus has been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report appearing herein, and has been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-1 under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in such Registration Statement and the exhibits thereto.
For further information with respect to the Company and the Common Stock,
reference is hereby made to the Registration Statement and exhibits and
schedules thereto which may be inspected without charge at the public reference
facilities maintained at the principal office of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained upon written request from the Public
Reference Branch of the Commission, 450 Fifth Street, Room 1024, N.W.,
Washington, D.C. 20549, at prescribed rates. Additionally, this Registration
Statement has been filed electronically through the Electronic Data Gathering,
Analysis and Retrieval system (EDGAR) and is publicly available through the
Commission's web site (http:\\www.sec.gov). Reference is made to the copies of
any contracts or other documents filed as exhibits to the Registration
Statement.
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
----
<S> <C>
COOPER INTERNATIONAL GROUP, INC
Independent Auditors' Report ................................................ F-2
Balance Sheet at April 4, 1996 .............................................. F-3
Notes to Financial Statement at April 4, 1996 ............................... F-4
COOPER FLOORING INTERNATIONAL, INC ..........................................
Independent Auditors' Report ................................................ F-8
Balance Sheets at June 30, 1995 and 1994 .................................... F-9
Statements of Operations for the Years Ended
June 30, 1995, 1994 and 1993 ............................................. F-10
Statements of Shareholder's Equity for the Years Ended
June 30, 1995, 1994 and 1993 ............................................. F-11
Statements of Cash Flows for the Years Ended
June 30, 1995, 1994 and 1993 ............................................. F-12
Notes to Financial Statements for the Years Ended
June 30, 1995, 1994 and 1993 ............................................. F-13
(Unaudited) Condensed Balance Sheet
at March 31, 1996 ........................................................ F-18
(Unaudited) Condensed Statements of Operations and Deficit for
the Nine Months Ended March 31, 1996 and 1995 ........................... F-19
(Unaudited) Condensed Statements of Cash Flows for the Nine
Months Ended March 31, 1996 and 1995 ..................................... F-20
(Unaudited) Notes to Condensed Financial Statements for the Nine Months Ended
March 31, 1996 and 1995 .................................................. F-21
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Cooper International Group, Inc.
We have audited the accompanying balance sheet of Cooper International Group,
Inc. (the "Company") as of April 4, 1996 (inception). This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of Cooper International Group, Inc. as of April 4, 1996
(inception) in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Miami, Florida
June 28, 1996 (July 12, 1996 as to Note 4)
F-2
<PAGE>
COOPER INTERNATIONAL GROUP, INC.
<TABLE>
<CAPTION>
BALANCE SHEET
APRIL 4, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
TOTAL $ --
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES $ --
-------------
STOCKHOLDER'S EQUITY:
Preferred stock, $.001 par value per share, 1,000,000 shares authorized;
none issued and outstanding --
Common stock, $.001 par value per share, 10,000,000 shares authorized;
100 shares issued and outstanding --
Additional paid-in capital 100
Less: Stock subscription receivable (100)
-------------
Total stockholder's equity --
-------------
TOTAL $ --
=============
</TABLE>
See notes to financial statement.
F-3
<PAGE>
COOPER INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENT
APRIL 4, 1996 (INCEPTION)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Description - Cooper International Group, Inc. (the
"Company") was recently organized to acquire, integrate and
operate seasoned, privately-held companies operating in the
floorcovering industry.
Year-End - The Company will adopt a June 30 year end.
Acquisition - Upon completion of the Offering described in Note
4, the Company will acquire (the "Acquisition") all of the issued
and outstanding capital stock of Cooper Flooring International,
Inc. ("Cooper Florida") from TDA Industries, Inc. ("TDA") for
consideration consisting of 1,149,900 shares of Common Stock and
a warrant to purchase 250,000 (subject to adjustment) shares of
Common Stock at $1.00 per share. Cooper Florida was founded in
1948 and is engaged in the wholesale distribution of carpet,
wood, laminate, ceramic tile and vinyl floorcoverings and padding
and accessories throughout Florida, portions of Georgia and
Alabama and, to a lesser extent, the Caribbean. The acquisition
of Cooper Florida will be accounted for as the combining of two
entities under common control with the net assets of Cooper
Florida recorded at historical carryover values. The 1,149,900
shares of Common Stock to be issued to TDA will be recorded at
Cooper Florida's historical net book value at the date of
acquisition. Accordingly, this transaction will not result in any
revaluation of Cooper Florida's assets or the creation of
goodwill. Upon the consummation of the Acquisition, Cooper
Florida will become a wholly-owned subsidiary of the Company and
will constitute the sole business operations of the Company until
such time, if any, as the Company consummates additional
acquisitions.
Stock Options and Warrants - In October 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure
provisions no later than fiscal years beginning after December
15, 1995 and adoption of the measurement and recognition
provisions for nonemployee transactions no later than December
15, 1995. The new standard defines a fair value method of
accounting for stock options and other equity instruments. Under
the fair value method, compensation cost is measured at the grant
date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are
not required, to adopt the fair value method of accounting for
employee stock-based transactions. Companies are also permitted
to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"), but would be required to disclose in a
note to the financial statements pro forma net income and, if
presented, earnings per share as if the Company had applied the
new method of accounting. The new standard also requires
increased disclosures for stock-based compensation arrangements
regardless of the method chosen to measure and recognize
compensation for employee stock-based arrangements.
The accounting requirements of the new method are effective for
all transactions entered into during the fiscal year of adoption.
The Company has determined it will elect to follow the provisions
of APB No. 25 and will disclose the impact of the new standard in
the Notes to Financial Statements at June 30, 1996.
F-4
<PAGE>
2. CONTEMPLATED TRANSACTIONS WITH RELATED PARTIES
TDA will provide office space and administrative services to the
Company at its offices in New York City pursuant to an
administrative services agreement to be entered into by the
Company and TDA upon the closing of the Offering. The term of the
administrative services agreement will be for two years, and the
fee payable by the Company to TDA for administrative services
will be $5,000 per month.
Prior to the Offering, the Orlando Facility and the Jacksonville
Facility were leased by Cooper Florida from Jay Cooper, President
of the Company and the Chairman of Cooper Florida, on a
month-to-month basis. Rent expense for the Orlando Facility and
the Jacksonville Facility aggregated approximately $290,000 in
each of the fiscal years ended June 30, 1995, 1994 and 1993. Upon
the closing of the Offering, Cooper Florida will enter into two
five-year leases with Mr. Cooper pursuant to which it will rent
the Orlando Facility and the Jacksonville Facility from Mr.
Cooper at base rents of $225,500 and $49,900 per year,
respectively. Such leases will be terminable by Cooper Florida
upon six months prior written notice.
The Miami Facility is leased by Cooper Florida from N.W. 74th
Avenue Associates, a partnership which is equally owned by Jay
Cooper and by Cooper Holding, Inc., a wholly-owned subsidiary of
TDA. The lease is a fifteen year lease, which terminates in
December 2008. Rent expense for the Miami Facility aggregated
approximately $267,000, $141,000 (net of rent abatement of
$131,000) and $324,000 in the fiscal years ended June 30, 1995,
1994 and 1993, respectively, offset by sublease income of
approximately $70,000 in each of those years.
Through June 1996, the Company borrowed an aggregate of $15,275
from TDA in order to pay the professional fees and other expenses
related to the Private Placement (Note 5) and a portion of the
professional fees and other expenses related to the Offering. The
Company intends to execute a promissory note in the principal
amount of $15,275 in favor of TDA. The principal amount of this
note, together with interest at the rate of 8% per annum, is due
and payable upon demand and, in any event, will be repaid out of
working capital upon the consummation of the Offering.
Douglas P. Fields, the Chief Executive Officer and Chairman of
the Board of Directors of the Company, is an officer, director
and a principal stockholder of TDA and an officer and director of
Cooper Florida. Additionally, Frederick M. Friedman, the
Executive Vice President, Secretary, Treasurer and a director of
the Company, is an officer, director and a principal stockholder
of TDA and an officer and director of Cooper Florida.
John E. Smircina, a director nominee of the Company, is also a
director of TDA.
3. STOCKHOLDER'S EQUITY
Initial Capitalization - In June 1996, the Company issued 100
shares of common stock to TDA for a subscription price of $100.
Such stock was previously subscribed for when the Company was
organized on April 4, 1996.
Common Stock - Holders of common stock are entitled to one vote
for each share held of record on each matter submitted to a vote
of stockholders. There is no cumulative voting for election of
directors. Subject to the prior rights of any series of preferred
stock which may from time to time be outstanding, if any, holders
of common stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds legally available
therefor and, upon the liquidation, dissolution or winding up of
the Company, are entitled to share ratably in all assets
remaining after payment of liabilities and payment
F-5
<PAGE>
of accrued dividends and liquidation preferences on the preferred
stock, if any. Holders of common stock have no pre-emptive rights
and have no rights to convert their common stock into any other
securities.
Preferred Stock - The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of
issuance by the Board of Directors, without further action by
stockholders, and may include voting rights (including the right
to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion and redemption rights and
sinking fund provisions.
Warrants - Each Warrant (see Note 4) entitles the registered
holder to purchase one share of common stock at an initial
exercise price of $6.00 per share for three years commencing on
the second anniversary of the date of the Offering, provided that
during such time a current prospectus relating to the common
stock is then in effect and the common stock is qualified for
sale or exempt from qualification under applicable state
securities laws. The Warrants included in the Units (see Note 4)
in the Offering are transferable separately from the common
stock.
Stock Option Plan - In June 1996, the Company adopted the 1996
Stock Option Plan covering 1,000,000 shares of common stock which
are intended to be granted to employees, directors and
consultants. The options are intended to qualify as incentive
stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. No options have been granted.
Upon the closing of the Offering, the Company intends to grant
options exercisable into 450,000 shares of Common Stock to
various of its employees and non-employee directors. All of such
options will have a term of ten years. The exercise price per
share of these options will be equal to the initial public
offering price of the Units. Of the options to purchase 450,000
shares of Common Stock which the Company intends to grant upon
the closing of this offering, the Company will grant options to
purchase 120,000, 100,000, 50,000 and 50,000 to Messrs. Cooper,
Yeager, Fields and Friedman, respectively. Of such amount granted
to Mr. Cooper, options to purchase 80,000 shares of Common Stock
will be exercisable as to one-fifth of the shares covered thereby
on the first anniversary of the date of grant and as to an
additional one-fifth of the shares covered thereby on each of the
second, third, fourth and fifth anniversaries of the date of the
grant. Options to purchase 40,000 shares of Common Stock will
become exercisable as to one-third of the shares covered thereby
on each of the seventh, eighth and ninth anniversaries of the
date of grant, unless there is a $300,000 increase in operating
income for Cooper Florida between the fiscal years ending June
30, 1996 and June 30, 1997, in which case the vesting of such
options will be accelerated. Such acceleration will allow such
options to vest beginning in 1997 and every year thereafter such
that the total amount of all options granted to Mr. Cooper and
vesting in any single year does not exceed $100,000 at the
exercise price. Of such amount granted to Mr. Yeager, options to
purchase 60,000 shares of Common Stock will be exercisable as to
one-fifth of the shares covered thereby on the first anniversary
of the date of grant and as to an additional one-fifth of the
shares covered thereby on each of the second, third, fourth and
fifth anniversaries of the date of the grant. Options to purchase
40,000 shares of Common Stock will become exercisable as to
one-third of the shares covered thereby on each of the seventh,
eighth and ninth anniversaries of the date of grant, unless there
is a $300,000 increase in operating income for Cooper Florida
between the fiscal years ending June 30, 1996 and June 30, 1997,
in which case the vesting of such options will be accelerated.
Such acceleration will allow such options to vest beginning in
1997 and every year thereafter such that the total amount of all
options granted to Mr. Yeager and vesting in any single year does
not exceed $100,000 at the exercise price. The options
exercisable to purchase 50,000 shares of Common Stock granted to
each of Messrs. Fields and Friedman will be Nonqualified Stock
Options and will vest as to one-fifth of the shares covered
thereby on the first anniversary of the date of grant and as to
an additional one-fifth of the shares covered thereby on each of
the second, third, fourth and fifth anniversaries of the date of
grant.
F-6
<PAGE>
Upon the closing of this offering, Paul D. Finkelstein, George
Skakel III and John E. Smircina, director nominees of the
Company, will each be granted options to purchase 10,000 shares
of Common Stock pursuant to the Company's 1996 Stock Option Plan.
Such options will have a term of ten years and will have an
exercise price per share equal to the initial public offering
price of the Units. All of such options will vest on the first
anniversary of the date of grant.
4. INITIAL PUBLIC OFFERING
On July 12, 1996, the Company signed a letter of intent with
State Street Capital Markets, Corp. (the "Representative") for an
initial public offering (the "Offering"). The Offering is
expected to cover 1,000,000 Units of the Company. Each Unit will
consist of one share of common stock, par value $.001 per share,
of the Company and one common stock purchase warrant ("Warrant")
to purchase one share of common stock exercisable at $6.00 per
share. The Warrants will be exercisable for a period of three
years commencing on the second anniversary of the closing of the
Offering.
5. PRIVATE PLACEMENT
On June 21, 1996, upon the closing of a private placement, the
Company issued warrants exercisable to purchase 2,000,000 shares
of common stock ("Bridge Warrants") and warrants exercisable to
purchase 250,000 shares of common stock ("Private Warrants") to
subscribers to the private placement in consideration of an
aggregate of $200,000 (the "Private Placement"). The net
proceeds, $152,000, are expected to be used to pay a portion of
the expenses related to the Offering and the Private Placement.
The Bridge Warrants are exercisable commencing two years
following the closing of the Offering, and shall expire five
years following the closing of the Offering. Upon the closing of
the Offering, the terms and conditions of the Bridge Warrants
will automatically convert to the terms and conditions of the
Warrants offered in the Offering. Each Private Warrant is
exercisable to purchase one share of common stock at an exercise
price equal to $1.00 per share. The Private Warrants are
exercisable commencing two years following the closing of the
Offering and shall expire five years following the closing of the
Offering.
Prior to the Offering, the Private Warrants may not be redeemed
by the Company without the prior written consent of the holders
thereof; provided, however, that in the event that the Offering
is not consummated pursuant to the terms set forth therein, or in
the event that the Offering is consummated and the acquisition of
Cooper Florida is not consummated pursuant to the terms set forth
therein, due to any act or omission within the control of Cooper
Florida or the Company or TDA (including, without limitation, any
material breach or material failure of performance under the
proposed acquisition agreement between the Company and Cooper
Florida), TDA has agreed to offer to purchase the Bridge Warrants
and the Private Warrants for an aggregate purchase price of
$200,000 from the holders thereof.
* * * * *
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Cooper Flooring International, Inc.
