<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PURO WATER GROUP, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5149 11-325396-8
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
</TABLE>
------------------------------
56-45 58TH STREET
MASPETH, NEW YORK 11378
(718) 326-7000
(Address and telephone number of Principal Executive Offices)
CT CORPORATION
CORPORATION TRUST CENTER
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 658-7581
(Name, address, and telephone number of Agent for Service)
------------------------------
COPIES OF COMMUNICATIONS TO:
DUANE L. BERLIN, ESQ. STEPHEN IRWIN, ESQ.
ERIC J. DALE, ESQ. JEFFREY S. SPINDLER, ESQ.
Lev, Berlin & Dale, P.C. Olshan Grundman Frome & Rosenzweig LLP
535 Connecticut Avenue 505 Park Avenue
Norwalk, Connecticut 06854 New York, New York 10022
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Shares of Common Stock, par value $.0063 (the "Common Stock")(2)...... $10,091,250 $3,057.95
Underwriter's Warrant to purchase shares of Common Stock(3)........... $135.00 $.04
Shares of Common Stock underlying the Underwriter's Warrant(4)........ $1,053,000 $319.09
Total Registration Fee................................................ $11,144,385 $3,377.08
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes up to 202,500 shares of Common Stock subject to the Underwriter's
over-allotment option from the Company.
(3) To be issued to the Underwriter at Closing.
(4) Pursuant to Rule 416, there are also being registered such additional
securities as may be required for issuance pursuant to the anti-dilution
provisions of the Underwriter's Warrant.
------------------------------
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 THAT 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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 15, 1996
[LOGO]
PURO WATER GROUP, INC.
1,350,000 SHARES OF COMMON STOCK
----------------
Puro Water Group, Inc. (the "Company") is hereby offering (the "Offering")
1,350,000 shares (the "Shares") of its common stock, $.0063 par value per share
(the "Common Stock").
Prior to this Offering, there has been no public market for the Common Stock
and no assurance can be given that any such market will develop. It is currently
estimated that the initial public offering price of the Common Stock will be
between $5.50 and $6.50 per Share. For information regarding the factors to be
considered in determining the price to the public in the Offering, see
"Underwriting." The Company has applied for listing of its Common Stock on the
American Stock Exchange under the symbol "HHO."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" CONTAINED AT PAGES 7 TO 10 OF
THIS PROSPECTUS AND "DILUTION."
---------------------
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMSSIONS(1) COMPANY (2)
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total (3)............................................ $ $ $
</TABLE>
(1) Does not include the Underwriter's non-accountable expense allowance equal
to 3% of the gross proceeds of the Offering or warrants to purchase up to
135,000 shares of Common Stock issuable to the Underwriter. The Company has
agreed to indemnify the Underwriter against certain liabilities under the
Securities Act of 1933, as amended (the "Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, including
the non-accountable expense allowance, estimated to be $ , or
$ if the Underwriter's over-allotment option is exercised in full.
(3) The Company has granted the Underwriter an option, exercisable within 45
days after the date of this Prospectus, to purchase up to an additional
202,500 shares of Common Stock upon the same terms as set forth above,
solely to cover over-allotments, if any. If such over-allotment option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The Shares are being offered by the Underwriter, subject to prior sale,
when, as and if delivered to the Underwriter and subject to the right to reject
orders in whole or in part, approval of certain legal matters by its counsel and
certain additional conditions. It is expected that delivery of the Shares will
be made against payment therefor at the offices of Laidlaw Equities, Inc., 100
Park Avenue, New York, New York 10017 on or about 1997.
LAIDLAW EQUITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
PURO WATER GROUP, INC.
The Company brochure photos here
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, 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 (I) ASSUMES NO EXERCISE
OF THE UNDERWRITER'S OVER-ALLOTMENT OPTION OR THE UNDERWRITER'S WARRANTS AND
(II) HAS BEEN ADJUSTED TO REFLECT A .4928 TO 1 REVERSE STOCK SPLIT TO BE
EFFECTED PRIOR TO CONSUMMATION OF THIS OFFERING (DECREASING THE NUMBER OF ISSUED
AND OUTSTANDING SHARES FROM 4,315,375 TO 2,126,789). EACH PROSPECTIVE INVESTOR
IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
The Company is a leading bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company markets its drinking water under the brand names Puro,
American Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. The
Company also rents and services water coolers, filtration systems, and
plumbed-in fountains numbering in excess of 25,000 located in businesses,
factories, and homes in the metropolitan New York area. The Company's facilities
consist of NSF (National Sanitation Foundation) certified bottling plants in
East Orange, New Jersey and Commack, Long Island, New York. In addition, the
Company is an authorized factory service center for all major water cooler
manufacturers and provides warranty repair coverage to many of its competitors.
According to a study prepared by the Beverage Marketing Corporation, bottled
water has been the fastest growing segment of the beverage industry for the past
ten years. Total bottled water consumption in the United States has tripled from
1985 to 1995. Annual consumption increased from 2.8 gallons per capita in 1980
to 11.0 gallons per capita in 1995 and it is projected to reach 14.2 gallons per
capita by the year 2000. Bottled water volume in the United States has grown
significantly, increasing from approximately 345 million gallons in 1977 to
approximately three billion gallons in 1995; from approximately $240 million in
sales in 1976 to over $3.3 billion in 1995. This growth has been fueled by
increasing public concern about the taste and safety of municipal water supplies
and the desire among today's increasingly diet and health conscious consumers
for an "ideal" beverage.
The Company's strategy is to capitalize on the growing demand for high
quality drinking water through the expansion of its existing customer base and
through the acquisition of regional bottlers and distributors in targeted
geographic markets. The bottled water distribution market is highly fragmented
and composed of many small regional companies, as well as a few larger companies
which own several brands, thus providing the Company with acquisition
opportunities. In addition, the Company continually seeks to grow revenues by
increasing route density through the acquisition and consolidation of new routes
within the existing route structure, thereby minimizing distribution and
administration costs. The continued consolidation of production and distribution
capabilities is a key component of the Company's operating plans, both within
its current markets and any additional markets that it may enter.
The Company is also the manager of a cooperative buying group, Quality
Bottler's Cooperative, Inc. (the "Cooperative"). Membership consists of the
twelve leading regional bottled water companies located throughout the United
States which are similar in size to the Company. Members are contractually
required to purchase all of their coolers, bottles, closures, and other key
items on a group basis. The Company believes that the purchasing power of the
Cooperative permits the group to buy at prices that are no higher than those
charged the largest buyer in the industry, Nestle's Perrier group (whose brands
in the Company's markets include Poland Spring, Great Bear and Deer Park).
RECENT TRANSACTIONS
Consistent with its strategy of acquiring regional water bottlers and
distributors, on January 31, 1996, the Company purchased the assets and assumed
certain liabilities of American Eagle Water/Electrified Co.,
3
<PAGE>
Inc. ("Electrified"). Electrified was a direct competitor of the Company in the
bottled water distribution and water cooler rental business in the New York City
area. The Company's acquisition of Electrified's modern high-speed production
facility in East Orange, New Jersey, together with its new bottling facility in
Commack, Long Island, New York, permits it to absorb additional bottling demand
without a commensurate increase in production costs.
On June 13, 1996, the Company entered into a long-term spring water supply
contract for its Commack, Long Island, New York, bottling facility with
Shawangunk Bulk Spring Water. The agreement provides for "most-favored-customer"
treatment with respect to pricing and priority water rights to the Indian Camp
Spring source in the foothills of the Catskill Mountains in New York for the
next forty-five years.