We have audited the accompanying balance sheets of Cooper Flooring
International, Inc. (formerly Cooper Distributors, Inc.) (the "Company"), a
wholly-owned subsidiary of TDA Industries, Inc., as of June 30, 1995 and 1994
and the related statements of operations, shareholder's equity and cash flows
for each of the three years in the period ended June 30, 1995. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Cooper Flooring International, Inc. as of
June 30, 1995 and 1994, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in fiscal 1994 the Company
changed its method of accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Miami, Florida
September 1, 1995
F-8
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
BALANCE SHEETS
JUNE 30, 1995 AND 1994
- ---------------------------------------------------------------------------------------
ASSETS 1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 219,225 $ 324,948
Accounts receivable - trade (net of allowance for doubtful
accounts - 1995 - $109,000; 1994 - $141,000) 2,479,137 2,353,228
Inventories 3,672,885 3,470,321
Deferred tax asset 182,573 199,974
Other current assets 376,104 168,226
---------- ----------
Total current assets 6,929,924 6,516,697
IMPROVEMENTS AND EQUIPMENT (net of accumulated
depreciation and amortization) (Note 2) 265,155 290,090
---------- ----------
$7,195,079 $6,806,787
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of capitalized leases (Note 3) $ -- $ 10,496
Accounts payable 1,948,270 1,385,651
Accrued expenses and other current liabilities 313,943 305,761
---------- ----------
Total current liabilities 2,262,213 1,701,908
DUE TO PARENT AND AFFILIATED COMPANIES (Note 3) 152,240 376,539
DEFERRED TAX LIABILITY 25,492 23,745
---------- ----------
Total liabilities 2,439,945 2,102,192
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 5)
SHAREHOLDER'S EQUITY:
Common Shares, $1 par value:
Authorized and outstanding - 500 shares 500 500
Additional paid-in capital 5,323,794 5,304,643
Deficit (569,160) (600,548)
---------- ----------
Total shareholder's equity 4,755,134 4,704,595
---------- ----------
$7,195,079 $6,806,787
========== ==========
</TABLE>
See notes to financial statements.
F-9
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
REVENUES $ 29,547,332 $ 28,020,473 $ 30,900,151
COST OF SALES 23,340,482 22,438,437 24,629,040
------------ ------------ ------------
6,206,850 5,582,036 6,271,111
------------ ------------ ------------
OPERATING EXPENSES (including a provision
for doubtful accounts of $86,000, $106,138 and
$86,306 in 1995, 1994 and 1993, respectively) 5,904,360 5,319,556 5,472,319
INTERCOMPANY CHARGES (NOTE 3) 247,234 121,219 304,212
------------ ------------ ------------
6,151,594 5,440,775 5,776,531
------------ ------------ ------------
INCOME FROM OPERATIONS 55,256 141,261 494,580
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (9,966) (3,278) (8,473)
Other income 5,098 2,121 187
------------ ------------ ------------
(4,868) (1,157) (8,286)
------------ ------------ ------------
INCOME BEFORE PROVISION (BENEFIT) FOR
INCOME TAXES 50,388 140,104 486,294
PROVISION (BENEFIT) FOR INCOME TAXES 19,000 (176,000) 182,000
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 31,388 316,104 304,294
EXTRAORDINARY ITEM:
Utilization of net operating loss carryover -- -- 180,000
------------ ------------ ------------
NET INCOME $ 31,388 $ 316,104 $ 484,294
============ ============ ============
</TABLE>
See notes to financial statements.
F-10
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------------------------
Additional
Common Shares Paid-In
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1992 500 $500 $4,947,576 $(1,143,856) $ 3,804,220
Net income -- -- -- 484,294 484,294
Capital contribution from Parent -- -- 357,067 -- 357,067
--- ---- ---------- ----------- -----------
Balance, June 30, 1993 500 500 5,304,643 (659,562) 4,645,581
Net income -- -- -- 316,104 316,104
Dividends paid to Parent -- -- -- (257,090) (257,090)
--- ---- ---------- ----------- -----------
Balance, June 30, 1994 500 500 5,304,643 (600,548) 4,704,595
Net income -- -- -- 31,388 31,388
Capital contribution from Parent -- -- 19,151 -- 19,151
--- ---- ---------- ----------- -----------
Balance, June 30,1995 500 $500 $5,323,794 $ (569,160) $ 4,755,134
=== ==== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-11
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,388 $ 316,104 $ 484,294
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 60,746 104,776 127,125
Deferred income taxes 19,148 (176,229) --
(Decrease) increase in allowance for doubtful accounts (31,689) 46,000 (4,000)
Gain on sale of equipment -- (2,701) --
Changes in operating assets and liabilities:
Increase in accounts receivable (94,220) (96,899) (50,669)
(Increase) decrease in inventories (202,564) 423,546 (274,495)
(Increase) decrease in other current assets (207,878) (17,776) 106,840
Increase (decrease) in accounts payable 562,619 190,011 (324,177)
Increase (decrease) in accrued expenses and other
current liabilities 8,182 (148,504) 86,929
Decrease in due to Parent and affiliated companies (224,299) (168,401) (413,618)
--------- --------- ---------
Net cash (used in) provided by operating activities (78,567) 469,927 (261,771)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (35,811) (49,974) (27,986)
Proceeds from sale of equipment -- 12,673 --
--------- --------- ---------
Net cash used in investing activities (35,811) (37,301) (27,986)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capitalized lease obligations (10,496) (15,016) (55,403)
Capital contribution from Parent 19,151 -- 357,067
Dividend paid to Parent -- (257,090) --
--------- --------- ---------
Net cash provided by (used in) financing activities 8,655 (272,106) 301,664
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (105,723) 160,520 11,907
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 324,948 164,428 152,521
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 219,225 $ 324,948 $ 164,428
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for interest $ 9,966 $ 3,278 $ 8,473
========= ========= =========
</TABLE>
See notes to financial statements.
F-12
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Business Description - The Company is a wholly-owned subsidiary
of TDA Industries, Inc. (the "Parent") and is engaged in the
wholesale distribution of carpet, ceramic tile, resilient
flooring, wood flooring, laminate and padding and accessories
throughout Florida, portions of Georgia and Alabama and, to a
lesser extent, the Caribbean. The Company operates in a single
industry segment. During fiscal 1996, the Company changed its
name from Cooper Distributors, Inc.
Inventories - Inventories are valued at the lower of cost or
market. Cost is determined by using the last-in, first-out (LIFO)
method. If inventories had been valued at the lower of first-in,
first-out (FIFO) cost or market, inventories would be higher by
approximately $874,000, $854,000 and $879,000 for fiscal 1995,
1994 and 1993, respectively, and income before provision for
income taxes would have increased by approximately $20,000 for
fiscal 1995, decreased $25,000 for fiscal 1994 and no effect for
fiscal 1993.
Depreciation and Amortization - Depreciation and amortization of
improvements and equipment are provided by the straight-line
method and by an accelerated method at various rates calculate to
extinguish the carrying values of the respective assets over
their estimated useful lives.
Income Taxes - The Company is included in the consolidated
Federal income tax return of its Parent. Income taxes are
calculated on a separate return filing basis.
As of July 1, 1993, the Company has adopted Statement of
Financial Accounting Standards, No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred income
taxes are recognized for the tax consequences of differences
between the bases of assets and liabilities for income tax and
financial statement reporting, based on enacted tax laws.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. Prior
to the adoption of SFAS No. 109, the Company accounted for income
taxes under Accounting Principles Board Opinion No. 11.
Cash and Cash Equivalents -The Company considers money market
accounts and highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents for the
purpose of these financial statements.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
F-13
<PAGE>
2. IMPROVEMENTS AND EQUIPMENT
The major classes of improvements and equipment are as follows:
Estimated
June 30, Useful
1995 1994 Lives
Furniture, fixtures and machinery $1,292,059 $1,257,088 5-10 years
Automotive equipment 188,930 188,930 3-5 years
Leasehold improvements 80,539 79,699 7-10 years
---------- ----------
1,561,528 1,525,717
Less: Accumulated depreciation and
amortization 1,296,373 1,235,627
---------- ----------
$ 265,155 $ 290,090
========== ==========
Automotive equipment at June 30, 1995 and 1994 includes assets
acquired under capitalized lease which expired in 1995.
3. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES
Fees of $50,000 have been charged to the Company in each of
fiscal 1995, 1994 and 1993. Such fees represent primarily audit
fees and accounting services incurred on behalf of the Company.
In fiscal 1995 and 1993, the Company received capital
contributions from its Parent of $19,151 and $357,067
respectively.
In fiscal 1994, the Company paid dividends to its Parent of
$257,090.
The Company leases two of its warehouse facilities from one of
its officers on a month-to-month basis. Rent expense under these
operating leases, which include certain occupancy costs, charged
to operations aggregated approximately $290,000 in fiscal 1995,
1994 and 1993.
The Company leases one of its warehouse facilities from a joint
venture which is fifty (50%) percent owned by the same officer of
the Company and fifty (50%) percent owned by a subsidiary of the
Parent. The lease is a fifteen year lease, which terminates in
December 2008. Rent expense under this lease, which includes
certain occupancy costs, aggregated approximately $197,000,
$71,000 (net of rent abatement of $131,000) and $254,000 in
fiscal 1995, 1994 and 1993, respectively, net of sublease income
of approximately $70,000 in each of those years.
The approximate future minimum rental commitments under all
related party operating leases are as follows:
Year Ending June 30, Amount
1996 $ 440,000
1997 440,000
1998 440,000
1999 440,000
2000 440,000
------------
$2,200,000
============
F-14
<PAGE>
The following is a reconciliation of the activity in the Due to
Parent and Affiliated Companies account for the periods
presented:
Year Ended June 30,
1995 1994 1993
Balance, beginning of year $ 376,539 $ 544,940 $ 958,558
Fees for auditing and
accounting services 50,000 50,000 50,000
Rent - net of sublease income 197,234 71,219 254,212
Dividends paid to parent -- 257,090 --
Capital contributions from parent (19,151) -- (357,067)
Cash advances - net (452,382) (546,710) (360,763)
--------- --------- ---------
Balance, end of year $ 152,240 $ 376,539 $ 544,940
========= ========= =========
4. INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of
July 1, 1993. The cumulative effect of this change in accounting
principle was to record a deferred tax asset of $211,230.
Components of the provision (benefit) for income taxes are as
follows:
Year Ended June 30,
1995 1994 1993
Current
Federal $ -- $ -- $152,823
State and local -- -- 29,177
Deferred 19,000 (176,000) --
--------- --------- --------
$ 19,000 $(176,000) $182,000
========= ========= ========
F-15
<PAGE>
A reconciliation of income taxes at the Federal statutory rate to
amounts provided is as follows:
Year Ended June 30,
1995 1994 1993
Tax provision at statutory rate $ 17,000 $ 47,635 $ 165,340
State and local income taxes 2,000 5,604 19,451
Other -- (273) (4,768)
Alternative Minimum Tax -- (17,736) 1,977
Cumulative impact of adopting SFAS No. 109 -- (211,230) --
--------- --------- ---------
$ 19,000 $(176,000) $ 182,000
========= ========= =========
Temporary differences which give rise to deferred tax assets and
liabilities as follows:
June 30,
1995 1994
Deferred Tax Assets:
Reserve for bad debts $ 41,560 $ 53,602
Inventory capitalization 21,241 20,110
AMT credit 19,713 19,713
Net operating loss carryover 100,059 106,549
--------- ---------
182,573 199,974
Deferred Tax Liability:
Depreciation (25,492) (23,745)
--------- ---------
Net deferred tax asset $ 157,081 $ 176,229
========= =========
At June 30, 1995, the Company had approximately $263,000 of net
operating loss carryforwards for Federal income tax purposes,
which expire through 2007.
5. COMMITMENTS AND CONTINGENCIES
The Company is committed to an unrelated party for a long-term
lease for property. The lease expires in 1997 and provides for
the payment of taxes and other occupancy costs. Rental expense
for this property for the years ended 1995, 1994 and 1993 was
$45,600, $43,600 and $27,300, respectively.
The approximate future minimum rental commitments under this
lease are as follows:
Year Ending June 30, Amount
1996 $ 40,000
1997 23,000
-----------
$ 63,000
===========
The Company currently buys, pursuant to an exclusive distribution
agreement, in excess of 15% of its carpet for orders in Florida
and portions of Alabama and Georgia from one supplier. Although
there are other suppliers available, the loss of this supplier
could have a material adverse effect on the business of the
F-16
<PAGE>
Company unless the Company could replace the product line of such
supplier with a product line with the same name and quality
recognition.
The Company has a profit sharing plan covering eligible employees
(the "Plan"). The Plan provides for contributions at the
Company's discretion. There were no contributions to the Plan in
fiscal 1995 or 1994. There was a contribution to the Plan of
approximately $16,000 in fiscal 1993.
* * * * *
F-17
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------
ASSETS March 31, 1996
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 76,620
Accounts receivable - trade (net of allowance for doubtful
accounts of $139.000) 2,541,907
Inventories 4,402,369
Deferred tax asset 116,974
Other current assets 307,556
-----------
Total current assets 7,445,426
IMPROVEMENTS AND EQUIPMENT (net of accumulated
depreciation and amortization) 293,882
-----------
$ 7,739,308
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,530,234
Accrued expenses and other current liabilities 308,172
-----------
Total current liabilities 2,838,406
DUE TO PARENT AND AFFILIATED COMPANIES 374,100
DEFERRED TAX LIABILITY 26,802
-----------
Total liabilities 3,239,308
-----------
SHAREHOLDER'S EQUITY:
Common Shares, $1 par value:
Authorized and outstanding - 500 shares 500
Additional paid-in capital 5,323,794
Deficit (824,294)
-----------
Total shareholder's equity 4,500,000
-----------
$ 7,739,308
===========
See notes to condensed financial statements.
F-18
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT
- --------------------------------------------------------------------------------
Nine Months Ended
March 31,
1996 1995
(Unaudited)
REVENUES $ 22,910,079 $ 22,139,873
COST OF SALES 17,840,496 17,495,196
------------ ------------
5,069,583 4,644,677
------------ ------------
OPERATING EXPENSES 4,704,354 4,404,699
------------ ------------
INTERCOMPANY CHARGES 189,355 182,396
------------ ------------
4,893,709 4,587,095
------------ ------------
INCOME FROM OPERATIONS 175,874 57,582
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense -- (1,085)
Other income 201 4,617
------------ ------------
201 3,532
------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES 176,075 61,114
PROVISION FOR INCOME TAXES 67,000 23,000
------------ ------------
NET INCOME 109,075 38,114
DEFICIT, BEGINNING OF PERIOD (569,160) (600,548)
DIVIDENDS PAID TO PARENT (364,209) --
------------ ------------
DEFICIT, END OF PERIOD $ (824,294) $ (562,434)
============ ============
See notes to condensed financial statements.
F-19
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
CONDENSED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1996 1995
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 109,075 $ 38,114
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 36,743 58,415
Deferred income taxes 66,909 23,224
Increase in allowance for doubtful accounts 29,753 32,589
Changes in operating assets and liabilities:
Increase in accounts receivable (92,523) (354,057)
Increase in inventories (729,484) (932,059)
Decrease (increase) in other current assets 68,548 (61,781)
Increase in accounts payable 581,964 801,599
Decrease in accrued expenses and other current liabilities (5,771) (107,114)
Increase in due to Parent and affiliated companies 221,860 192,606
--------- ---------
Net cash provided by (used in) operating activities 287,074 (308,464)
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (65,470) (23,225)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capitalized lease obligations -- (7,660)
Capital contribution from Parent -- 14,671
Dividend paid to Parent (364,209) --
--------- ---------
Net cash (used in) provided by financing activities (364,209) 7,011
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (142,605) (324,678)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 219,225 324,948
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 76,620 $ 270
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ -- $ 1,085
========= =========
</TABLE>
See notes to condensed financial statements.
F-20
<PAGE>
COOPER FLOORING INTERNATIONAL, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The condensed financial statements of Cooper Flooring
International, Inc. (the "Company"), a wholly-owned subsidiary of
TDA Industries, Inc., included herein have been prepared by the
Company, which is responsible for their integrity and
objectivity, without audit. In the opinion of management, all
adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of financial position,
results of operations and cash flows have been included. These
condensed financial statements, which, to the best of
management's knowledge and belief, were prepared in accordance
with generally accepted accounting principles, should be read in
conjunction with the financial statements and notes thereto for
the year ended June 30, 1995. Operating results for the interim
period are not necessarily indicative of results for the entire
year.
2. PROPOSED SALE OF THE COMPANY
The Company's Parent intends to sell the Company to a newly
formed entity, Cooper International Group, Inc. ("CIG"). CIG was
organized on April 4, 1996 for the purpose of acquiring,
integrating and operating seasoned, privately-held companies
operating in the floorcovering industry. The acquisition of the
Company by CIG is contingent upon the successful completion of an
initial public offering of 1,000,000 Units of CIG consisting of
1,000,000 shares of CIG common stock, par value $.001 per share,
and 1,000,000 common stock purchase warrants to purchase one
share of CIG common stock exercisable at $6.00 per share. Upon
consummation of the acquisition, the Company will constitute the
sole business operations of CIG until such time, if any, as CIG
consummates additional acquisitions. Additionally, amounts due to
Parent and affiliated companies in the aggregate amount of
approximately $374,000 at March 31, 1996 will be converted to a
6% note payable on the first anniversary of the closing of CIG's
initial public offering.
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<PAGE>
===================================== =======================================
No person is authorized in
connection with any offering made
hereby to give any information or
to make any representation not COOPER INTERNATIONAL
contained in this Prospectus, and, GROUP, INC.
if given or made, such information
or representation must not be 1,000,000 Units
relied upon as having been
authorized by the Company or the Consisting of
Representatives. This Prospectus
does not constitute an offer to 1,000,000 Shares of Common Stock and
sell or a solicitation of an offer
to buy any of the securities 1,000,000 Common Stock Purchase Warrants
offered hereby to any person in any
jurisdiction in which it is
unlawful to make such an offer or
solicitation. Neither the delivery
of this Prospectus nor any sale
made hereunder shall under any
circumstances create any
implication that the information
contained herein is correct as of
any date subsequent to the date
hereof.
TABLE OF CONTENTS
PAGE
Prospectus Summary.................4
Risk Factors.......................8
Use of Proceeds...................16
Dividend Policy...................17 ----------------------------
Capitalization....................18 PROSPECTUS
Dilution..........................20 ----------------------------
Unaudited Pro Forma Condensed
Consolidated Balance Sheet......22
Selected Financial Information....25
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......26
Business..........................30
Management........................36
Principal Stockholders............42
Concurrent Registration for
Selling Securityholders.........44
Certain Transactions..............46
Description of Capital Stock......49
Underwriting......................54
Shares Eligible for Future Sale...56
Legal Matters.....................58
Experts...........................58
Additional Information............58 STATE STREET CAPITAL MARKETS,
Index to Financial Statements.... F-1 CORP.
Until _________ __, 1996 (25 days
after the date of this Prospectus),
all dealers effecting transactions
in the registered securities,
whether or not participating in
this distribution, may be required
to deliver a Prospectus. This is in , 1996
addition to the obligations of
dealers to deliver a Prospectus
when acting as Representatives 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.
It is estimated that the following expenses will be incurred in
connection with the proposed offering hereunder. All of such expenses will be
borne by the registrant.
Registration fee - Securities and Exchange Commission......$9,201.70
NASD filing fee............................................
Nasdaq Stock Market listing fee............................ *
Legal fees and expenses.................................... *
Accounting fees and expenses............................... *
Transfer agent fees and expenses........................... *
Blue sky fees and expenses (including counsel fees)........ *
Printing expenses.......................................... *
Miscellaneous.............................................. *
-------
Total.......................................$ *
=======
- ------------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
1. Section 145 of Delaware General Corporation Law. Section 145
of the Delaware General Corporation Law provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of 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), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, in and of itself, create a
presumption that his conduct was unlawful.
Section 145 also provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he 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 by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest 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 Court of Chancery or the court in which
such action or suit was brought shall determine upon adjudication that, despite
the adjudication of liability but in
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<PAGE>
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
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 above, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
therewith.
Any such indemnification (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 or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth above. 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; or
(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 stockholders.
Section 145 permits a Delaware business corporation to 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 by him in such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify such person.
2. Charter Provisions on Indemnity. Article Eleventh of the
Certificate of Incorporation of the Company sets forth the extent to which the
Company's directors and officers may be indemnified by the Company against
liabilities which they may incur while serving in such capacity. Such
indemnification will be provided to the fullest extent permitted and in the
manner required by the Delaware General Corporation Law. This article generally
provides that the Company shall indemnify the directors and officers of the
Company who are or were a party to any threatened, pending, or completed action,
suit or proceeding, whether in nature civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Company or of any constituent corporation absorbed into the Company by
consolidation or merger or serves or served with another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Company or of any such constituent corporation and, at the Company's option,
provides advances for expenses incurred in defending any such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of such officer or
director to repay such advances unless it is ultimately determined that he is
entitled to indemnification by the Company.
3. Limitation of Liability of Directors. As permitted by the
Delaware General Corporation Law, the Company's Certificate of Incorporation
provides that a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of the fiduciary
duty of care as a Director. By its terms and in accordance with the Delaware
General Corporation Law, however, this provision does not eliminate or limit the
liability of a director of the Company (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (relating to
unlawful payments
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<PAGE>
of dividends or unlawful stock repurchases or redemptions), or (iv) for any
transaction from which the director derived an improper personal benefit.
4. Director and Officer Liability Insurance. The Company has not
purchased director and officer liability insurance but intends to do so
subsequent to this offering. Any such insurance, if obtained, would cover its
directors and officers with respect to liability which they may incur in
connection with their serving as such, which liability could include liability
under the Securities Act. The insurance may also provide certain additional
coverage for the directors and officers against certain liability even though
such liability would not be subject to indemnification under Article Eleventh of
the Company's Certificate of Incorporation.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) In April 1996, the Company issued 100 shares of Common Stock
to TDA Industries, Inc., for a subscription price of $100.
(b) In June 1996, the Company issued an aggregate of 2,000,000
Bridge Warrants and 250,000 Private Warrants in consideration for an aggregate
of $200,000.
No underwriting discounts or commissions were paid in connection
with any of the transactions set forth in (a) and (b) above. The issuance and
sale of the securities set forth in (a) and (b) above are believed by the
registrant to be exempt from registration under the Securities Act in reliance
upon section 4(2) of such Act as transactions not involving a public offering.
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<PAGE>
Exhibit
NUMBER DESCRIPTION
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit
Number Description
------ -----------
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
4.1* Specimen of Common Stock Certificate
4.2* Form of Representative's Unit Purchase Option
4.3* Form of Warrant Agreement, including Form of
Warrant Certificate
4.4 Form of Bridge Warrant
4.5 Form of Private Warrant
4.6* Form of Acquisition Warrant
5.1* Opinion of Parker Chapin Flattau & Klimpl, LLP
10.1* Form of Stock Purchase Agreement by and between
the Registrant and TDA Industries, Inc. in
connection with the acquisition of Cooper Flooring
International, Inc.
10.2* Form of Jay Cooper Employment Agreement
10.3* Form of James C. Yeager Employment Agreement
10.4 1996 Stock Option Plan
10.5* Form of Orlando Facility Lease
10.6* Form of Jacksonville Facility Lease
10.7* Form of Miami Facility Lease
10.8* Form of Tampa Facility Lease
- -----------------------------------------------------------------
* To be filed by amendment.
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<PAGE>
Exhibit
NUMBER DESCRIPTION
10.9* Form of Management and Administrative Services
Agreement to be entered into by TDA Industries,
Inc. and the Registrant
23.1 Consents of Deloitte & Touche LLP
23.2* Consent of Parker Chapin Flattau & Klimpl, LLP
(Included in Exhibit 5.1)
23.3* Consent of John E. Smircina
23.4* Consent of George Skakel III
23.5* Consent of Paul D. Finkelstein
24.1 Power of Attorney (Included on page II-8)
- -----------------------------------------------------------------
* To be filed by amendment.
(b) Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
ALLOWANCE FOR DOUBTFUL ACCOUNTS (1)
Balance Charged
at to Balance
Beginning Costs at
of and End of
Year Expenses Deductions Year
---- -------- ---------- ----
Year Ended
June 30, 1993 $ 99,384 $ 86,306 $ (91,100) $ 94,590
Year Ended
June 30, 1994 94,590 106,138 (59,671) 141,057
Year Ended
June 30, 1995 141,057 86,000 (117,689) 109,000
(1) Data relates to Cooper Florida due to the fact that the Company
was organized in April 1996 and has conducted no business
activities to date.
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<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this registration statement;
(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. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(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.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, as
amended, each filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to provide to
the Representatives, at the closing specified in the underwriting agreement
included in Exhibit 1.1 hereto, certificates in such denominations and
registered in such names as required by the Representatives to permit delivery
to each purchaser.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
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<PAGE>
Item 14 above, 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 Securities 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
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability
under the Securities Act of 1933, as amended, the information omitted from the
form of prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended,
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability
under the Securities Act of 1933, as amended, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of New
York, State of New York, on the 9th day of August, 1996.
COOPER INTERNATIONAL GROUP, INC.
By /S/ DOUGLAS P. FIELDS
-----------------------------
Douglas P. Fields
Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Cooper International
Group, Inc. hereby constitute and appoint Douglas P. Fields and Frederick M.
Friedman, and each of them, with full power to act without the other and with
full power of substitution and resubstitution, our true and lawful
attorneys-in-fact with full power to execute in our name and behalf in the
capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement and to file
the same, with all exhibits thereto and other documents in connection therewith
with the Securities and Exchange Commission and hereby ratify and confirm that
such attorneys-in-fact, or either of them, or their substitutes shall lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ DOUGLAS P. FIELDS Chairman of the Board of Directors August 9, 1996
- -------------------------- and Chief Executive Officer
Douglas P. Fields
/S/ FREDERICK M. FRIEDMAN Executive Vice President, Chief August 9, 1996
- -------------------------- Financial Officer, Treasurer, Secretary
Frederick M. Friedman and Director (Principal Financial and
Accounting Officer)
II-8
CERTIFICATE OF INCORPORATION
OF
COOPER INTERNATIONAL GROUP, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Cooper International Group, Inc.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the registered
agent of the corporation in the State of Delaware is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted 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.
FOURTH: The name and the mailing address of the incor- porator are as
follows:
Name Mailing Address
---- ---------------
Kenneth A. Rosenblum c/o Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
FIFTH: The corporation is to have perpetual existence.
SIXTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 11,000,000 of which (i) 1,000,000
shall be Preferred Stock, par value $0.001 per share; and (ii) 10,000,000 shall
be Common Stock, par value $0.001 per share.
A statement of the designations of the authorized classes of stock or
of any series thereof, and the powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, or of the authority of the board of directors to fix by
resolution or resolutions such designations and other terms not fixed by the
Certificate of Incorporation, is as follows:
<PAGE>
1. The Preferred Stock may be issued in one or more
series, from time to time, with each such series to have such
designation, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series
adopted by the board of directors of the corporation, subject to the
limitations prescribed by law and in accordance with the provisions
hereof, the board of directors being hereby expressly vested with
authority to adopt any such resolution or resolutions. The authority
of the board of directors with respect to each such series shall
include, but not be limited to, the determination or fixing of the
following:
(i) The distinctive designation and number of
shares comprising such series, which number may (except
where otherwise provided by the board of directors in
creating such series) be increased or decreased (but not
below the number of shares then outstanding) from time to
time by like action of the board of directors;
(ii) The dividend rate of such series, the
conditions and times upon which such dividends shall be
payable, the relation which such dividends shall bear to
the dividends payable on any other class or classes of
stock or series thereof, of any other series of the same
class, whether the corporation shall be required to pay
such dividends on specified dates, if funds are legally
available for the payment thereof, or, whether the payment
of such dividends shall be entirely at the discretion of
the board of directors, whether such dividends shall be
payable in cash or by the issuance of Common or Preferred
Stock of the corporation, and whether dividends shall be
cumulative or non-cumulative;
(iii) Whether or not the shares of such series
shall be subject to redemption by the corporation and the
conditions thereof, and the times, prices and other terms
and provisions upon which the shares of the series may be
redeemed;
(iv) Whether or not the shares of the series
shall be subject to the operation of a retirement or
sinking fund to be applied to the purchase or redemption
of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(v) Whether or not the shares of the series
shall be convertible into or exchangeable for shares of
any other class or classes, with or without par value, or
of any other series of the same class, and, if provision
is made for conversion or exchange, the times, prices,
rates, adjustments and other terms and conditions of such
conversion or exchange;
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(vi) Whether or not the shares of the series
have voting rights, in addition to the voting rights
provided by law, and, if so, subject to the limitation
hereinafter set forth, the terms of such voting rights;
(vii) The rights of the shares of the series in
the event of voluntary or involuntary liquidation,
dissolution, or upon the distribution of assets of the
corporation; and
(viii) Any other powers, preferences and
relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof,
of the shares of such series, as the board of directors
may deem advisable and as shall not be inconsistent with
the provisions of this Certificate of Incorporation.
2. The holders of shares of the Preferred Stock of each
series shall be entitled to receive dividends, in accordance with the
provisions of the resolution of the board of directors creating each
series, out of funds legally available for the payment thereof, at
the rates fixed by the board of directors for such series, and no
more, before any dividends, other than dividends payable in Common
Stock, shall be declared and paid, or set apart for payment, on the
Common Stock with respect to the same dividend period.
3. Whenever, at any time, dividends on the then
outstanding Preferred Stock as may be required with respect to any
series outstanding shall have been paid or declared and set apart for
payment on the then outstanding Preferred Stock, and after complying
with respect to any retirement or sinking fund or funds for any
series of Preferred Stock, the board of directors may, subject to the
provisions of the resolution or resolutions creating any series of
Preferred Stock, declare and pay dividends on the Common Stock.