On June 27, 1996, the Company entered into a long-term spring water supply
contract for its East Orange, New Jersey bottling facility with its primary bulk
spring water supplier, Mountainwood Spring Water Co., Inc. ("Mountainwood"). The
agreement provides for "most-favored-customer" treatment with respect to
priority water rights over a forty-three year period. Management believes that
Mountainwood's spring source, in the foothills of the Kittatinny Mountains near
the Delaware Water Gap, is considered the highest volume, free flowing certified
natural spring water source in the northeastern United States. Effective July 1,
1996, the Company also acquired Mountainwood's five-gallon bottled water direct
delivery and bottled water cooler rental routes.
The Company is continuing to pursue mergers and/or acquisitions with
regional water bottlers and distributors, as well as certain members of the
Cooperative. As of the date of this Prospectus, the Company has thirteen
companies under active review as candidates for acquisition or merger, although
the Company has no agreements, commitments or arrangements with respect to any
proposed mergers or acquisitions. As consideration for any future acquisitions,
the Company may pay cash, incur indebtedness or issue debt or equity securities.
Such acquisitions could result in material changes in the Company's financial
condition and operating results. There can be no assurance that suitable merger
or acquisition opportunities will be available to the Company or that the
Company will be able to consummate any mergers or acquisitions on satisfactory
terms. In addition, there can be no assurance that the Company will be able to
integrate or manage successfully other acquired businesses.
The Company was incorporated in January 1994 and represents the acquisition
of LSL Hydro Corp. and Puro Corporation of America. The Company is organized
under the laws of the State of Delaware. The Company's principal executive
offices are located at 56-45 58th Street, Maspeth, New York 11378 and its
telephone number is (718) 326-7000. After the consummation of this Offering, the
Company intends to move its principal executive offices to 76 Mall Drive,
Commack, Long Island, New York 11725. Its telephone number at such location is
(516) 254-1000. The Company's home page address on the Internet is
www.purowater.com.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered......................... 1,350,000 shares
Common Stock outstanding prior to this
Offering.................................... 2,126,789 shares(1)
Common Stock to be outstanding after this
Offering.................................... 3,476,789 shares(1)
Use of proceeds.............................. Repayment of certain outstanding
indebtedness, and working capital. See "Use
of Proceeds."
Proposed American Stock Exchange symbol...... HHO
</TABLE>
- ------------------------
(1) Does not include (i) 400,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option Plan (the "Stock Option Plan")
(none of which options have been granted to date; however, the Company has
committed to grant options to purchase 88,167 shares of Common Stock at an
exercise price equal to the initial public offering price per share of the
Shares offered hereby less underwriting discounts and commissions pursuant
to the Stock Option Plan to two employees of the Company upon consummation
of this Offering), (ii) an aggregate of 123,210 shares of Common Stock
reserved for issuance upon the exercise of outstanding options at an
exercise price equal to the initial public offering price per share of the
Shares offered hereby less underwriting discounts and commissions, and (iii)
shares of Common Stock in an amount equal to the outstanding principal
amount of a convertible note ($269,992.82 as of November 1, 1996, which
amount is reduced by $1,428.58 per month) divided by the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions reserved for issuance upon conversion of such
note.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information presented below for the period from
inception (February 1, 1994) through December 31, 1994 and as of and for the
year ended December 31, 1995 has been derived from financial statements which
have been audited by Arthur Andersen LLP, independent public accountants, and
are included elsewhere in this Prospectus. The summary financial information for
the nine months ended September 30, 1995 and as of and for the nine months ended
September 30, 1996 has been derived from unaudited financial statements which
have been prepared on the same basis as the audited financial statements and, in
the opinion of management, includes all adjustments of a normal recurring nature
necessary for the fair presentation of the information shown therein. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The information set forth below should be read in conjunction with the
Company's financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
INCEPTION YEAR
(FEBRUARY 1, 1994) ENDED SEPTEMBER 30,
THROUGH DECEMBER 31, --------------------
DECEMBER 31, 1994 1995 1995 1996
------------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Bottled water sales and other revenue........................ $ 2,918 $ 4,175 $ 3,121 $ 6,384
Rental revenue............................................... 1,136 1,326 992 1,684
------- ------------- --------- ---------
Total revenue.............................................. 4,054 5,501 4,113 8,068
------- ------------- --------- ---------
Costs and expenses:
Costs of goods sold (excluding depreciation)................. 1,147 1,616 1,263 2,293
Operating expenses (excluding depreciation and
amortization)............................................... 1,197 1,306 1,014 1,523
General and administrative expenses.......................... 948 1,309 917 1,892
------- ------------- --------- ---------
Total costs and expenses................................... 3,292 4,231 3,194 5,708
------- ------------- --------- ---------
EBIDTA (1)...................................................... 762 1,270 919 2,360
------- ------------- --------- ---------
Depreciation and amortization:
Cost of goods sold........................................... 106 237 130 337
Operating expenses........................................... 113 214 149 422
------- ------------- --------- ---------
Total depreciation and amortization........................ 219 451 279 759
------- ------------- --------- ---------
Income from operations.......................................... 543 819 640 1,601
------- ------------- --------- ---------
Other income (expense):
Interest expense............................................. (130) (303) (221) (541)
Other income (expense)....................................... 47 119 108 (5)
Plant relocation charges (2)................................. -- -- -- (250)
------- ------------- --------- ---------
Total other expense........................................ (83) (184) (113) (796)
------- ------------- --------- ---------
Income before provision for income taxes........................ 460 635 527 805
Provision for income taxes...................................... 204 231 190 290
------- ------------- --------- ---------
Net income...................................................... $ 256 $ 404 $ 337 $ 515
------- ------------- --------- ---------
------- ------------- --------- ---------
Earnings per share (3).......................................... $ 0.15 $ 0.22 $ 0.19 $ 0.23
------- ------------- --------- ---------
------- ------------- --------- ---------
Weighted average common shares outstanding (3).................. 1,745 1,829 1,745 2,194
------- ------------- --------- ---------
------- ------------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------- -------------------------
ACTUAL ACTUAL AS ADJUSTED(4)
------------------- --------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash................................................................ $ 689 $ 326 $ 1,326
Working capital (deficit)........................................... 1,049 (248) 1,530
Total assets........................................................ 8,350 17,253 18,253
Long-term debt...................................................... 2,505 7,688 2,966
Total stockholders' equity.......................................... 3,515 4,530 11,030
</TABLE>
- ------------------------------
(1) "EBITDA" is defined as earnings from operations before interest expense,
income taxes, depreciation and amortization.
(2) Represents non-recurring charges of $250,000 related to the closing of two
of the Company's bottling plants and the relocation of such production
facilities to the Company's Commack, Long Island, New York and East Orange,
New Jersey facilities.
(3) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere
herein.
(4) Adjusted to give effect to the sale by the Company of 1,350,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$6.00 per share and the initial application of the net proceeds therefrom.
See "Use of Proceeds".
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OFFERED
HEREBY.
RISK ASSOCIATED WITH GROWTH STRATEGY AND RAPID EXPANSION. Implementation of
the Company's proposed expansion will be substantially dependent on, among other
things, the Company's ability to hire and retain skilled management, financial,
marketing and other personnel, and successfully manage growth (including
monitoring operations, controlling costs and maintaining effective quality and
inventory controls). The Company's growth strategy and plans are subject to
change as a result of a number of factors, including progress or delays in the
Company's marketing efforts, changes in market conditions and competitive
factors. There can be no assurance that the Company will be able to successfully
implement its business strategy or otherwise expand its operations. See "Use of
Proceeds."