4. The holders of shares of the Preferred Stock of each
series shall be entitled upon liquidation or dissolution or upon the
distribution of the assets of the corporation to such preferences as
provided in the resolution or resolutions creating such series of
Preferred Stock, and no more, before any distribution of the assets
of the corporation shall be made to the holders of shares of Common
Stock. Whenever the holders of shares of the Preferred Stock shall
have been paid the full amounts to which they shall be entitled, the
holders of shares of the Common Stock shall be entitled to share
ratably in all assets of the corporation remaining unless otherwise
provided in the resolution or resolutions creating such series of
Preferred Stock.
5. At all meetings of the stockholders of the corporation,
the holders of shares of the Common Stock shall be entitled to one
vote for each share of Common Stock held by them. Except as otherwise
provided by a resolution or resolutions of the board of directors
creating any series of Preferred Stock or by the General Corporation
Law of Delaware, the holders of shares of the Common Stock issued and
outstanding shall have and possess the exclusive right to notice of
stockholders' meetings and the exclusive
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power to vote. The holders of shares of the Preferred Stock issued
and outstanding shall have and possess the exclusive right to notice
of stockholders' meetings and the exclusive power to vote. The
holders of shares of the Preferred Stock issued and outstanding
shall, in no event, be entitled to more than one vote for each share
of Preferred Stock held by them unless otherwise required by law.
6. The Preferred Stock purchased, redeemed or converted
pursuant to any of the provisions of the resolution of the board of
directors creating each series, shall, at the discretion of the board
of directors, be held in the treasury of the corporation subject to
reissuance, or shall, from time to time, in the discretion of the
board of directors, upon the filing and recording of such certificate
as may be in accordance with the laws of the State of Delaware, be
returned to the status of authorized and unissued shares of Preferred
Stock, in which event such shares shall no longer be part of the
series created in connection with the original issuance thereof.
7. No holder of the Common Stock or the Preferred Stock of
the corporation shall be entitled as such, as a matter of right, to
subscribe for, or purchase any part of, any new or additional issue
of stock of the corporation of any class or of any issue of
securities convertible into stock, or of any warrants or rights to
purchase stock, whether now or hereafter authorized and whether
issued for money or for a consideration other than money.
Subject to the provisions of this Article SIXTH, upon such
terms, in such manner and under such conditions, in conformity with
law, as may be fixed by the board of directors, the board of
directors shall have the power to issue bonds, debentures, or other
obligations, either convertible or non-convertible, into the
corporation's stock, and warrants and rights to purchase the
corporation's stock.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the following provisions are inserted in
this Certificate of Incorporation for the regulation and conduct of the business
and affairs of the corporation:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its board of directors, consisting of not
less than two (2) nor more than nine (9) persons. The exact number of directors
within the minimum and maximum limitations specified herein shall be fixed from
time to time by resolution of a majority of the whole board of directors. All
directors of the corporation shall hold office until their respective successors
shall be elected and qualified or until their earlier resignation or removal.
All directors shall have the power, from time to time, to increase or decrease
their own number, within the minimum and maximum limitations specified herein,
by resolution of the board of directors as hereinabove provided.
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2. Directors may be removed from office with or without cause by the
holders of a majority of the outstanding shares of capital stock of the
corporation entitled to vote at an election of directors.
3. Newly created directorships resulting from an increase in the
number of directors and all vacancies occurring in the board, including
vacancies occurring in the board by reason of the removal of directors, may be
filled by the affirmative vote of a majority of the directors then in office,
though less than a quorum of the board of directors, and directors so chosen
shall hold office until their respective successors shall be elected and
qualified.
4. The directors of the corporation, by the affirmative vote of a
majority of the whole board, at any regular or special meeting, shall have the
power to adopt, amend or repeal By-laws of the corporation, provided, however,
that such power of the board shall not divest the stockholders of the
corporation of their power to adopt, amend or repeal By-laws of the corporation.
5. In addition to the powers and authorities conferred upon the board
of directors of the corporation by this certificate of incorporation, the board
of directors of the corporation may exercise all such powers and take all such
actions as may be exercised or taken by the corporation, subject, however, to
the provisions of the laws of the State of Delaware, this certificate of
incorporation and the By-laws of the corporation.
EIGHTH: 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 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 of 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.
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<PAGE>
NINTH: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. 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 by-laws of the corporation. Elections of
directors need not be by written ballot unless the by-laws of the corporation
shall so provide.
TENTH: No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
liability of a director (i) for any breach of such director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which such director derived an improper personal benefit.
Neither the amendment nor repeal of this Article TENTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
TENTH, shall eliminate or reduce the effect of this Article TENTH in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article TENTH, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ELEVENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall 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.
TWELFTH: 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.
Signed on April 3, 1996.
/s/ Kenneth A. Rosenblum
------------------------
Kenneth A. Rosenblum
Incorporator
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BY-LAWS
OF
COOPER INTERNATIONAL GROUP, INC.
(a Delaware corporation)
-------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The corporation's registered office in
the state of Delaware shall be established and maintained at the office of The
Prentice-Hall Corporation System, Inc., 1013 Centre Road, in the city of
Wilmington, in the county of New Castle, in the state of Delaware, and The
Prentice-Hall Corporation System, Inc. shall be the registered agent of this
corporation in charge of the corporation's registered office in the state of
Delaware.
SECTION 2. OTHER OFFICES. The corporation may have other offices,
either within or without the state of Delaware, at such place or places as the
board of directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the state
of Delaware, and at such time and date as the board of directors, by resolution,
shall determine and as set forth in the notice of the meeting.
If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a board of directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the state of Delaware, as shall be stated in the notice of the
meeting.
<PAGE>
SECTION 3. VOTING. Each stockholder entitled to vote in accordance
with the terms of the corporation's certificate of incorporation and these
by-laws shall be entitled to one vote, in person or by proxy, for each share of
stock entitled to vote held by that stockholder, but no proxy shall be voted
after three years from its date unless that proxy provides for a longer period.
Upon the demand of any stockholder, the vote for directors and the vote upon any
question before the meeting, shall be by ballot. All elections for directors
shall be decided by plurality vote; all other questions shall be decided by
majority vote except as otherwise provided by the corporation's certificate of
incorporation or the laws of the state of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the 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 shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the
corporation's certificate of incorporation or by these by-laws, the presence, in
person or by proxy, of stockholders holding a majority of the stock of the
corporation entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At any such adjourned meeting at which
the requisite amount of stock entitled to vote shall be represented, any
business may be transacted that might have been transacted at the meeting as
originally noticed; but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes may be called by the chairman, vice-chairman, chief
executive officer, president or secretary, in each case upon the resolution or
written request of a majority of the board of directors or upon the vote or
written request of stockholders holding 66-2/3% or more of the outstanding
common stock of the corporation. Any business (regardless of whether specified
in the notice of meeting) may be conducted at a special meeting.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than 60 days before the date of the meeting. No business
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<PAGE>
other than that stated in the notice shall be transacted at any meeting without
the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the
corporation's certificate of incorporation, any action required to be taken at
any annual or special meeting of stockholders, or any action that may be taken
at any annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take that
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors constituting the
board of directors shall be not more than ten nor less than one, as fixed from
time to time in these by-laws or by action the board of directors. The initial
number of directors shall be two. The directors shall be elected at the annual
meeting of the stockholders and each director shall be elected to serve until
his or her successor shall be elected and shall qualify. Directors need not be
stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. That resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the president or secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill the vacancy and that person shall hold office for the unexpired term and
until his successor shall be duly elected and qualified, provided, however, that
if there are no directors then in office due to a vacancy, the stockholders may
elect a successor who shall hold office for the unexpired term and until his
successor shall be duly elected and qualified.
SECTION 4. REMOVAL. Except as hereinafter provided, any director or
directors may be removed either for or without cause at any time by the
affirmative vote of the holders of a majority of all the shares of stock
outstanding and entitled to vote, at a special meeting of the stockholders
called for the purpose, and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of a majority
in interest of the stockholders entitled to vote.
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<PAGE>
Unless the corporation's certificate of incorporation otherwise
provides, stockholders may effect removal of a director who is a member of a
classified board of directors only for cause. If the corporation's certificate
of incorporation provides for cumulative voting and if less than the entire
board is to be removed, no director may be removed without cause if the votes
cast against his removal would be sufficient to elect him if then cumulatively
voted at an election of the entire board of directors, or, if there be classes
of directors, at an election of the class of directors of which he is a part.
If the holders of any class or series are entitled to elect one or
more directors by the provisions of the corporation's certificate of
incorporation, these provisions shall apply, with respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
SECTION 5. INCREASE OF NUMBER. The number of directors may be
increased by the affirmative vote of a majority of the directors, though less
than a quorum, or by the affirmative vote of a majority in interest of the
stockholders, at the annual meeting or at a special meeting called for that
purpose, and by like vote the additional directors may be chosen at that meeting
to hold office until the next annual election and until their successors are
elected and qualify.
SECTION 6. POWERS. The board of directors shall exercise all of the
powers of the corporation except such powers as are by law, or by the
corporation's certificate of incorporation or by these by-laws, conferred upon
or reserved to the stockholders.
SECTION 7. COMMITTEES. The board of directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of the absent or disqualified member or members.
Any committee, to the extent provided in the resolution of the board
of directors, or in these by-laws, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no committee shall have the power
or authority in reference to amending the corporation's certificate of
incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets,
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<PAGE>
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution, these by-laws or the corporation's certificate of
incorporation expressly so provide, no committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
SECTION 8. MEETINGS. The directors elected upon any annual meeting of
the stockholders may hold their first meeting for the purpose of organization
and the transaction of business, if a quorum be present, immediately after the
annual meeting of the stockholders; or the time and place of that meeting may be
fixed by consent in writing of all the directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board may be called by the chairman, vice
chairman, chief executive officer, president or secretary, in each case upon the
request of a majority of the directors, and shall be held at such place or
places as may be determined by the directors, or as shall be stated in the call
of the meeting. Notice of special meetings of the board may be given by
telephone, facsimile transmission or by first class, certified or registered
mail at the telephone number, facsimile number or address, respectively, of each
director contained in the records of the corporation.
Unless otherwise restricted by the corporation's certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and that participation in a meeting shall
constitute presence in person at the meeting.
SECTION 9. QUORUM. A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting that is so
adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing in these by-laws shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the board of directors, or of any committee
thereof, may be taken without a meeting, if a written consent thereto is signed
by all members of the board or
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<PAGE>
committee, as the case may be, and that written consent is filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
president, a treasurer, and a secretary, all of whom shall be elected by the
board of directors and who shall hold office until their successors are elected
and qualified. In addition, the board of directors may elect a chairman, a
vice-chairman, a chief executive officer, a chief operating officer, one or more
vice-presidents and such assistant secretaries and assistant treasurers as they
may deem proper. None of the officers of the corporation need be directors.
Each of the foregoing officers shall have the power and authority to
sign instruments and stock certificates in accordance with section 103(a)(2) of
the Delaware General Corporation Law or any similar provision and to sign
agreements on behalf of the corporation. The officers shall be elected at the
first meeting of the board of directors after each annual meeting of the
stockholders. Any two or more offices may be held at the same time by the same
person. Any officer may be removed, with or without cause, by the board of
directors. Any vacancy may be filled by the board of directors.
SECTION 2. OTHER OFFICERS AND AGENTS. The board of directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board of directors.
SECTION 3. CHAIRMAN. The chairman, if one be elected, shall preside
at all meetings of the stockholders and at all meetings of the board of
directors, and shall have such other power and authority and perform such other
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors.
SECTION 4. VICE-CHAIRMAN. The vice-chairman, if one be elected,
shall, in the absence or disability of the chairman, preside at all meetings of
the stockholders and at all meetings of the board of directors, and shall have
such other power and authority and perform such other duties as may be
prescribed by these by-laws or as may be assigned from time to time by the board
of directors or the chairman.
SECTION 5. CHIEF EXECUTIVE OFFICER. The chief executive officer, if
one be elected, shall, in the absence or disability of the chairman and
vice-chairman, preside at all meetings of the stockholders and at all meetings
of the board of directors, and shall have general supervision, direction and
control of the business and affairs of the corporation subject to the
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<PAGE>
authorization and control of the board of directors, and shall have such other
power and authority and perform such other duties as may be prescribed by these
by-laws or as may be assigned from time to time by the board of directors.
In the absence or disability of the chief executive officer, the
president, if available, and if the president is not available the chief
operating officer, if available, shall have the authority, and shall perform the
duties, of the chief executive officer.
SECTION 6. PRESIDENT. The president shall, in the absence or
disability of the chairman, vice-chairman and chief executive officer, preside
at all meetings of the stockholders and at all meetings of the board of
directors, and shall have such other power and authority and perform such other
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors or the chief executive officer.
In the absence or disability of the chief executive officer, the
president, if available, shall have the authority, and shall perform the duties,
of the chief executive officer.
SECTION 7. CHIEF OPERATING OFFICER. The chief operating officer, if
one be elected, shall have such power and authority and perform such duties as
may be prescribed by these by-laws or as may be assigned from time to time by
the board of directors.
In the absence or disability of the president, the chief operating
officer, if available, shall have the authority, and shall perform the duties,
of the president. In addition, in the absence or disability of the chief
executive officer and the president, the chief operating officer, if available,
shall have the authority and perform the duties of the chief executive officer.
SECTION 8. VICE-PRESIDENT. Each vice-president shall have such power
and authority and perform such duties as may be prescribed by these by-laws or
as may be assigned from time to time by the board of directors or the chief
executive officer.
The board of directors may designate one or more vice- presidents, in
such order of priority as shall be specified by the board of directors, to have
the authority, and to perform the duties, of the chief executive officer in the
absence or disability of the chief executive officer, the president and the
chief operating officer; provided, however, that no vice-president shall have
such authority or perform such duties unless specifically designated for that
purpose by the board of directors.
SECTION 9. TREASURER. The treasurer shall have the custody of the
corporate funds and securities, shall keep full and accurate account of receipts
and disbursements in books belonging to the corporation and shall deposit all
moneys and other valuables in the name and to the credit of the corporation in
such depositaries as may be designated by the board of directors.
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<PAGE>
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the chief executive officer, taking proper
vouchers for such disbursements. He shall render to the chief executive officer
and board of directors at the regular meetings of the board of directors, or
whenever they may request it, an account of all his transactions as treasurer
and of the financial condition of the corporation. If required by the board of
directors, he shall give the corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the board of directors shall
prescribe.
SECTION 10. SECRETARY. The secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these by- laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the chief executive officer, the president, the chairman,
the vice-chairman or by the board of directors or stockholders, upon whose
requisition the meeting is called as provided in these by- laws.
The secretary shall record all the proceedings of the meetings of the
corporation and of the directors in a book to be kept for that purpose, and
shall perform such other duties as may be assigned to him by the chief executive
officer or the board of directors. He shall have custody of the seal of the
corporation and shall affix the same to all instruments requiring it, when
authorized by the chief executive officer or the board of directors, and attest
the same.
SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant treasurers, if any shall be elected, shall, in the absence of the
treasurer, have the authority, and perform the duties, of the treasurer, and
shall have such other power and authority and perform such other duties as may
be prescribed by these by-laws or as may be assigned from time to time by the
board of directors or the chief executive officer.
Assistant secretaries, if any shall be elected, shall, in the absence
of the secretary, have the authority, and perform the duties, of the secretary,
and shall have such other power and authority and perform such other duties as
may be prescribed by these by-laws or as may be assigned from time to time by
the board of directors or the chief executive officer.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by
either the chairman, vice chairman, president, chief executive officer or
vice-president, and by either the treasurer or an assistant treasurer, or the
secretary or an assistant secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation. Any or all the
signatures may be facsimiles.
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<PAGE>
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of the new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon transfer the
old certificates shall be surrendered to the corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to such
other person as the directors may designate, by whom they shall be canceled, and
new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than 60 nor less than ten days
before the date of the meeting, nor more than 60 days before any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the corporation's
certificate of incorporation, the board of directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends upon the
capital stock of the corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the directors from time
to time in their discretion deem proper for working capital or as a reserve fund
to meet contingencies or for equalizing dividends or for such other purposes as
the directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
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SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the board of directors.
SECTION 8. CHECKS. 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, agent or agents of the
corporation, and in such manner, as shall be determined from time to time by
resolution of the board of directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these by-laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and that notice shall be deemed to have been given
on the day of the mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatsoever is required to be given under the
provisions of any law, or under the provisions of the corporation's certificate
of incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to that notice, whether before or after the time
stated therein, shall be deemed equivalent to that notice.
ARTICLE VI
AMENDMENTS
These by-laws may be altered or repealed and by-laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal of the by-law or by-laws to be made
be contained in the notice of that special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the board of directors, at any regular
meeting of the board of directors, or at any special meeting of the board of
directors, if notice of the proposed alteration or repeal, or of the by-law or
by-laws to be made, be contained in the notice of that special meeting.
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THE REGISTERED HOLDER OF THIS CLASS A WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS CLASS A WARRANT EXCEPT AS HEREIN
PROVIDED.
Class A Warrant No. _______
CLASS A COMMON STOCK PURCHASE WARRANT
For the Purchase of ____ Shares of Common Stock
of
COOPER INTERNATIONAL GROUP, INC.
(a Delaware corporation)
1. CLASS A WARRANT.
THIS CERTIFIES THAT, in consideration of $____________ duly paid by or
on behalf of ______________ (the "Holder"), as registered owner of this Class A
Common Stock Purchase Warrant (the "Class A Warrant"), to COOPER INTERNATIONAL
GROUP, INC. (the "Company"), the Holder is entitled, at any time during the
three year period (the "Exercise Period") commencing on the second anniversary
of the closing of an initial public offering of securities of the Company (an
"IPO"), but not thereafter, to subscribe for, purchase and receive, in whole or
in part, up to _____ shares of Common Stock, $.001 par value (the "Common
Stock"), of the Company. This Class A Warrant shall be initially exercisable as
to each share of Common Stock covered hereby at $3.00 per share (the "Exercise
Price"). The term "Exercise Price" shall mean the initial exercise price or such
exercise price, as adjusted or converted (pursuant to Section 6 hereof) in the
manner provided herein, depending on the context. As more fully set forth in
Section 6 hereof, in the event that the Company consummates an IPO, and the
securities offered and sold in the IPO include warrants, on the closing date of
the IPO, the Exercise Price with respect to each share of Common Stock covered
by the Class A Warrant represented hereby will automatically be converted into
the exercise price per share of the warrants offered and sold to the public in
the IPO.
This Class A Warrant is one of the Class A Warrants being issued by the
Company in connection with the Company's private placement to accredited
investors (the "Private Placement") of units consisting of an aggregate of (i)
2,000,000 Class A Warrants to purchase up to 2,000,000 shares of Common Stock
and (ii) 250,000 Class B Common Stock Purchase Warrants to purchase up to
250,000 shares of Common Stock.
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2. EXERCISE.
In order to exercise this Class A Warrant, the exercise form attached
hereto must be duly executed, completed and delivered to the Company at its
principal office as set forth in Section 8.4 hereof during the Exercise Period,
together with this Class A Warrant and payment of the Exercise Price for the
shares of the Common Stock being purchased. The Company shall issue a
certificate or certificates evidencing the shares of Common Stock which are the
subject of any such exercise as soon as practicable after its receipt of an
exercise form. The Holder shall not have any rights whatsoever as a stockholder
of the Company until such time as the certificate or certificates evidencing
shares of Common Stock issuable upon exercise of this Class A Warrant have been
issued by the Company upon due exercise of this Class A Warrant by the Holder.
If the rights represented hereby shall not be exercised at or before 5:00 p.m.,
Eastern Time, on the last day during the Exercise Period, this Class A Warrant
shall become and be void and without further force or effect and all rights
represented hereby shall cease and expire.
3. RESTRICTIONS ON TRANSFER; REGISTRATION OF TRANSFERS.
3.1 RESTRICTIONS ON TRANSFER. The registered Holder of this Class A
Warrant, by its acceptance hereof, agrees that prior to any proposed transfer of
all or any part of this Class A Warrant or any securities purchased upon the
exercise of this Class A Warrant, if such transfer is not made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), such holder will, if requested by the Company, deliver to the
Company:
(i) an opinion of counsel reasonably satisfactory in form and substance
to the Company that the Class A Warrant or the securities purchased upon
the exercise of the Class A Warrant may be transferred without
registration under the Act;
(ii) an agreement by the proposed transferee to the impression of the
restrictive investment legend set forth below on the Class A Warrant or
the securities to be received;
(iii) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order"
with any transfer agent or registrar with respect to the securities
purchased upon exercise of the Class A Warrant; and
(iv) an agreement by such transferee to be bound by the provisions of
this Section 3 relating to the transfer of such Class A Warrant or the
securities purchased upon exercise of such Class A Warrant.
Each Class A Warrant holder agrees that each Class A Warrant and each
certificate representing securities purchased upon exercise of this Class A
Warrant shall bear legends as follows unless such securities have been
registered under the Act:
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"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act, or
pursuant to an exemption from registration under the Act."
"The securities represented by this certificate may not be publicly
offered for sale, sold or otherwise transferred for a period commencing
on June 21, 1996 [the Closing Date of this offering] and ending twenty
four (24 months) following the closing of the initial public offering of
Cooper International Group, Inc., without the prior approval of State
Street Capital Markets Corp."
FOR GEORGIA RESIDENTS ONLY
"These securities have been issued or sold in reliance on paragraph (13)
of code Section 10-5-9 of the 'Georgia Securities Act of 1973,' and may
not be sold or transferred except in a transaction which is exempt under
such Act or pursuant to an effective registration under such Act".
3.2 REGISTRATION OF TRANSFERS. In order to make any permitted transfer
or assignment of this Class A Warrant, the Holder must deliver to the Company
the assignment form attached hereto duly executed and completed, together with
this Class A Warrant and payment of all transfer taxes, if any, payable in
connection therewith. Upon receipt of such form and this Class A Warrant, the
Company shall immediately transfer this Class A Warrant or any part thereof
specified in the assignment form, on the books of the Company and shall execute
and deliver a new warrant or warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the number of shares of
Common Stock purse hereunder or such portion of such number as shall be
contemplated by such assignment.
4. NEW CLASS A WARRANTS TO BE ISSUED.
4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section
3 hereof, ---------------------------- this Class A Warrant may be exercised or
assigned in whole or in part. In the event of the exercise or assignment hereof
in part only, upon delivery to the Company of this Class A Warrant for
cancellation, together with the duly executed exercise or assignment form and
funds sufficient to pay the Exercise Price and any required transfer tax, the
Company shall promptly cause to be delivered to the Holder without charge a new
Class A Warrant or new warrants of like tenor with this Class A Warrant in the
name of the Holder evidencing the right to purchase, in the aggregate, the
remaining number of underlying shares of Common Stock purchasable hereunder
after giving effect to any such partial exercise or assignment.
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4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Class A
Warrant and of an indemnification by the Holder in favor of the Company,
reasonably satisfactory to it, the Company shall execute and deliver to the
Holder a new warrant of like tenor and date.
5. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
5.1 SUBDIVISION AND COMBINATION. In case the Company shall at any time
during the Exercise Period subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
5.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 5, the number of shares of
Common Stock issuable upon the exercise of this Class A Warrant shall be
adjusted to the nearest full number obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Class A Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
5.3 RECAPITALIZATION. For the purpose of this Class A Warrant, the term
"Common Stock" shall also mean any other class of stock resulting from
successive changes or reclassifications of Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
5.4 MERGER OR CONSOLIDATION. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock) during the Exercise
Period, the corporation formed by or resulting from such consolidation or merger
shall execute and deliver to the Holder(s) a supplemental warrant providing that
the holder of each warrant then outstanding or to be outstanding shall have the
right thereafter (until the stated expiration of such warrant) to receive, upon
exercise of such warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
warrants might have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such supplemental warrants shall provide for
adjustments which shall be identical to the adjustments provided in Section 5.
The above provision of this Section shall similarly apply to successive
consolidations or mergers.
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5.5 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment of
the Exercise Price shall be made:
(i) upon the issuance of the Class A and Class B Warrants
(including shares of Common Stock issued upon exercise of those
warrants) issued in connection with the Private Placement;
(ii) upon the issuance of shares of Common Stock and warrants
(including shares of Common Stock issued upon exercise of those
warrants) issued in connection with an IPO;
(iii) upon the issuance or sale of shares of Common Stock
issuable upon the exercise of any stock options granted under any stock
option plan of the Company; or
(iv) if the amount of said adjustment shall be less than two
cents ($.02) per share of Common Stock, provided, however, that in such
case, any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together
with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least two cents ($.02) per share
of Common Stock.
5.6 REDEMPTION OF CLASS A WARRANTS. This Class A Warrant cannot be
redeemed by the Company without the prior written consent of the Holder.
Under certain circumstances, as more fully set forth in the Company's
Confidential Term Sheet, dated April 29, 1996, as amended on May 28, 1996, TDA
Industries, Inc., the Company's parent, has agreed to purchase this Class A
Warrant from the Holder.
5.7 DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company
shall at any time during the Exercise Period prior to the exercise in full of
this Class A Warrant declare a non-cash dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to its
stockholders any assets, property, rights, evidences of indebtedness, securities
(other than shares of Common Stock), whether issued by the Company or by
another, or any other thing of value other than cash, the Holder of this Class A
Warrant shall thereafter be entitled, in addition to the shares of Common Stock
or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of such Class A Warrant, the same property, assets,
rights, evidences of indebtedness, securities or any other thing of value that
it would have been entitled to receive at the time of such dividend or
distribution as if the Class A Warrant had been exercised immediately prior to
such dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Section 5.7.
5.8 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Class A Warrant, nor shall it be required to issue
scrip or pay cash in lieu of any fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to
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the nearest whole number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof.
6. CONVERSION OF EXERCISE PRICE AND REGISTRATION UNDER THE ACT.
(a) In the event the Company consummates an IPO with State Street
Capital Markets Corp. acting as an underwriter, and the securities offered in
the IPO include warrants which are exercisable to purchase shares of Common
Stock ("IPO Warrants"), on the closing date of the IPO the Exercise Price with
respect to the Class A Warrant represented hereby will automatically be
converted to the exercise price per share of the IPO Warrants, with no action
needed on the part of the Holder hereof.
(b) The Company agrees that, in an IPO, it shall register for resale
under the Act (i) this Class A Warrant and (ii) the shares of Common Stock
issuable upon exercise of this Class A Warrant.
(c) The registration referred to in Section 6(b) above shall be at
the Company's sole expense, except that the Company shall not be responsible for
fees or disbursements of counsel to the Holder (if any) or for underwriting
discounts, selling commissions or expense allowances attributable to any sales
of this Class A Warrant or the shares of Common Stock issuable upon the exercise
thereof. During the Exercise Period, the Company shall comply with all laws,
rules and regulations under the Federal securities laws applicable to the
Company necessary to permit the public sale of the Class A Warrant or the shares
of Common Stock acquired upon the exercise thereof, including, without
limitation, all reporting and prospectus delivery requirements thereunder.
Additionally, in connection with the registration referred to in Section 6(b)
above, the Company will, at its expense, take all necessary action which may be
required in qualifying or registering this Class A Warrant or the shares
acquired upon the exercise thereof, under the securities or Blue Sky laws of
such number of states as are reasonably requested by the Holder, provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
7. RESERVATION. The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of issuance
upon exercise of the Class A Warrant, such number of shares of Common Stock or
other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Class A
Warrant and payment of the Exercise Price therefor, all shares of Common Stock
and other securities, properties and rights issuable upon such exercise shall be
duly and validly issued, fully paid and nonassessable and not subject to
preemptive rights of any stockholder.
8. CERTAIN NOTICE REQUIREMENTS.
8.1 HOLDER'S RIGHT TO RECEIVE NOTICE. Nothing herein shall be construed
as conferring upon the Holder the right to vote or consent or to receive notice
as a stockholder for the
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election of directors or any other matter. The Holder shall not have any right
whatsoever as a stockholder of the Company until such time as the certificate or
certificates evidencing shares of Common Stock issuable upon exercise of this
Class A Warrant have been issued by the Company upon due exercise of this Class
A Warrant by the Holder. If, however, at any time prior to the expiration of the
Class A Warrant and its exercise, any of the events described in Section 8.2
shall occur, then, in one or more of said events, the Company shall give written
notice of such event at least fifteen (15) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, conversion or exchange
of securities or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify such
record date or the date of the closing of the transfer books, as the case may
be.
8.2 EVENTS REQUIRING NOTICE. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall declare a record date to calculate the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash as set forth in Section 5.7, or a
cash dividend or distribution payable otherwise than out of retained earnings,
as indicated by the accounting treatment of such dividend or distribution on the
books of the Company, or (ii) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor, or (iii) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation or merger) or a sale of all or substantially all of its property,
assets and business shall be proposed, or (iv) a merger or consolidation
pursuant to Section 5.4 hereof.
8.3 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 5
hereof, send notice to the Holder of such event and change (the "Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's Chief Executive Officer and Treasurer.
8.4 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Class A Warrant shall be in writing and shall be
deemed to have been duly given or made when hand delivered, or when delivered by
responsible overnight courier or by registered or certified mail, return receipt
requested, addressed as set forth below.
(i) If to the registered Holder of this Class A Warrant, to:
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with a copy to:
Robert L. Blessey, Esq.
51 Lyon Ridge Road
Katonah, New York 10536
(ii) if to the Company, to:
Cooper International Group, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attention: Douglas P. Fields
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Henry I. Rothman, Esq.
Either of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 8.4.