DEPENDENCE ON OFFERING PROCEEDS TO FINANCE EXPANSION; NEED FOR ADDITIONAL
FINANCING. The Company is dependent on the proceeds of this Offering or other
financing to implement its proposed expansion. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations (including
the costs associated with its proposed expansion), that the net proceeds of this
Offering and cash generated from operations will be sufficient to satisfy its
anticipated cash requirements for at least 12 months following the consummation
of this Offering. In the event that the Company's plans change, its assumptions
change or prove to be inaccurate or the proceeds of this Offering prove to be
insufficient to fund the Company's operations (due to unanticipated expenses,
delays, problems, difficulties or otherwise), the Company would be required to
seek additional financing sooner than anticipated. The Company may determine,
depending upon the opportunities available to it, to seek additional debt or
equity financing to fund the cost of continuing expansion. To the extent that
the Company incurs indebtedness or issues debt securities, the Company will be
subject to risks associated with incurring substantial indebtedness, including
the risks that interest rates may fluctuate and cash flow may be insufficient to
pay principal and interest on any such indebtedness. The Company has no current
arrangements with respect to, or sources of, additional financing. There can be
no assurance that additional financing will be available to the Company on
commercially reasonable terms or at all. If the Company is unable to obtain
additional financing its current plans for expansion could be materially
adversely affected. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
REGULATION. The Company's water bottling plants and water coolers are
subject to the jurisdiction of the Federal Food and Drug Administration (FDA)
and various state and local health and other regulatory agencies which regulate
the quality of drinking water and other products. The Company believes that it
is in compliance with all applicable laws and regulations and has all required
licenses to conduct its business. However, no assurances can be given that
current laws or regulations applicable to the Company's business will not
change. Any such new laws or regulations or the Company's expansion into new
geographic areas could subject the Company to substantial costs in order to
comply with such applicable laws or regulations. Any failure by the Company to
comply with any new or existing laws or regulations could subject the Company to
substantial penalties. See "Business -- Regulation."
COMPETITION. The Company competes with numerous well-established companies
which distribute drinking water sold off the shelf at retail (primarily
supermarket) locations. Many of the Company's competitors have achieved
significant national, regional and local brand name and product recognition and
additional competitors have sought to enter the drinking water market.
In recent years, several companies have introduced drinking water products
positioned to capitalize on the growing consumer preference for purified and
aesthetically pleasing water. It can be expected that the Company will be
subject to increasing competition from companies whose products or marketing
strategies
7
<PAGE>
address these consumer preferences. Some of the Company's competitors and
potential competitors possess substantially greater financial, personnel,
marketing and other resources than the Company and have established reputations
for success in the sale of purified water products. See "Business--Competition."
DEPENDENCE ON KEY PERSONNEL; ATTRACTION AND RETENTION OF KEY PERSONNEL. The
Company is dependent to a great extent, on the experience, abilities and
continued services of Mr. West and Mr. Levy, the Company's President and Chief
Executive Officer, respectively. While the Company's management has substantial
experience in the bottled water distribution business, no assurances can be
given that such prior experience will assure the Company's success. Prior to the
consummation of this Offering, each of Messrs. West and Levy shall enter into a
five year employment agreement with the Company, each of which employment
agreement will contain confidentiality and non-competition provisions. The
Company has key-person life insurance policies on the lives of Messrs. West and
Levy in the amount of $500,000 per person. Prior to consumation of this
Offering, the Company will have key-person life insurance policies on the lives
of Messrs. West and Levy in the amount of $1,000,000 per person. The loss of the
services of Messrs. West or Levy could have a material adverse effect on the
Company. The Company's success also depends upon its ability to attract and
retain other qualified personnel. There can be no assurances that the Company
will be able to attract and retain qualified personnel. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this Offering, the
Company's directors and officers will beneficially own approximately 63% of the
Company's outstanding shares of Common Stock. These persons will be able to
control actions requiring the consent of stockholders, such as the election of
directors. See "Security Ownership of Management and Others" and "Description of
Securities."
POSSIBLE ACQUISITIONS. It is currently anticipated that a portion of the
Company's future growth will result from acquisitions of other similar or
complementary businesses. There can be no assurance that suitable acquisition
opportunities will be available or that the Company will be able to consummate
acquisition transactions on satisfactory terms. In addition, there can be no
assurance that the Company will be able to integrate or manage successfuly other
acquired businesses.
USE OF PROCEEDS TO REPAY INDEBTEDNESS. The Company intends to use
approximately $5,500,000 or approximately 85% of the net proceeds from this
Offering to repay indebtedness incurred in recent acquisitions.
POTENTIAL LIABILITY; INSURANCE. The Company is engaged in a business which
could expose it to possible liability claims from others, including personal
injury claims. The Company maintains a general liability insurance policy that
is subject to a $1,000,000 per occurrence limit with a $2,000,000 aggregate
limit and a $4,000,000 umbrella liability policy. There can be no assurance,
however, that the Company's insurance will be sufficient to cover potential
claims or that an adequate level of coverage will be available in the future at
a reasonable cost. A partially insured or completely uninsured successful claim
against the Company could have a material adverse effect on the Company. See
"Business -- Product Liability and Insurance."
IMMEDIATE AND SUBSTANTIAL DILUTION; PURCHASE OF COMMON STOCK BY INSIDERS AT
BELOW OFFERING PRICE. The shares of Common Stock held by the Company's current
stockholders were purchased for prices significantly lower than the initial
public offering price. Based on an assumed initial public offering price of
$6.00 per share, a purchaser in this Offering will experience immediate and
substantial dilution of approximately 84% or $5.03 per share. See "Dilution."
NO DIVIDENDS. The Company has never paid a cash dividend on its Common
Stock and does not intend to pay any cash dividends to its stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. See "Dividend Policy."
NO ASSURANCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE
VOLATILITY OF MARKET. Prior to this Offering, there has been no public trading
market for the Common Stock. Consequently, the initial public offering price of
the Common Stock has been determined by negotiations between the Company and
8
<PAGE>
the Underwriter and does not necessarily reflect the Company's book value or
other established criteria of valuation. There can be no assurance that a
regular trading market for the Common Stock will develop after this Offering or
that, if developed, it will be sustained. The market price of the Common Stock
following this Offering may be highly volatile as has been the case with the
securities of many emerging companies. Factors such as the Company's operating
results and announcements by the Company or its competitors may significantly
impact the market price of the Company's securities. In addition, in recent
years, the stock market has experienced a high level of price and volume
volatility and market prices for the securities of many companies have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. Although the Underwriter intends to make a market
in the Common Stock, it is not obligated to do so and may cease such market
making activities at any time. See "Underwriting."
EFFECT OF OUTSTANDING OPTIONS AND CONVERTIBLE NOTE, COMPANY'S STOCK OPTION
PLAN AND UNDERWRITER'S WARRANTS. As of the date of this Prospectus, (i) options
to purchase an aggregate of 123,210 shares of Common Stock are issued and
outstanding which are exercisable at the initial public offering price of the
Shares offered hereby less underwriting discounts and commissions, and (ii) a
convertible note convertible into shares of Common Stock in an amount equal to
the outstanding principal amount of such note ($269,992.82 as of November 1,
1996, which amount is reduced by $1,428.58 per month) divided by the initial
public offering price per share of the Shares offered hereby less underwriting
discounts and commissions is issued and outstanding. In addition, while no
options are presently issued and outstanding under the Company's Stock Option
Plan, the Company may from time to time issue options under the Stock Option
Plan to purchase up to 400,000 shares of Common Stock. The Company has committed
to grant options to purchase 88,167 shares of Common Stock at an exercise price
equal to the initial public offering price of the Shares offered hereby less
underwriting discounts and commissions pursuant to the Stock Option Plan to two
employees of the Company upon consummation of this Offering. In connection with
this Offering, the Company will issue and sell to the Underwriter for nominal
consideration Warrants which entitle the Underwriter to purchase an aggregate of
135,000 shares of Common Stock. The Underwriter's Warrants will be exercisable,
commencing one year and ending five years after the date of this Prospectus, at
an exercise price of 120% of the initial public offering price per share of the
Shares offered hereby. The holders of the options and a convertible note
presently outstanding, holders of any subsequently issued options, warrants or
other convertible securities of the Company, as well as the Underwriter will
have the opportunity to profit from a rise in the market price of the Company's
Common Stock without assuming the risk of ownership. The sale of Common Stock or
other securities held by or issuable to any such holders, or merely the
potential of such sales, could have an adverse effect on the market price of the
Company's Common Stock. The Company may find it more difficult to raise
additional equity capital, if it should be needed for the business of the
Company, while any of such securities are outstanding. At any time when the
holders thereof might be expected to convert or exercise them, the Company would
probably be able to obtain additional equity capital on terms more favorable
than those provided by such securities. To the extent that any such securities
are converted or exercised, as the case may be, the percentage of ownership
interest of the Company's stockholders will be diluted. See "Dilution" and
"Management--1996 Stock Option Plan."
SHARES ELIGIBLE FOR FUTURE SALE. The 2,126,789 shares of Common Stock
outstanding immediately prior to this Offering are "restricted securities"
within the meaning of the Act and, generally, may be sold only in compliance
with Rule 144 under the Act. In addition, all of the 2,126,789 shares are
subject to lockup restrictions described below. Of such restricted securities,
2,069,929 may be sold pursuant to Rule 144 upon the expiration of the lockup
restrictions described below and 56,860 may be sold pursuant to Rule 144 on
October 1, 1998. Under Rule 144, a person who has held restricted securities for
a period to two years may sell a limited number of such securities into the
public market without registration of such securities under the Act. Rule 144
also permits, under certain circumstances, persons who are not affiliates of the
Company to sell their restricted securities without quantity limitations once
they have satisfied Rule 144(k)'s three-year holding period. In addition, the
Securities and Exchange Commission (the "Commission") has proposed revisions to
Rule 144 and Rule 144(k), the effect of which would be to shorten the holding
period under Rule 144 from two years to one year and to shorten the holding
period under Rule 144(k) from three
9
<PAGE>
years to two years. Sales made pursuant to Rule 144 by the Company's existing
stockholders may have a depressive effect on the price of the shares of Common
Stock in the public market, should a public market for the shares develop. Such
sales could also adversely affect the Company's ability to raise capital at that
time through the sale of its equity securities. All of the Company's officers,
directors and stockholders have agreed not to sell, assign or transfer any of
their shares of Common Stock for a period of eighteen (18) months from the
closing of this Offering without the Underwriter's prior written consent. The
holders of all of the 2,126,789 shares of "restricted securities" have certain
registration rights with respect to such shares. The holders of the
Underwriter's Warrants will have certain registration rights with respect to the
Common Stock underlying such warrants, commencing one year after the effective
date of this Offering. See "Shares Eligible for Future Sale."
FORWARD LOOKING STATEMENTS. This Prospectus contains forward-looking
statements within the meaning of Section 27A of the Act, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward-looking statements involve risks and uncertainty.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Prospectus will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Shares
offered hereby at an assumed initial public offering price of $6.00 per share,
after deducting underwriting discounts and expenses payable by the Company, are
estimated to be $6,500,000 ($7,557,050 if the Underwriter's over-allotment
option is exercised in full).
The Company presently intends to use the net proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
- -------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Repayment of seller's notes(1)........................................................ $ 3,500,000 54%
Repayment of outstanding loan(2)...................................................... 2,000,000 31
Working capital(3).................................................................... 1,000,000 15
------------ -----
Total........................................................................... $ 6,500,000 100%
------------ -----
------------ -----
</TABLE>
- ------------------------
(1) Reflects repayment in full of indebtedness incurred in connection with the
acquisition by the Company of certain assets of Electrified. The notes
evidencing the indebtedness were originally issued in January 1996. The
notes bear interest at the prime rate, interest payments only due through
February 1997, and then equal monthly installments of principal and interest
from March 1997 through February 2000.
(2) Reflects repayment of a note payable to European American Bank having an
oustanding principal amount of $2,000,000 bearing interest at an annual rate
of prime plus .25%, due in monthly installments of interest only through May
31, 1997 at which time the principal plus any accrued and unpaid interest is
due in full. The proceeds of this note were used for acquisition financing.
(3) The Company may seek to utilize funds allocated to working capital for
business acquisitions. Although the Company has no current plan to acquire
any other business, the Company may seek to acquire, where feasible,
companies whose businesses are compatible with those of the Company. The
Company does not currently have any agreements, commitments or arrangements
with respect to any proposed acquisitions, and no assurance can be given
that any acquisition opportunity will be consummated in the future.
The allocation of the net proceeds of this Offering set forth above
represents the Company's best estimate based upon its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
future revenue and expenditures. The Company reserves the right to reallocate
these proceeds within the above-mentioned categories or to other purposes if
management believes it is in the Company's best interest because of any
unpredictable factors.
Any additional net proceeds realized from the exercise of the Underwriter's
over-allotment option (up to $1,057,050) will be added to the Company's working
capital.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds and interest-bearing savings and
management accounts.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on the Common Stock.
The Company currently intends to reinvest earnings, if any, to finance the
development and expansion of its business and does not intend to declare or pay
any cash dividends in the foreseeable future.
11
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company at September 30, 1996
was $(3,114,759) or $(1.46) per share of Common Stock based on the 2,126,789
shares of Common Stock outstanding. Net tangible book value per share represents
the amount of the Company's total tangible assets less the Company's total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the receipt and initial application of net proceeds (estimated
to be approximately $6,500,000) from the sale of the Shares offered hereby at an
assumed initial public offering price of $6.00 per share, the pro forma net
tangible book value of the Company at September 30, 1996 would have been
$3,386,241 or $.97 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $2.43 per share to existing
stockholders and an immediate, substantial dilution of approximately 84% or
$5.03 per share to purchasers of Common Stock offered hereby. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 6.00
Net tangible book value (deficit) per share at September 30,
1996.............................................................. $ (1.46)
Increase per share attributable to new investors................... 2.43
---------
Pro forma net tangible book value per share after this Offering...... .97
---------
Dilution per share to new investors.................................. $ 5.03
---------
---------
</TABLE>
The following table, calculated on the same basis as above, sets forth, with
respect to current stockholders and new investors, a comparison of the number of
shares of Common Stock acquired from the Company, the percentage ownership of
such shares, the total consideration paid, the percentage of total consideration
paid and the average price per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current stockholders (1)................................ 2,126,789 61% $ 3,356,114 29% $ 1.58
New investors........................................... 1,350,000 39 8,100,000 71 $ 6.00
---------- --- ------------- ---
3,476,789 100% $ 11,456,114 100%
---------- --- ------------- ---
---------- --- ------------- ---
</TABLE>
- ------------------------
(1) Includes 56,860 shares of Common Stock issued upon the exercise of warrants
on October 1, 1996 for consideration of $1,000. Does not include (i) 400,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan (none of which options have been granted to date; however, the
Company has committed to grant options to purchase 88,167 shares of Common
Stock at an exercise price equal to the initial public offering price per
share of the Shares offered hereby less underwriting discounts and
commissions pursuant to the Stock Option Plan to two employees of the
Company upon consummation of this Offering), (ii) an aggregate of 123,210
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price equal to the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions, and (iii) shares of Common Stock in an amount
equal to the outstanding principal amount of a convertible note ($269,992.82
as of November 1, 1996, which amount is reduced by $1,428.58 per month)
divided by the initial public offering price per share of the Shares offered
hereby less underwriting discounts and commissions reserved for issuance
upon conversion of such note.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, and as adjusted to reflect the issuance and sale by the
Company of the Shares offered hereby at an assumed initial public offering price
of $6.00 per share and the initial application of the net proceeds therefrom.