9. MISCELLANEOUS.
9.1 AMENDMENTS. All material modifications or amendments to this Class A
Warrant shall require the written consent of the party against whom enforcement
of the modification or amendment is sought.
9.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Class A Warrant.
9.3 ENTIRE AGREEMENT. This Class A Warrant (together with the other
agreements and documents heretofore or hereinafter delivered pursuant to or in
connection with this Class A Warrant) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
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9.4 BINDING EFFECT. This Class A Warrant shall inure solely to the
benefit of and shall be binding upon the Holder and the Company and their
permitted assignees, respective successors, legal representatives and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Class A
Warrant or any provisions herein contained.
9.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Class A Warrant
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without giving effect to the conflict of laws
provisions thereof. Any action, proceeding or claim against the Company or the
Holder arising out of, or relating in any way to this Class A Warrant shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and the Company and the
Holder irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The Holder and the Company waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. The
prevailing party in any such action shall be entitled to recover from the other
party all of its reasonable attorneys' fees and expenses relating to such action
or proceeding and/or incurred in connection with the preparation therefor. The
Holder and the Company waive their right to trial by jury.
9.6 WAIVER, ETC. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Class A Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Class A Warrant or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Class A Warrant. No waiver of any breach, noncompliance or nonfulfillment of any
of the provisions of this Class A Warrant shall be effective unless set forth in
a written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
noncompliance or nonfulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, noncompliance or nonfulfillment.
9.7 SEVERABILITY. In the event that any provision of this Class A
Warrant shall be determined to be illegal or unenforceable, the remaining
provisions of this Class A Warrant shall remain binding and in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Class A Warrant to be
signed by its duly authorized officer on the 21st day of June, 1996.
COOPER INTERNATIONAL GROUP, INC.
By:______________________________
Douglas P. Fields
President and Chief Executive Officer
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Form to be used to exercise Class A Warrant:
COOPER INTERNATIONAL GROUP, INC.
122 East 42nd Street, Suite 1116
New York, New York 10168
Date: ________________, 19__
The Undersigned hereby elects irrevocably to exercise the within Class A
Warrant and to purchase __________ shares of Common Stock of Cooper
International Group, Inc. and hereby makes payment of $_____________ (at the
rate of $______________ per share) in payment of the Exercise Price pursuant
thereto. Please issue the shares as to which this Class A Warrant is exercised
in accordance with the instructions given below.
Signature
__________________________________________
Signature Guaranteed
Print Name, Address and Social Security or
Taxpayer Identification Number:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name _________________________________________________________________________
(Print in Block Letters)
Address ______________________________________________________________________
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Class A Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
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Form to be used to assign Class A Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of all or
part of the within Class A Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby sell,
assign and transfer unto __________________________ the right to purchase
____________ shares of Common Stock of Cooper International Group, Inc. (the
"Company") evidenced by the within Class A Warrant and does hereby authorize the
Company to transfer such right on the books of the Company.
Dated:__________________, 199_
__________________________________________
Signature
__________________________________________
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Class A Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
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THE REGISTERED HOLDER OF THIS CLASS B WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS CLASS B WARRANT EXCEPT AS HEREIN
PROVIDED.
Class B Warrant No._____ _____ Class B Warrants
CLASS B COMMON STOCK PURCHASE WARRANT
For the Purchase of Shares of Common Stock
of
COOPER INTERNATIONAL GROUP, INC.
(a Delaware corporation)
1. CLASS B WARRANT.
THIS CERTIFIES THAT, in consideration of $______________ duly paid by or
on behalf of _____________________ (the "Holder"), as registered owner of this
Class B Common Stock Purchase Warrant (this "Class B Warrant"), to COOPER
INTERNATIONAL GROUP, INC. (the "Company"), the Holder is entitled, at any time
during the three year period (the "Exercise Period") commencing on the second
anniversary of the closing of an initial public offering of securities of the
Company (an "IPO"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to __________ shares of Common Stock, $.001 par value
(the "Common Stock"), of the Company. This Class B Warrant shall be initially
exercisable as to each share of Common Stock covered hereby at $1.00 per share
(the "Exercise Price"). The term "Exercise Price" shall mean the initial
exercise price or such exercise price, as adjusted in the manner provided
herein, depending on the context.
This Class B Warrant is one of the Class B Warrants being issued by the
Company in connection with the Company's private placement to accredited
investors (the "Private Placement") of units consisting of an aggregate of (i)
2,000,000 Class A Common Stock Purchase Warrants to purchase up to 2,000,000
shares of Common Stock and (ii) 250,000 Class B Warrants to purchase up to
250,000 shares of Common Stock.
2. EXERCISE.
In order to exercise this Class B Warrant, the exercise form attached
hereto must be duly executed, completed and delivered to the Company at its
principal office as set forth in Section 8.4 hereof, during the Exercise Period,
together with this Class B Warrant and payment of the Exercise Price for the
shares of the Common Stock being purchased. The Company shall issue a
certificate or certificates evidencing the shares of Common Stock which are the
subject of any such
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exercise as soon as practicable after its receipt of an exercise form. The
Holder shall not have any rights whatsoever as a stockholder of the Company
until such time as the certificate or certificates evidencing shares of Common
Stock issuable upon exercise of this Class B Warrant have been issued by the
Company upon due exercise of this Class B Warrant by the Holder. If the rights
represented hereby shall not be exercised at or before 5:00 p.m., Eastern Time,
on the last day during the Exercise Period, this Class B Warrant shall become
and be void and without further force or effect and all rights represented
hereby shall cease and expire.
3. RESTRICTIONS ON TRANSFER; REGISTRATION OF TRANSFERS.
3.1 RESTRICTIONS ON TRANSFER. The registered Holder of this Class B
Warrant, by its acceptance hereof, agrees that prior to any proposed transfer of
all or any part of this Class B Warrant or any securities purchased upon the
exercise of this Class B Warrant, if such transfer is not made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), such holder will, if requested by the Company, deliver to the
Company:
(i) an opinion of counsel reasonably satisfactory in form and substance
to the Company that the Class B Warrant or the securities purchased upon
the exercise of the Class B Warrant may be transferred without
registration under the Act;
(ii) an agreement by the proposed transferee to the impression of the
restrictive investment legend set forth below on the Class B Warrant or
the securities to be received;
(iii) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order"
with any transfer agent or registrar with respect to the securities
purchased upon exercise of the Class B Warrant; and
(iv) an agreement by such transferee to be bound by the provisions of
this Section 3 relating to the transfer of such Class B Warrant or the
securities purchased upon exercise of such Class B Warrant.
Each Class B Warrant holder agrees that each Class B Warrant and each
certificate representing securities purchased upon exercise of this Class B
Warrant shall bear legends as follows unless such securities have been
registered under the Act:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act, or
pursuant to an exemption from registration under the Act."
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"The securities represented by this certificate may not be publicly
offered for sale, sold or otherwise transferred for a period commencing
on June 21, 1996 and ending twenty four (24 months) following the
closing of the initial public offering of Cooper International Group,
Inc., without the prior approval of State Street Capital Markets Corp."
FOR GEORGIA RESIDENTS ONLY
"These securities have been issued or sold in reliance on paragraph (13)
of code Section 10-5-9 of the 'Georgia Securities Act of 1973,' and may
not be sold or transferred except in a transaction which is exempt under
such Act or pursuant to an effective registration under such Act".
3.2 REGISTRATION OF TRANSFERS. In order to make any permitted transfer
or assignment of this Class B Warrant, the Holder must deliver to the Company
the assignment form attached hereto duly executed and completed, together with
this Class B Warrant and payment of all transfer taxes, if any, payable in
connection therewith. Upon receipt of such form and this Class B Warrant, the
Company shall immediately transfer this Class B Warrant or any part thereof
specified in the assignment form on the books of the Company and shall execute
and deliver a new warrant or warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the number of shares of
Common Stock purchasable hereunder or such portion of such number as shall be
contemplated by such assignment.
4. NEW CLASS B WARRANTS TO BE ISSUED.
4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section
3 hereof, this Class B Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon delivery to
the Company of this Class B Warrant for cancellation, together with the duly
executed exercise or assignment form and funds sufficient to pay the Exercise
Price and any required transfer tax, the Company shall promptly cause to be
delivered to the Holder without charge a new Class B Warrant or new warrants of
like tenor with this Class B Warrant in the name of the Holder evidencing the
right to purchase, in the aggregate, the remaining number of underlying shares
of Common Stock purchasable hereunder after giving effect to any such partial
exercise or assignment.
4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Class B
Warrant and of an indemnification by the Holder in favor of the Company,
reasonably satisfactory to it, the Company shall execute and deliver to the
Holder a new warrant of like tenor and date.
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5. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
5.1 SUBDIVISION AND COMBINATION. In case the Company shall at any time
during the Exercise Period subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
5.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 5, the number of shares of
Common Stock issuable upon the exercise of this Class B Warrant shall be
adjusted to the nearest full number obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Class B Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
5.3 RECAPITALIZATION. For the purpose of this Class B Warrant, the term
"Common Stock" shall also mean any other class of stock resulting from
successive changes or reclassifications of Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
5.4 MERGER OR CONSOLIDATION. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock) during the Exercise
Period, the corporation formed by or resulting from such consolidation or merger
shall execute and deliver to the Holder(s) a supplemental warrant providing that
the holder of each warrant then outstanding or to be outstanding shall have the
right thereafter (until the stated expiration of such warrant) to receive, upon
exercise of such warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
warrants might have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such supplemental warrants shall provide for
adjustments which shall be identical to the adjustments provided in Section 5.
The above provision of this Section shall similarly apply to successive
consolidations or mergers.
5.5 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment of
the Exercise Price shall be made:
(i) upon the issuance of the Class A and Class B Warrants
(including shares of Common Stock issued upon exercise of those
warrants) issued in connection with the Private Placement;
(ii) upon the issuance of shares of Common Stock and warrants
(including shares of Common Stock issued upon exercise of those
warrants) issued in connection with an IPO;
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(iii) upon the issuance or sale of shares of Common Stock
issuable upon the exercise of any stock options granted under any stock
option plan of the Company; or
(iv) if the amount of said adjustment shall be less than two
cents ($.02) per share of Common Stock, provided, however, that in such
case, any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together
with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least two cents ($.02) per share
of Common Stock.
5.6 REDEMPTION OF CLASS B WARRANTS. This Class B Warrant cannot be
redeemed by the Company without the prior written consent of the Holder.
Under certain circumstances, as more fully set forth in the Company's
Confidential Term Sheet, dated April 29, 1996, as amended on May 28, 1996, TDA
Industries, Inc., the Company's parent, has agreed to purchase this Class B
Warrant from the Holder.
5.7 DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company
shall at any time during the Exercise Period prior to the exercise in full of
this Class B Warrant declare a non-cash dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to its
stockholders any assets, property, rights, evidences of indebtedness, securities
(other than shares of Common Stock), whether issued by the Company or by
another, or any other thing of value other than cash, the Holder of this Class B
Warrant shall thereafter be entitled, in addition to the shares of Common Stock
or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of such Class B Warrant, the same property, assets,
rights, evidences of indebtedness, securities or any other thing of value that
it would have been entitled to receive at the time of such dividend or
distribution as if the Class B Warrant had been exercised immediately prior to
such dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Section 5.7.
5.8 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Class B Warrant, nor shall it be required to issue
scrip or pay cash in lieu of any fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
6. REGISTRATION RIGHTS.
6.1 DEFINITIONS. As used in this Section 6, the following terms shall
have the following respective meanings:
(i) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
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(ii) "FORM S-1, FORM SB-1, FORM S-2, FORM SB-2 AND FORM S-3" shall mean
Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively, promulgated
by the Commission or any substantially similar form then in effect.
(iii) the terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such Registration Statement.
(iv) "REGISTRABLE SECURITIES" shall mean the Class B Warrants and the
shares of Common Stock underlying the Class B Warrants (the "Class B Shares")
and, if this Class B Warrant, or any part of this Class B Warrant is exercised,
any Common Stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for, or in replacement of the Class B Warrant Shares,
so long as such securities are ineligible for sale under subparagraph (k) of
Rule 144, PROVIDED, HOWEVER, Registrable Securities shall not include any
securities that have been sold pursuant to Rule 144 or an effective registration
statement.
(v) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with this Section 6, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such Registration. Such expenses shall not include fees or disbursements of
counsel to holders of Registrable Securities or Selling Expenses.
(vi) "REGISTRATION STATEMENT" shall mean Form S-1, Form SB-1, Form S-2,
Form SB-2 or Form S-3, whichever is applicable, including the prospectus
included therein, all amendments and supplements thereto and all exhibits and
material incorporated by reference therein.
(vii) "RULE 144" shall mean Rule 144 promulgated by the Commission
pursuant to the Act and any successor rule thereto or similar rule promulgated
by the Commission.
(viii) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
6.2 DEMAND REGISTRATION RIGHTS. If at any time commencing two (2) years
after the closing of the Company's IPO the Company shall be requested in writing
by the holders of 51% or more of the Registrable Securities to effect the
registration of Registrable Securities (a "Registration Request"), the Company
shall send written notice of such Registration Request to the remaining holders
of Registrable Securities, if any (the "Notification"), within ten days of the
Company's receipt of the Registration Request. Unless a remaining holder of
Registrable Securities shall deliver a written request for inclusion in the
Registration Statement of a specified number of its Registrable Securities
within ten days of the date of the Notification by the Company, the right of
such remaining holder of Registrable Securities to participate in such
Registration shall terminate. If any such remaining holder of Registrable
Securities so notifies the Company within the period
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specified above of its desire to participate in the Registration, such
Registrable Securities of such holder shall be included in the Registration.
Upon the receipt by the Company of a Registration Request, the Company shall
promptly use its best efforts to effect the Registration of the Registrable
Securities that the Company has been requested to Register within sixty (60)
days thereafter, or such longer period as may be agreed upon by the Company and
the holders of Registrable Securities; PROVIDED, HOWEVER, that the Company shall
not be obligated to effect any Registration except in accordance with the
following provisions:
(i) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 6.2. If any Registration
Statement filed by the Company pursuant to this Section 6.2 fails to be declared
effective by the Commission or is subject to a stop-order by the Commission
after being declared effective prior to the sale of all of the Registrable
Securities included therein, such requested Registration shall not be counted
for the purposes of the limitation contained in the preceding sentence.
(ii) Notwithstanding the foregoing, the Company may include in any such
Registration requested pursuant to this Section 6.2 any authorized but unissued
shares of the Company's Common Stock (or authorized treasury shares) for sale by
the Company or any issued and outstanding shares of the Company's Common Stock
for sale by others; PROVIDED, HOWEVER, that the inclusion of such previously
authorized but unissued shares of Common Stock by the Company or issued and
outstanding shares of Common Stock by others in such Registration shall not
prevent the holders of Registrable Securities from registering the entire number
of Registrable Securities requested by it.