This table should be read in conjunction with the Company's financial statements
and pro forma unaudited financial statements of operations and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
<S> <C> <C>
Total long-term debt (less current portion)(1)..................................... $ 7,687,589 $ 3,200,096
------------- -------------
Stockholders' equity:
Common stock, $.0063 par value; 10,000,000 shares authorized; 2,069,929; issued
and outstanding and 3,476,789, as adjusted, respectively (2);................... 13,041 21,904
Additional paid-in capital....................................................... 3,342,073 9,834,210
Retained earnings................................................................ 1,174,517 1,174,517
------------- -------------
Total stockholders' equity................................................... 4,529,631 11,030,631
------------- -------------
Total capitalization....................................................... $ 12,217,220 $ 14,230,727
------------- -------------
------------- -------------
</TABLE>
- ------------------------
(1) See Notes 7 and 10 to the Financial Statements included elsewhere herein for
information regarding the Company's long-term debt and other long-term
obligations.
(2) Includes 56,860 shares of Common Stock issued upon the exercise of warrants
on October 1, 1996 for consideration of $1,000. Does not include (i) 400,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan (none of which options have been granted to date; however, the
Company has committed to grant options to purchase 88,167 shares of Common
Stock at an exercise price equal to the initial public offering price per
share of the Shares offered hereby less underwriting discounts and
commissions pursuant to the Stock Option Plan to two employees of the
Company upon consummation of this Offering), (ii) an aggregate of 123,210
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price equal to the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions, and (iii) shares of Common Stock in an amount
equal to the outstanding principal amount of a convertible note ($269,992.82
as of November 1, 1996, which amount is reduced by $1,428.58 per month)
divided by the initial public offering price per share of the Shares offered
hereby less underwriting discounts and commissions reserved for issuance
upon conversion of such note.
13
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below for the year
ended December 31, 1995, gives effect to the acquisition of Electrified as
though acquired on January 1, 1995. The pro forma statement of operations
information also reflects (a) the increase in amortization expense as a result
of the increase of intangible assets from the acquisition for the year ended
December 31, 1995 and (b) the increase in interest expense for the year ended
December 31, 1995 resulting from the issuance of notes payable to the sellers in
connection with the Electrified transaction. The pro forma financial information
is not necessarily indicative of what the Company's results of operations would
have been had such transaction occurred at the beginning of the period. The pro
forma financial information below should be read in conjunction with the audited
financial statements of the Company and the notes thereto contained elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1995
---------------------------------------------------------------------
PRO FORMA
PURO ELECTRIFIED COMBINED ADJUSTMENTS(1) COMBINED
------------ ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue:
Bottled water sales and other revenue............. $ 4,175 $ 4,425 $ 8,600 $ -- $ 8,600
Rental revenue.................................... 1,326 733 2,059 -- 2,059
------------ ----------- ----------- ----- ------------
Total revenue................................... 5,501 5,158 10,659 -- 10,659
------------ ----------- ----------- ------------
Costs and expenses:
Cost of goods sold (excluding depreciation)....... 1,616 2,615 4,231 -- 4,231
Operating expenses (excluding depreciation and
amortization).................................... 1,306 1,479 2,785 -- 2,785
General and administrative expenses............... 1,309 883 2,192 -- 2,192
------------ ----------- ----------- ----- ------------
Total costs and expenses........................ 4,231 4,977 9,208 -- 9,208
------------ ----------- ----------- ----- ------------
EBITDA (2).......................................... 1,270 181 1,451 -- 1,451
Depreciation and amortization....................... 451 447 898 272 1,170
------------ ----------- ----------- ----- ------------
Income (loss) from operations....................... 819 (266) 553 (272) 281
------------ ----------- ----------- ----- ------------
Other income (expense):
Interest expense.................................. (303) (53) (356) (342) (698)
Other income (expense)............................ 119 310 429 -- 429
Plant relocation charges.......................... -- -- -- -- --
------------ ----------- ----------- ----- ------------
Total other income (expense).................... (184) 257 73 (342) (269)
------------ ----------- ----------- ----- ------------
Income (loss) before provision for income taxes..... 635 (9) 626 (614) 12
Provision for income taxes.......................... 231 9 240 235 5
------------ ----------- ----------- ----- ------------
Net income (loss)................................... $ 404 $ (18) $ 386 $ (379) $ 7
------------ ----------- ----------- ----- ------------
------------ ----------- ----------- ----- ------------
Earnings per share(3)............................... $ 0.22 $ 0.00
------------ ------------
------------ ------------
Weighted average common shares outstanding(3)....... 1,829 1,829
------------ ------------
------------ ------------
</TABLE>
14
<PAGE>
- ------------------------
(1) The pro forma statement of operations data for the year ended December 31,
1995 gives effect to the purchase of Electrified as if it had occurred as of
January 1, 1995. The effects of this transaction is set forth below.
(i) Reflects the increase of intangible assets as a result of the purchase
and an increase in the corresponding amortization expense of $272,000
for the year ended December 31, 1995.
(ii) Reflects the increase in interest expense of $342,000 as a result of
the issuance of notes payable to the sellers of Electrified.
(iii) Income taxes have been adjusted to reflect the adjustments described
in (i) and (ii) above.
(2) "EBITDA" is defined as earnings from operations before interest expense,
income taxes, depreciation and amortization.
(3) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere
herein.
15
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the period from inception
(February 1, 1994) through December 31, 1994 and as of and for the year ended
December 31, 1995 have been derived from financial statements which have been
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this Prospectus. The selected financial data for the nine months
ended September 30, 1995 and as of and for the nine months ended September 30,
1996 has been derived from unaudited financial statements which have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, include all adjustments of a normal recurring nature
necessary for a fair presentation of the information shown therein. The results
of operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
data set forth below should be read in conjunction with the Company's financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 1, NINE MONTHS ENDED
1994) THROUGH YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ------------------------
1994 1995 1995 1996
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Bottled water sales and other revenue:..................... $ 2,918 $ 4,175 $ 3,121 $ 6,384
Rental revenue............................................. 1,136 1,326 992 1,684
------ ------ ----------- -----------
Total revenue.......................................... 4,054 5,501 4,113 8,068
------ ------ ----------- -----------
Costs and expenses:
Cost of goods sold (excluding depreciation)................ 1,147 1,616 1,263 2,293
Operating expenses (excluding depreciation and
amortization)............................................. 1,197 1,306 1,014 1,523
General and administrative expenses........................ 948 1,309 917 1,892
------ ------ ----------- -----------
Total costs and expenses............................... 3,292 4,231 3,194 5,708
------ ------ ----------- -----------
EBITDA(1).................................................... 762 1,270 919 2,360
------ ------ ----------- -----------
Depreciation and amortization:
Cost of goods sold......................................... 106 237 130 337
Operating expenses......................................... 113 214 149 422
------ ------ ----------- -----------
Total depreciation and amortization.................... 219 451 279 759
------ ------ ----------- -----------
Income from operations....................................... 543 819 640 1,601
------ ------ ----------- -----------
Other income (expense):
Interest expense........................................... (130) (303) (221) (541)
Other income (expense)..................................... 47 119 108 (5)
Plant relocation charges (2)............................... -- -- -- (250)
------ ------ ----------- -----------
Total other expense.................................... (83) (184) (113) (796)
------ ------ ----------- -----------
Income before provision for income taxes..................... 460 635 527 805
Provision for income taxes................................... 204 231 190 290
------ ------ ----------- -----------
Net income................................................... $ 256 $ 404 $ 337 $ 515
------ ------ ----------- -----------
------ ------ ----------- -----------
Earnings per share(3)........................................ $ 0.15 $ 0.22 $ 0.19 $ 0.23
------ ------ ----------- -----------
------ ------ ----------- -----------
Weighted average common shares outstanding(3)................ 1,745 1,829 1,745 2,194
------ ------ ----------- -----------
------ ------ ----------- -----------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- -------------------------
ACTUAL ACTUAL AS ADJUSTED(4)
----------------- --------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash........................................................ $ 689 $ 326 $ 1,326
Working capital (deficit)................................... 1,049 (248) 1,530
Total assets................................................ 8,350 17,253 18,253
Long-term debt.............................................. 2,505 7,688 2,966
Total stockholders' equity.................................. 3,515 4,530 11,030
- ------------------------
(1) "EBITDA" is defined as earnings from operations before interest expense, income taxes, depreciation and
amortization.
(2) Represents non-recurring charges of $250,000 related to the closing of two of the Company's bottling
plants and the relocation of such production facilities to the Company's Commack, Long Island, New York
and East Orange, New Jersey facilities.
(3) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere herein.
(4) Adjusted to give effect to the sale by the Company of the 1,350,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $6.00 per share and the initial application of
the net proceeds therefrom. See "Use of Proceeds."
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analylsis should be read in conjunction with
the Company's financial statements and the notes thereto included elsewhere in
this Prospectus.
GENERAL BACKGROUND
The Company is a leading bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company also rents and services water coolers, filtration
systems, and plumbed-in fountains located in businesses, factories, and homes in
the metropolitan New York area.
The Company was formed in January 1994 and represents the acquisition of LSL
Hydro Corp. and Puro Corporation of America. Subsequently, the Company has
acquired eight additional distributors of high quality drinking water in the New
York City, New Jersey and Long Island markets. Since 1994, the Company has grown
from approximately 5,000 water customers to in excess of 25,000.
OVERVIEW
The Company's strategy is to capitalize on the growing demand for high
quality drinking water through the expansion of its existing customer base and
through the acquisition of regional water bottlers and distributors in targeted
geographic markets. The Company's acquisition of Electrified's modern high-speed
production facility enables it to absorb new bottling demand without a
commensurate increase in production costs. Similarly, the new bottling facility
in Commack, Long Island, New York can absorb additional volume with minimum
incremental cost. In addition, management continually seeks to grow revenues by
increasing route density through the acquisition and consolidation of new routes
within its existing route structure, thereby minimizing distribution and
administration costs. The continued consolidation of production and distribution
capabilities is a key component of the Company's operating plans, both within
its current markets and any additional markets it may enter.
RESULTS OF OPERATIONS
The Company derives its revenues from two major sources: bottled water sales
and the rental and service of water coolers, filtration systems and plumbed-in
fountains. While most other bottled water companies sell only pre-packaged
bottled water, the Company also rents water treatment equipment which processes
and dispenses drinking water at the point of use enabling the consumer to enjoy
quality drinking water with reduced contaminants.
Additionally, in contrast to most other water treatment dealers and
distributors that have historically sold their water treatment equipment
outright, the Company creates long-term relationships with its own customers by
renting or placing the equipment under lease/service agreements. These
agreements result in revenue streams which provide the Company with a base of
recurring revenue.
18
<PAGE>
The following table sets forth, for the periods indicated, the percentage
relationship to total revenues of certain items included in the Company's
Statement of Operations.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD FROM INCEPTION SEPTEMBER 30,
(FEBRUARY 1, 1994) YEAR ENDED --------------------
THROUGH DECEMBER 31, 1994 DECEMBER 31, 1995 1995 1996
------------------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Bottled water sales and other revenue..................... 72.0 75.9 75.9 79.1
Rental revenue............................................ 28.0 24.1 24.1 20.9
------ ------ --------- ---------
Total revenue........................................... 100.0% 100.0% 100.0% 100.0%
------ ------ --------- ---------
Costs and expenses:
Cost of goods sold (excluding depreciation)............... 28.3 29.4 30.7 28.4
Operating expenses (excluding depreciation and
amortization)........................................... 29.5 23.7 24.7 18.9
General and administrative expenses....................... 23.4 23.8 22.3 23.5(1)
------ ------ --------- ---------
Total costs and expenses................................ 81.2 76.9 77.7 70.8
------ ------ --------- ---------
EBITDA(2)................................................... 18.8 23.1 22.3 29.2
------ ------ --------- ---------
Depreciation and amortization:
Cost of goods sold........................................ 2.6 4.3 3.2 4.2
Operating expenses........................................ 2.8 3.9 3.6 5.2
------ ------ --------- ---------
Total depreciation and amortization..................... 5.4 8.2 6.8 9.4
------ ------ --------- ---------
Income from operations...................................... 13.4 14.9 15.5 19.8
Other income (expense):
Interest expense.......................................... (3.2) (5.5) (5.4) (6.7)
Other income (expense).................................... 1.1 2.2 2.6 (0.1)
Plant relocation charges(3)............................... 0.0 0.0 0.0 (3.1)
------ ------ --------- ---------
Total other expense..................................... (2.1) (3.3) (2.8) (9.9)
------ ------ --------- ---------
Income before provision for income taxes.................... 11.3 11.6 12.7 9.9
Provision for income taxes.................................. 5.0 4.2 4.6 3.6
------ ------ --------- ---------
Net income.................................................. 6.3% 7.4% 8.1% 6.3%
------ ------ --------- ---------
------ ------ --------- ---------
</TABLE>
- ------------------------
(1) Includes certain "non-recurring" expenses totaling $47,000 for the nine
months ended September 30, 1996.
(2) "EBITDA" is defined as earnings from operations before interest expense,
income taxes, depreciation and amortization.
(3) Represents non-recurring charges of $250,000 related to the closing of two
of the Company's bottling plants and the relocation of such production
facilities to the Company's Commack, Long Island, New York and East Orange,
New Jersey facilities.
THE PERIOD FROM INCEPTION (FEBRUARY 1, 1994) TO DECEMBER 31, 1994, YEAR ENDED
DECEMBER 31, 1995 AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
REVENUES. Revenues in 1995 increased by 34% to $5.5 million from $4.1
million in the period from inception (February 1, 1994) to December 31, 1994.
The growth in revenues was attributable to the increase in the number of coolers
in operation as well as the acquisition of smaller distributors in the Company's
19
<PAGE>
market area. Revenues for the nine months ended September 30, 1996 increased by
98% to $8.1 million from $4.1 for the nine months ended September 30, 1995. This
increase in revenues reflects the acquisition of Electrified's operations in
East Orange, New Jersey for eight of the nine months and the acquisition of the
five-gallon routes from Mountainwood for three months beginning July 1, 1996.
Moreover, this increase occurred notwithstanding unusually cold spring and
summer seasons in 1996 compared to the heat wave in 1995 and record breaking
snow storms in early 1996.