(iii) The Company shall not be required to file a Registration Statement
pursuant to this Section 6.2: (A) within three (3) months after any sale of
Common Stock to an underwriter for resale for the account of the Company
pursuant to an effective Registration Statement or (B) for 90 days after the
Registration Request under this Section 6.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated,
provided, however, that in either case, the Company is actively involved in good
faith preparation of any such Registration Statement under this Section 6.2.
(iv) The Company will file the Registration Statement on a form which
permits the sale of the Registrable Securities in an underwritten public
offering, utilizing a managing underwriter or underwriters selected by the
Company which shall be reasonably acceptable to the holders of Registrable
Securities requesting Registration (or a managing underwriter or underwriters
recommended or selected by such holders of Registrable Securities and approved
by the Company, which approval shall not be unreasonably withheld, conditioned,
or delayed), and the Company will (x) enter into an underwriting agreement with
customary terms and provisions as reasonably agreed to by the Company and the
underwriter of the offering, which shall include such representations and
warranties to the holders of the Registrable Securities and the underwriters as
are customarily made
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by issuers to underwriters and selling shareholders, as the case may be, in
underwritten public offerings; in connection with any underwritten offering, the
Company shall, if requested by the managing underwriter or underwriters thereof,
agree not to register or sell publicly any of the securities of the Company for
a period beginning seven (7) days prior to the date the Company and the
underwriter reasonably expect the Registration Statement to become effective,
and for a period of up to 90 days after the effective date of the Registration
Statement, provided that the holders of Registrable Securities also agree to
such limitations; (y) furnish to each holder of Registrable Securities a signed
counterpart, addressed to such holder, or upon which such holder may rely, of an
opinion of counsel to the Company and a "comfort" letter(s) signed by the
independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with respect to the Registration Statement (and the prospectus
included therein) and (in the case of the accountant's letter) with respect to
events subsequent to the date of the financial statements, as are customarily
covered in opinions of issuer's counsel and in accountant's letters delivered to
the underwriters in underwritten public offerings of securities; and (z) in
connection with any underwritten Registration utilizing Form S-3 or S-2 or any
similar short form registration, if the underwriter, for marketing reasons,
requests the inclusion in the Registration Statement of information which is not
required under the Act to be included in a Registration Statement on the
applicable form, the Company will provide such information for inclusion in the
Registration Statement.
6.3 PIGGYBACK REGISTRATION RIGHTS. (a) Commencing two (2) years after
the closing of the Company's IPO, each time that the Company proposes to
Register a public offering solely of any of its securities other than pursuant
to a Registration Statement on Form S-4 or Form S-8 or similar or successor
forms, the Company shall promptly give written notice of such proposed
Registration to the holders of Registrable Securities, which shall offer the
right to include any Registrable Securities in the proposed Registration.
(b) The holders of Registrable Securities shall have twenty (20) days
from the receipt of the notice referenced in Section 6.3 above (or such longer
period as shall be set forth in such notice) to deliver to the Company a written
request specifying the number of shares of Registrable Securities the holder
intends to sell and such holder's intended plan of disposition. The giving of
any such request by any holder of Registrable Securities shall not impose upon
such holder any obligation to sell any of the Registrable Securities.
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under this Section 6.3 may specify that the Registrable Securities
be included in the underwriting on the same terms and conditions as the shares
of common stock, if any, otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section 6.3, the
Company shall cause all such Registrable Securities to be included in such
Registration Statement.
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(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering determines and advises the Company in writing that
the inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of common stock proposed to be included therein by holders of the
Company's common stock other than the holders of Registrable Securities (such
other shares hereinafter collectively referred to as the "Other Shares"), would
interfere with the successful marketing of the securities proposed to be
included in the underwritten public offering, then the number of such shares to
be included in such underwritten public offering shall be reduced, and such
shares shall be excluded from such underwritten public offering in a number
deemed necessary by such managing underwriter, based upon and subject to a pro
rata reduction of the number of Registrable Securities and Other Shares each
holder of any of such securities proposed to include therein.
(f) In connection with any underwritten offering by the Company, each of
the holders of Registrable Securities shall, if requested by the managing
underwriter or underwriters thereof, agree not to sell publicly any of the
Registrable Securities owned by them other than pursuant to such underwritten
offering for a period beginning 7 days prior to the date the Company and the
underwriter reasonably expect the Registration Statement to become effective,
and for a period of up to 90 days after the effective date of the Registration
Statement, provided that the Company's officers, directors, principal
stockholders and other affiliates (as such term is defined in the Act) also
agree to such limitations.
6.4 REGISTRATION PROCEDURE. If and whenever the Company is under an
obligation pursuant to the provisions of this Section 6 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
(i) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities, using, if available to the Company for
the sale of the Registrable Securities, Form S-3, which Registration Statement
complies with all requirements of the Act and use its best efforts to cause such
Registration Statement to become and remain effective in accordance with Section
6.4(ii) hereof, keeping the holders of Registrable Securities advised as to the
initiation, progress and completion of the Registration;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective;
provided, however, that in connection with any proposed Registration intended to
permit an offering of any Registrable Securities from time to time (i.e., a so
called "Shelf Registration"), the Company shall not be obligated to cause any
such Registration to remain effective for more than twelve (12) months from the
effective date thereof and to comply with all applicable provisions of the Act
with respect to the sale or other disposition of all Registrable Securities
covered by such Registration Statement; prior to filing any Registration
Statement relating to or including the Registrable Securities or prospectus or
any amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the
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Registration Statement, the Company will furnish the holders and any
underwriters involved in the sale of the Registrable Securities copies of all
such documents proposed to be filed which will be subject to the reasonable
prior review and comment of the holders and such underwriters;
(iii) furnish such number of copies of any summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the holders of the
Registrable Securities may reasonably request, in order to facilitate the public
sale or other disposition of such Registrable Securities;
(iv) use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under the securities or blue
sky laws of such jurisdictions as the holders of the Registrable Securities
shall reasonably request and do any and all other acts or things which may be
necessary or advisable to enable the holders thereof to consummate the public
sale or other disposition thereof in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required to consent to general service of process or
qualify to do business as a foreign corporation where it would not be otherwise
required to consent or qualify;
(v) at any time or when a prospectus covered by such Registration
Statement is required to be delivered under the Act, notify the holders of the
Registrable Securities of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and, at the request
of the holders of the Registrable Securities, prepare, file and furnish a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing;
(vi) provide a transfer agent for the Common Stock no later than the
effective date of the Registration of any Registrable Securities;
(vii) use its best efforts to comply with all applicable rules and
regulations of the Commission;
(viii) use its best efforts to cause all the Registrable Securities
either (A) to be listed on a national securities exchange (if the Registrable
Securities are not already so listed) and on each additional national securities
exchange on which similar securities issued by the Company are then listed, if
the listing of the Registrable Securities is then permitted under the rules of
such exchange, or (B) to secure designation of all the Registrable Securities as
a Nasdaq "national market system security" within the meaning of Rule 11Aa2-1 of
the Commission or, failing that, (C) to secure listing on the Nasdaq SmallCap
Market for the Registrable Securities; and
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(x) use its best efforts, if requested by counsel to the underwriters,
to help in obtaining all necessary approval of underwriters' compensation terms
from the National Association of Securities Dealers, Inc. in connection with
such offering.
6.5 EXPENSES. The Company shall pay all Registration Expenses incurred
by the Company in complying with this Section 6; PROVIDED, HOWEVER, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by a Registration effected pursuant to this Section 6 hereof
shall be borne by the seller thereof in proportion to the number of Registrable
Securities sold by the seller thereof.
6.6 INFORMATION FURNISHED BY AND REPRESENTATIONS OF HOLDERS. It shall be
a condition precedent to the Company's obligations to the holders of the
Registrable Securities pursuant to this Section 6 that they furnish to the
Company in writing such information regarding themselves and the distribution
proposed by them as the Company may reasonably request. Additionally, in
connection with a Registration under this Section 6, the holders of Registrable
Securities represent and warrant to the Company that such holders will use their
best efforts to comply with all applicable rules and regulations of the
Commission and will make such representations and warranties to the Company and
the underwriters, in each case, as are customarily made by selling shareholders
to issuers and underwriters, as the case may be, in underwritten public
offerings.
6.7 THE COMPANY'S INDEMNIFICATION OF HOLDERS. The Company shall
indemnify and hold harmless, to the fullest extent permitted by law, each holder
of the Registrable Securities, each of its officers, directors and partners, and
each person controlling the holder of the Registrable Securities (within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), and each underwriter thereof, if any,
and each of its officers, directors, partners, and each person who controls such
underwriter (within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act), against all claims, losses, damages or liabilities (or actions in
respect thereof) suffered or incurred by any of them, to the extent such claims,
losses, damages or liabilities arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus or any related Registration Statement incident to any such
Registration, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Act or the Exchange Act applicable to the Company and
relating to actions or inactions required of the Company in connection with any
such Registration; and the Company will reimburse the holder of the Registrable
Securities, each such underwriter, each of their officers, directors and
partners and each person who controls any such holder of Registrable Securities
or underwriter, for all legal and all other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity contained in this
Section 6.7 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be withheld, conditioned or
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delayed); and PROVIDED, HOWEVER, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based upon any untrue statement or omission based upon
information furnished in writing to the Company by the holder of Registrable
Securities.
6.8 HOLDERS' INDEMNIFICATION OF THE COMPANY. Each holder of Registrable
Securities participating in any Registration shall indemnify and hold harmless ,
to the fullest extent permitted by law, the Company, each of its directors and
officers, each underwriter, if any, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) suffered or incurred by any of them and arising out of or based
upon any untrue statement (or alleged untrue statement) of a material fact
contained in such Registration Statement or related prospectus, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the holder of any rule or regulation promulgated under the Act or
the Exchange Act applicable to the holder and relating to actions or inactions
required of such holder in connection with the Registration of the Registrable
Securities pursuant to such Registration Statement; and will reimburse the
Company and such directors, officers, partners, persons, underwriters and
controlling persons for all legal and all other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; such indemnification and reimbursement shall be to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such Registration
Statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by the holder and stated to be specifically
for use in connection with the offering of Registrable Securities.
6.9 INDEMNIFICATION PROCEDURE. Promptly after receipt by an indemnified
party under this Section 6 of notice of the commencement of any action which may
give rise to a claim for indemnification hereunder, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 6, promptly notify the indemnifying party in writing of the
commencement thereof and generally summarize such action (but the omission of
such notice shall not relieve the indemnifying party from liability except to
the extent that the indemnifying party is actually prejudiced by such failure to
receive the notice). The indemnifying party shall have the right to participate
in and to assume the defense of such claim, and shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, the parties entitled to
indemnification shall have the right to employ separate counsel (reasonably
satisfactory to the indemnifying party) to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
indemnified parties unless the named parties to such action or proceedings
include both the indemnifying party and the indemnified parties and the
indemnifying party or such indemnified parties shall have been advised by
counsel that there are one or more legal defenses available to the indemnified
parties which are different from or additional to those available to the
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indemnifying party (in which case, if the indemnified parties notify the
indemnifying party in writing that they elect to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action or proceeding on behalf of
the indemnified parties, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding or separate or
substantially similar or related action or proceeding in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate counsel at any time for
all indemnified parties, which counsel shall be designated in writing by the
holders of a majority of the Registrable Securities).
6.10 CONTRIBUTION. If the indemnification provided for in this Section 6
from an indemnifying party is unavailable to an indemnified party hereunder in
respect to any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the statements or omissions which
result in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or indemnified party and the parties'
relative intent, knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent such statement
or omission. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 6.10 were determined by pro rata
allocation or by any other allocation that does not take into account the
equitable considerations referred to in this Section 6.10. No person guilty of
fraudulent misrepresentation within the meaning of the Act in connection with a
Registration under this Section 6 shall be entitled to contribution or
indemnification from any person that is not guilty of such fraudulent
misrepresentation. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action, suit,
proceeding or claim arising in connection with a Registration under this Section
6.
7. RESERVATION. The Company shall at all times reserve and keep available out of
its authorized shares of Common Stock, solely for the purpose of issuance upon
exercise of the Class B Warrant, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Class B Warrant and
payment of the Exercise Price therefor, all shares of Common Stock and other
securities, properties and rights issuable upon such exercise shall be duly and
validly issued, fully paid and nonassessable and not subject to preemptive
rights of any stockholder.
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8. CERTAIN NOTICE REQUIREMENTS.
8.1 HOLDER'S RIGHT TO RECEIVE NOTICE. Nothing herein shall be construed
as conferring upon the Holder the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter. The Holder
shall not have any right whatsoever as a stockholder of the Company until such
time as the certificate or certificates evidencing shares of Common Stock
issuable upon exercise of the Class B Warrant have been issued by the Company
upon due exercise of this Class B Warrant by the Holder. If, however, at any
time prior to the expiration of the Class B Warrant and its exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
8.2 EVENTS REQUIRING NOTICE. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall declare a record date to calculate the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, as set forth in Section 5.7, or
a cash dividend or distribution payable otherwise than out of retained earnings,
as indicated by the accounting treatment of such dividend or distribution on the
books of the Company, or (ii) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor, or (iii) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation or merger) or a sale of all or substantially all of its property,
assets and business shall be proposed or (iv) a merger or consolidation pursuant
to Section 5.4 hereof.
8.3 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 5
hereof, send notice to the Holder of such event and change (the "Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's Chief Executive Officer and Treasurer.
8.4 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Class B Warrant shall be in writing and shall be
deemed to have been duly given or made when hand delivered, or when delivered by
responsible overnight courier or by registered or certified mail, return receipt
requested, addressed as set forth below:
(i) If to the registered Holder of this Class B Warrant, to:
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<PAGE>
with a copy to:
Robert L. Blessey, Esq.
51 Lyon Ridge Road
Katonah, New York 10536
(ii) if to the Company, to:
Cooper International Group, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attention: Douglas P. Fields
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Henry I. Rothman, Esq.
Either of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 8.4.
9. MISCELLANEOUS.
9.1 AMENDMENTS. All material modifications or amendments to this Class B
Warrant shall require the written consent of the party against whom enforcement
of the modification or amendment is sought.
9.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Class B Warrant.
9.3 ENTIRE AGREEMENT. This Class B Warrant (together with the other
agreements and documents heretofore or hereinafter delivered pursuant to or in
connection with this Class B Warrant) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
9.4 BINDING EFFECT. This Class B Warrant shall inure solely to the
benefit of and shall be binding upon the Holder and the Company and their
permitted assignees, respective successors, legal representatives and assigns,
and no other person shall have or be construed to have
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<PAGE>
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Class B Warrant or any provisions herein contained.
9.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Class B Warrant
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without giving effect to the conflict of laws
provisions thereof. Any action, proceeding or claim against the Company or the
Holder arising out of, or relating in any way to this Class B Warrant shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and the Company and the
Holder irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The Holder and the Company waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. The
prevailing party in any such action shall be entitled to recover from the other
party all of its reasonable attorneys' fees and expenses relating to such action
or proceeding and/or incurred in connection with the preparation therefor. The
Holder and the Company waive their right to trial by jury.