COST OF GOODS SOLD. Cost of goods sold (excluding depreciation) increased
by 45% to $1.6 million in 1995 from $1.1 million in the period from inception
(February 1, 1994) to December 31, 1994. Cost of goods sold (excluding
depreciation) increased as a percentage of revenues to 29.4% in 1995 from 28.3%
in the period from inception (February 1, 1994) to December 31, 1994. This
increase is reflective of the trend to a higher percentage of natural spring
water sold compared to processed drinking water. Although cost of goods sold
(excluding depreciation) for the nine months ended September 30, 1996 increased
by 77% to $2.3 million from $1.3 million for the nine months ended September 30,
1995, cost of goods sold (excluding depreciation) as a percentage of revenues
for the nine months ended September 30, 1996 fell to 28.4% from 30.7% for the
same period in 1995. This decrease was the result of the production economies
associated with the newly acquired East Orange, New Jersey bottling facility.
These savings were partially offset by the higher packaging costs of the
one-gallon bottling lines and substantial increases in the rates paid for tolls
and fuel for delivery vehicles.
OPERATING EXPENSES. Operating expenses (excluding depreciation and
amortization) increased by 8.3% to $1.3 million in 1995 from $1.2 million in the
period from inception (February 1, 1994) to December 31, 1994. However,
operating expenses (excluding depreciation and amortization) decreased as a
percentage of revenues to 23.7% in 1995 from 29.5% in the period from inception
(February 1, 1994) to December 31, 1994. This decrease was due to efficiencies
achieved in the Company's bottling operations, route delivery, and servicing
system -- primarily from the addition of new accounts in existing market areas
that did not cause a commensurate increase in the required number of route
delivery personnel and field technicians. Operating expenses (excluding
depreciation and amortization) increased by 50% to $1.5 million for the nine
months ended September 30, 1996, from $1.0 million for the nine months ended
September 30, 1995. Due to the acquisition of Electrified's operations for eight
of the nine months ended September 30, 1996 and the acquisition of
Mountainwood's delivery routes for the three months beginning July 1, 1996,
operating expenses (excluding depreciation and amortization) as a percentage of
revenues decreased to 18.9% for the nine months ended September 30, 1996
compared to 24.7% for the nine months ended September 30, 1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 44% to $1.3 million in 1995 from $0.9 million in the period from
inception (February 1, 1994) to December 31, 1994. General and administrative
expenses increased as a percentage of revenues to 23.8% in 1995 from 23.4% in
the period from inception (February 1, 1994) to December 31, 1994. This increase
was the result of increased insurance costs associated with an increase in the
number of the Company's delivery vehicles. General and administrative expenses
increased by 111% to $1.9 million in the nine months ended September 30, 1996
from $0.9 million for the same period in 1995. General and administrative
expenses increased as a percentage of revenues to 23.5% for the nine months
ended September 30, 1996 from 22.3% for the same period in 1995. This increase
in general and administrative expenses reflects the associated cost of closing
the Company's plants in Port Jefferson and Maspeth, New York and the addition of
rental costs of East Orange, New Jersey and Commack, Long Island, New York.
Insurance, professional fees and other costs also contributed to the increase.
TOTAL DEPRECIATION AND AMORTIZATION. Total depreciation and amortization
increased by 150% to $0.5 million in 1995 from $0.2 million in the period from
inception (February 1, 1994) to December 31, 1994. Total depreciation and
amortization increased as a percentage of revenues to 8.2% in 1995 from 5.4% in
the period from inception (February 1, 1994) to December 31, 1994. This increase
was due primarily to the Company's continued investment in new coolers and route
acquisitions. Total depreciation and amortization for the nine month period
ended September 30, 1996 increased by 167% to $0.8 million from $0.3 million for
20
<PAGE>
the same period in 1995. Total depreciation and amortization increased as a
percentage of revenues to 9.4% for the nine months ended September 30, 1996 from
6.8% for the same period in 1995. This increase resulted primarily from the
Electrified acquisition, which included a modern high-capacity bottling facility
and the opening of a new bottling facility in Commack, Long Island, New York.
INCOME FROM OPERATIONS. Income from operations increased by 60% to $0.8
million in 1995 from $0.5 million in the period from inception (February 1,
1994) to December 31, 1994. Income from operations increased as a percentage of
revenues to 14.9% in 1995 from 13.4% in the period from inception (February 1,
1994) to December 31, 1994. Income from operations for the nine month period
ended September 30, 1996 increased by 167% to $1.6 million from $0.6 million for
the same period in 1995. Income from operations as a percentage of revenues
increased to 19.8% for the nine months ended September 30, 1996 from 15.5% for
the same period in 1995. This increase was the result of an increase in sales,
the consolidation of production facilities and an improvement in route densities
and scheduling.
INTEREST EXPENSE. Interest expense increased by 200% to $0.3 million in
1995 from $0.1 million in the period from inception (February 1, 1994) to
December 31, 1994. Interest expense increased as a percentage of revenues to
5.5% in 1995 from 3.2% in the period from inception (February 1, 1995) to
December 31, 1994. This increase was primarily due to increased borrowing in
order to fund the Company's expansion. For the nine months ended September 30,
1996, interest expense increased by 150% to $0.5 million from $0.2 million for
the same period in 1995. Interest expense increased as a percentage of revenues
to 6.7% for the nine months ended September 30, 1996 from 5.4% for the same
period in 1995. This increase was due to additional borrowings in connection
with certain acquisitions.
PLANT RELOCATION CHARGES. During the nine months ended September 30, 1996,
the Company relocated all bottled water production from its plants in Maspeth,
New York, and Port Jefferson, New York, to the Electrified facility in East
Orange, New Jersey, and the newly opened bottling plant in Commack, Long Island,
New York. The Maspeth and Port Jefferson bottling plants were subsequently
closed. Non-recurring plant relocation charges of $0.3 million or 3.1% of
revenues for the period ended September 30, 1996 were incurred.
PROVISION FOR INCOME TAXES
The effective income tax rate was 44% for the year ended December 31, 1994
and 36% for the year ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have been
cash flow from operations, proceeds from the sale of equity securities to the
Company's current stockholders, purchase money financing of business
acquisitions, and borrowing under the Company's bank agreement described below.
During 1995, net cash provided by operating activities was $0.4 million. In
1995, the Company made capital expenditures for coolers, other equipment, and
routes aggregating $2.8 million, which was funded by cash from operations,
private equity placement, purchase money financing of business acquisitions and
borrowings under the Company's bank agreement.
At December 31, 1995, cash totalled $0.7 million, and approximately $1.0
million of additional borrowings were available under the Company's bank
agreement. As of September 30, 1996, cash totalled $0.3 million, and no
additional borrowing was available under the Company's bank agreement.
The Company's bank agreement provides for aggregate long-term borrowings of
up to $3.0 million, approximately all of which is currently outstanding,
maturing between November 1, 1997 and December 31, 2001, bearing interest at the
prime rate plus .25% per annum, secured by substantially all of the assets of
the Company and guaranteed by certain stockholders of the Company. In addition,
the bank agreement contains covenants that include requirements to maintain
certain working capital, debt coverage and other financial
21
<PAGE>
ratios and restrictions and limitations on the payment of dividends, guaranty
payments, additional borrowings and the amount of compensation paid to employees
who are stockholders. The Company is in material compliance with all such
covenants. Approximately $2.0 million of the net proceeds from this Offering
will be used to repay amounts outstanding under the Company's bank agreement.