9.6 WAIVER, ETC. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Class B Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Class B Warrant or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Class B Warrant. No waiver of any breach, noncompliance or nonfulfillment of any
of the provisions of this Class B Warrant shall be effective unless set forth in
a written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
noncompliance or nonfulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, noncompliance or nonfulfillment.
9.7 SEVERABILITY. In the event that any provision of this Class B
Warrant shall be determined to be illegal or unenforceable, the remaining
provisions of this Class B Warrant shall remain binding and in full force and
effect.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Class B Warrant to be
signed by its duly authorized officer on the 21st day of June, 1996.
COOPER INTERNATIONAL GROUP, INC.
By:______________________________
Douglas P. Fields
President and Chief Executive Officer
Agreed to and Accepted
on this ______ day of June, 1996
By:_____________________________
Print Name:_______________________
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<PAGE>
Form to be used to exercise Class B Warrant:
COOPER INTERNATIONAL GROUP, INC.
122 East 42nd Street, Suite 1116
New York, New York 10168
Date: ________________, 19__
The Undersigned hereby elects irrevocably to exercise the within Class B
Warrant and to purchase __________ shares of Common Stock of Cooper
International Group, Inc. and hereby makes payment of $_____________ (at the
rate of $______________ per share) in payment of the Exercise Price pursuant
thereto. Please issue the shares as to which this Class B Warrant is exercised
in accordance with the instructions given below.
______________________________________
Signature
______________________________________
Signature Guaranteed
Print Name, Address and Social Security or
Taxpayer Identification Number:
______________________________________
______________________________________
______________________________________
______________________________________
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name _______________________________________________________________________
(Print in Block Letters)
Address _______________________________________________________________________
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Class B Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
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<PAGE>
Form to be used to assign Class B Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of all or
part of the within Class B Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby sell,
assign and transfer unto __________________________ the right to purchase
____________ shares of Common Stock of Cooper International Group, Inc. (the
"Company") evidenced by the within Class B Warrant and does hereby authorize the
Company to transfer such right on the books of the Company.
Dated:__________________, 199_
______________________________________
Signature
______________________________________
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Class B Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
-19-
1996 STOCK OPTION PLAN
of
COOPER INTERNATIONAL GROUP, INC.
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to employees (including directors and officers
who are employees) and to consultants and directors who are not employees of
Cooper International Group, Inc., a Delaware corporation (the "Company"), or any
of its Subsidiaries (as defined in Paragraph 19), and to offer an additional
inducement in obtaining the services of such persons. The Plan provides for the
grant of "incentive stock options" ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified
stock options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of common stock, $.001 par value per share,
of the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 1,000,000. Such shares of Common Stock may, in the discretion
of the Board of Directors of the Company (the "Board of Directors"), consist
either in whole or in part of authorized but unissued shares of Common Stock or
shares of Common Stock held in the treasury of the Company. Subject to the
provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated unexercised or which
ceases for any reason to be exercisable shall again become available for the
granting of options under the Plan. The Company shall at all times during the
term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or a committee of the Board of Directors consisting of not
less than two directors (collectively, the "Committee"). A majority of the
members of the Committee shall constitute a quorum, and the acts of a majority
of the members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the employees who shall
be granted Employee Options and the consultants who shall be granted Consultant
Options and the Non-Employee Directors who shall be granted Non-Employee
Director Options (all as defined in Paragraph 19); the times when options shall
be granted; whether an Employee Option shall be an ISO or a NQSO; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in
<PAGE>
installments and, if in installments, the number of shares of Common Stock to be
subject to each installment, whether the installments shall be cumulative, the
date each installment shall become exercisable and the term of each installment;
whether to accelerate the date of exercise of any option or installment; whether
shares of Common Stock may be issued upon the exercise of an option as partly
paid and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option; the form of payment of the exercise price; whether to restrict the sale
or other disposition of the shares of Common Stock acquired upon the exercise of
an option and, if so, whether to waive any such restriction; whether to subject
the exercise of all or any portion of an option to the fulfillment of
contingencies as specified in the contract referred to in Paragraph 11 (the
"Contract"), including without limitation, contingencies relating to entering
into a covenant not to compete with the Company, any of its Subsidiaries or a
Parent (as defined in Paragraph 19), to financial objectives for the Company,
any of its Subsidiaries or a Parent, a division of any of the foregoing, a
product line or other category, and/or the period of continued employment of the
optionee with the Company, any of its Subsidiaries or a Parent, and to determine
whether such contingencies have been met; whether an optionee is Disabled (as
defined in Paragraph 19); the amount, if any, necessary to satisfy the Company's
obligation to withhold taxes or other amounts; the fair market value of a share
of Common Stock; to construe the respective Contracts and the Plan; with the
consent of the optionee, to cancel or modify an option, provided, that the
modified provision is permitted to be included in an option granted under the
Plan on the date of the modification, and further, provided, that in the case of
a modification (within the meaning of Section 424(h) of the Code) of an ISO,
such option as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; and to make all other determinations
necessary or advisable for administering the Plan. Any controversy or claim
arising out of or relating to the Plan, any option granted under the Plan or any
Contract shall be determined unilaterally by the Committee in its sole
discretion. The determinations of the Committee on the matters referred to in
this Paragraph 3 shall be conclusive and binding on the parties.
No member or former member of the Committee shall be liable for any
action, failure to act or determination made in good faith with respect to the
Plan or any option hereunder. In addition, the Company shall indemnify and hold
harmless each member and former member of the Committee and their respective
successors, assigns, heirs and personal representatives from and against any
liability, loss, claim, damage and expense (including without limitation
attorneys fees and expenses) incurred in connection therewith by reason of any
action, failure to act or determination made in good faith under or in
connection with the Plan or any option hereunder to the fullest extent permitted
with respect to directors under the Company's certificate of incorporation,
by-laws or applicable law.
4. ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant (a) Employee Options
to employees (including officers and directors who are employees) of the Company
or any of its Subsidiaries, (b)
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<PAGE>
Consultant Options to consultants to the Company or any of its Subsidiaries, and
(c) Non-Employee Director Options to Non-Employee Directors. Such options
granted shall cover such number of shares of Common Stock as the Committee may
determine, in its sole discretion; provided, however, that the maximum number of
shares subject to Employee Options that may be granted to any individual during
any calendar year under the Plan (the "162(m) Maximum") shall not exceed 250,000
shares; and further, provided, that the aggregate market value (determined at
the time the option is granted in accordance with Paragraph 5) of the shares of
Common Stock for which any eligible employee may be granted ISOs under the Plan
or any other plan of the Company, or of a Parent or a Subsidiary of the Company,
which are exercisable for the first time by such optionee during any calendar
year shall not exceed $100,000. Such limitation shall be applied by taking ISOs
into account in the order in which they were granted. Any option (or the portion
thereof) granted in excess of such amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee in its sole discretion;
provided, however, that the exercise price of an ISO shall not be less than the
fair market value of the Common Stock subject to such option on the date of
grant; and further, provided, that if, at the time an ISO is granted, the
optionee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the exercise
price of such ISO shall not be less than 110% of the fair market value of the
Common Stock subject to such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on The
Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price information is
available with respect to the Common Stock, the average of the highest and
lowest sales prices per share of Common Stock on such day on Nasdaq, or (ii) if
such information is not available, the average of the highest bid and lowest
asked prices per share of Common Stock on such day on Nasdaq, or (c) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable, or if no trades have been made or no quotes are
available for such day, the fair market value of the Common Stock shall be
determined by the Board by any method consistent with applicable regulations
adopted by the Treasury Department relating to stock options.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion;
provided, however, that the
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<PAGE>
term of each ISO granted pursuant to the Plan shall be for a period not
exceeding 10 years from the date of grant thereof; and further, provided, that
if, at the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, of any of its Subsidiaries
or of a Parent, the term of the ISO shall be for a period not exceeding five
years from the date of grant. Options shall be subject to earlier termination as
hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract
permits, with previously acquired shares of Common Stock having an aggregate
fair market value on the date of exercise (determined in accordance with
Paragraph 5) equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock
The Committee may, in its sole discretion, permit payment of the
exercise price of an option by delivery by the optionee of a properly executed
notice, together with a copy of his irrevocable instructions to a broker
acceptable to the Committee to deliver promptly to the Company the amount of
sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than the death or Disability of the Optionee) may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired; provided, however, that if
such relationship is terminated
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<PAGE>
either (a) for cause, or (b) without the consent of the Company, such option
shall terminate immediately.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Except as may otherwise be expressly provided in the applicable
Contract, Employee Options and Consultant Options granted under the Plan shall
not be affected by any change in the status of the optionee so long as the
optionee continues to be an employee of, or a consultant to, the Company, or any
of the Subsidiaries or a Parent (regardless of having changed from one to the
other or having been transferred from one corporation to another).
Except as may otherwise be expressly provided in the applicable
Contract, the holder of an Non-Employee Director Option whose directorship with
the Company has terminated for any reason other than his death or Disability may
exercise such option, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the date the option would otherwise have
expired; provided, however, that if his directorship shall be terminated for
cause, such option shall terminate immediately.
Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the Company,
any of its Subsidiaries or a Parent to terminate the optionee's relationship at
any time for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
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<PAGE>
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee of, or consultant to,
the Company, its Parent and Subsidiaries has terminated by reason of such
optionee's Disability may exercise his Employee Option or Consultant Option, to
the extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies (a) while he is a director of the Company, (b)
within three months after the termination of his directorship with the Company
(unless such termination was for cause) or (c) within one year after the
termination following the termination of his directorship by reason of
Disability, his Non-Employee Director Options may be exercised, to the extent
exercisable on the date of his death, by his Legal Representative at any time
within one year after death, but not thereafter and in no event after the date
the option would otherwise have expired. Except as may otherwise be expressly
provided in the applicable Contract, an optionee whose directorship with the
Company has terminated by reason of Disability, may exercise his Non-Employee
Director Options, to the extent exercisable on the effective date of such
termination, at any time within one year after such date, but not thereafter and
in no event after the date the option would otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in
its sole discretion, as a condition to the exercise of any option that either
(a) a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
The Committee may require, in its sole discretion, as a condition to
the exercise of any option that the optionee execute and deliver to the Company
his representations and warranties, in form, substance and scope satisfactory to
the Committee, which the Committee determines are necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
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<PAGE>
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
In addition, if at any time the Committee shall determine, in its
sole discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding option and the
exercise price thereof, and the 162(m) Maximum shall be appropriately adjusted
in the same manner as the number and kind of shares of a stockholder of the
Company who owned the same number and kind of shares immediately prior to such
event, and the exercise price of the options shall be adjusted so that the
aggregate exercise price of each outstanding unexercised option remains the
same. Notwithstanding the foregoing, such adjustment may provide for the
elimination of fractional shares which might otherwise be subject to options
without payment therefor. Such adjustments shall be made by the Board of
Directors, whose determination shall be conclusive and binding on all parties.
In the event of (a) the liquidation or dissolution of the Company, or
(b) a merger in which the Company is not the surviving corporation or a
consolidation, any outstanding options shall terminate upon the earliest of any
such event, unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on June 26, 1996. No option may be granted under the Plan
after June 25, 2006. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that
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<PAGE>
ISOs granted hereunder meet the requirements for "incentive stock options" under
the Code, to comply with the provisions of Rule 16b-3 of the Securities Exchange
Act of 1934, Section 162(m) of the Code, or any change in applicable law,
regulations, rulings or interpretations of administrative agencies; provided,
however, that no amendment shall be effective without the requisite prior or
subsequent stockholder approval which would (a) except as contemplated in
Paragraph 12, increase the maximum number of shares of Common Stock for which
options may be granted under the Plan or the 162(m) Maximum, (b) to the extent
required by Rule 16b-3, materially increase the benefits accruing to
participants under the Plan or (c) change the eligibility requirements to
receive options hereunder. No termination, suspension or amendment of the Plan
shall, without the consent of the holder of an existing and outstanding option
affected thereby, adversely affect his rights under such option. The power of
the Committee to construe and administer any options granted under the Plan
prior to the termination or suspension of the Plan nevertheless shall continue
after such termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process, and any such attempted
assignment, transfer, pledge, hypothecation or disposition shall be null and
void ab initio and of no force or effect.
15. WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject
to any limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
(determined in accordance with Paragraph 5), or (c) any combination thereof, in
an amount equal to the amount which the Committee determines is necessary to
satisfy the Company's obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend
or legends upon the certificates for shares of Common Stock issued upon exercise
of an option under the Plan and may issue such "stop transfer" instructions to
its transfer agent in respect of such shares as it determines, in its
discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
and any applicable state securities laws, (b) implement the provisions of the
Plan or any agreement between the Company and the optionee with respect to such
shares of Common Stock, or (c) permit the Company to determine the occurrence of
a "disqualifying disposition," as
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described in Section 421(b) of the Code, of the shares of Common Stock issued or
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Constituent Corporation" shall mean any corporation which
engages with the Company, any of its Subsidiaries or a Parent in a transaction
to which Section 424(a) of the Code applies (or would apply if the option
assumed or substituted were an ISO), or any Parent or any Subsidiary of such
corporation.
(b) "Consultant Option" shall mean a NQSO granted pursuant to the
Plan to a person who, at the time of grant, is a consultant to the Company or a
Subsidiary of the Company, and at such time is neither a common law employee of
the Company or any of its Subsidiaries nor a director of the Company.
(c) "Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
(d) "Employee Option" shall mean an option granted pursuant to
the Plan to an individual who, at the time of grant, is an employee of the
Company or any of its Subsidiaries.
(e) "Legal Representative" shall mean the executor, administrator
or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under the
Plan.
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<PAGE>
(f) "Non-Employee Director" shall mean a person who is a director
of the Company, but is not a common law employee of the Company, any of its
Subsidiaries or a Parent.
(g) "Non-Employee Director Option" shall mean a NQSO granted
pursuant to the Plan to a person who, at the time of the grant, is a
Non-Employee Director.
(h) "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
(i) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be
granted hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan or any Contract shall not affect
the validity, legality or enforceability of any other provision, all of which
shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by
the affirmative vote a majority of the shares present in person or by proxy and
entitled to vote thereon at the next duly held meeting of the Company's
stockholders at which a quorum is present. No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of
any option shall be determined as if the Plan had not been subject to such
approval. Notwithstanding the foregoing, if the Plan is not approved by a vote
of the stockholders of the Company on or before June 25, 1997, the Plan and any
options granted hereunder shall terminate.
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INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholder of
Cooper Flooring International, Inc.
We consent to the use in this Registration Statement of Cooper International
Group, Inc. on Form S-1 of our report dated September 1, 1995 related to the
financial statements of Cooper Flooring International, Inc. (formerly Cooper
Distributors, Inc.) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Information" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Cooper Flooring International,
Inc. (the "Company") listed in Item 16. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
August 7, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Cooper International
Group, Inc. on Form S-1 of our report dated June 28, 1996 appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Information" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
August 7, 1996