In addition, approximately $3.5 million of the net proceeds will be used to
repay certain purchase money financing incurred in connection with the
Electrified transaction. Simultaneously with the Electrified transaction, the
Company obtained a letter of credit in the amount of $3,500,000 from European
American Bank to secure such financing. In addition, in connection with the
Mountainwood transaction in June 1996, the Company obtained a letter of credit
in the amount of $500,000 from European American Bank to secure seller financing
of a like amount. Peter T. Dixon, the Company's Chairman of the Board of
Directors and a principal stockholder, secured both of these letters of credit
with personal assets. See "Certain Transactions."
The Company believes that the net proceeds from this Offering, together with
cash provided from operations, will be sufficient to satisfy its anticipated
cash requirements for at least twelve months following the consummation of this
Offering.
The Company is in negotiations with its principal lender regarding an
increase in its borrowing facilities, which may consist of either or both long
and short term borrowings. There can be no assurance that such negotiations will
be successfully completed.
FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Act and Section 21E of the Exchange Act, which are
intended to be covered by the safe harbors created thereby. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. Factors that could cause
actual results to differ from the results discussed in the forward-looking
statements include, but are not limited to, those discussed in "Risk Factors."
In light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
22
<PAGE>
BUSINESS
The Company is a leading bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company markets its drinking water under the brand names Puro,
American Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. The
Company also rents and services water coolers, filtration systems, and
plumbed-in fountains numbering in excess of 25,000 located in businesses,
factories, and homes in the metropolitan New York area. The Company's facilities
consist of NSF (National Sanitation Foundation) certified bottling plants in
East Orange, New Jersey and Commack, Long Island, New York. In addition, the
Company is an authorized factory service center for all major water cooler
manufacturers and provides warranty repair coverage to many of its competitors.
The Company is also the manager of the Quality Bottler's Cooperative, Inc.
(the "Cooperative"). Membership consists of the twelve leading regional bottled
water companies located throughout the United States which are similar in size
to the Company. Members are contractually required to purchase all of their
coolers, bottles, closures, and other key items on a group basis. A management
fee is paid to the Company based on purchase volume. The Company believes that
the purchasing power of the Cooperative permits the group to buy at prices which
are no higher than those charged the largest buyer in the industry.
INDUSTRY OVERVIEW
Bottled water has been the fastest growing segment of the beverage industry
for the last ten years. According to the May 1996 edition of "Bottled Water in
the United States," a study prepared by the Beverage Marketing Corporation (the
"BEVERAGE MARKET SURVEY"), total bottled water consumption in the United States
has tripled from 1985 to 1995. Annual consumption increased from 2.8 gallons per
capita in 1980 to 11 gallons per capita in 1995, and it is projected to reach
14.2 gallons per capita by the turn of the century. Bottled water volume in the
United States has grown significantly, increasing from approximately 345.0
million gallons in 1977 to approximately 3.0 billion gallons in 1995; from
approximately $240.0 million in sales for 1976 to over $3.3 billion in 1995.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 U.S. BOTTLED WATER SALES
<S> <C> <C>
(AMOUNTS IN MILLIONS)
GALLONS SOLD
NONSPARKLING 2,430.20 84.30%
IMPORTED 97.1 3.40%
SPARKLING 356.2 12.40%
TOTAL-2,883.5 MILLION
DOLLAR SALES
NONSPARKLING $2,121.20 62.90%
IMPORTED $425.00 12.60%
SPARKLING $828.80 24.60%
TOTAL-3,375.0 MILLION
SOURCE: BEVERAGE MARKET SURVEY
</TABLE>
23
<PAGE>
The bottled water market comprises three segments: non-sparkling (domestic),
sparkling (domestic) and imported water (both sparkling and non-sparkling).
Non-sparkling water, which is consumed as an alternative to tap water, is the
segment in which the Company competes and is the largest of the three segments,
representing 84.3% of the total market in terms of gallons of water sold.
Sparkling water contains carbonation and is positioned to compete in the broad
"refreshment beverage" category. Domestic sparkling water accounts for
approximately 12.4% of total bottled water consumption. The remaining 3.4%
consists of imported bottle water brands.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NON-SPARKLING SPARKLING IMPORTS
<S> <C> <C> <C>
Millions of Gallons
1977 256.7 85.6 3.2
1978 352.9 113.5 13.4
1979 401.2 133.8 28.1
1980 463.1 155.2 11.4
1981 537.7 175.9 11.6
1982 614.0 196.5 12.9
1983 722.4 210.3 13.6
1984 843.3 230.3 16.5
1985 953.1 254.8 29.8
1986 1070.4 281.6 30.8
1987 1223.4 300.6 37.2
1988 1406.9 316.5 49.7
1989 1623.5 329.5 55.6
1990 1753.3 371.3 73.9
1991 1770.5 368.0 71.4
1992 1839.5 365.9 86.3
1993 1990.5 366.4 92.5
1994 2214.6 366.4 104.0
1995 2430.2 356.2 97.0
Source: Beverage Market Survey
</TABLE>
The Company believes this growth in bottled water consumption is largely a
function of two consumer trends. First, consumers have increasingly turned to
alternative sources of drinking water as a result of growing concerns about the
perceived decline in the quality of the tap water available in their homes and
offices. Second, an increasing diet and health consciousness among consumers has
led many consumers to seek a beverage choice which closely resembles the "ideal"
refreshment beverage. That is, one that has NO CALORIES, NO PRESERVATIVES, NO
ADDITIVES OR SUGAR, NO SODIUM AND NO ALCOHOL. High quality bottled drinking
water meets these demands.
According to the BEVERAGE MARKET SURVEY, over the past five years, the
bottled water market has grown at an average annual rate of 5.5% (1990-1995),
and the Beverage Marketing Corporation projects that it will grow at a slightly
higher rate of 6.5% between 1995 and 2000. Bottled water volume in the United
States is projected to grow from approximately 3.0 billion gallons in 1995 to
approximately 3.9 billion gallons by the year 2000. Per capita consumption is
projected to reach 14.2 gallons for every person in the United States by the
year 2000.
24
<PAGE>
PROJECTED U.S. BOTTLED WATER MARKET
1995-2000
<TABLE>
<CAPTION>
5 YEARS'
AVERAGE
MILLIONS OF ANNUAL GALLONS
YEAR GALLONS GROWTH PER CAPITA
- ------------------------------------ ----------- ------------- -------------
<S> <C> <C> <C>
1995................................ 2,883.5 5.5% 11.0
2000................................ 3,943.2 6.5% 14.2
</TABLE>
- ------------------------
SOURCE: BEVERAGE MARKET SURVEY
Bottled water channels of distribution consists of drinking water purchased
in pre-filled containers from retail locations (primarily supermarkets), water
delivered in pre-filled containers to residential or commercial establishments,
and water sold through a self-service or "vended" format to retail consumers who
fill their own containers. The market share of each of these distribution
channels varies considerably by geographical area. According to the BEVERAGE
MARKET SURVEY, the total share of the national bottled water of these
distribution channels for 1995 was: retail (53.0%), home delivery (20.6%),
commercial delivery (18.4%) and vended (8.0%).
Further impetus for consumers' tap water concern took place on August 6,
1996 when President Clinton signed into law the Safe Drinking Water
Reauthorization Act of 1996. For the first time, federal law requires all local
water utilities to issue annual reports disclosing the chemicals and bacteria
that the tap water contains. The language must be simple and sent directly to
customers with the water utility bills. Especially important is a 24-hour
notification requirement when any contaminant poses a significant risk. The
Company believes that this change in the nation's law will increase the public's
concern over the quality and safety of public water supplies. Usage of high
quality bottled water and drinking water filtration systems can be expected to
benefit from this increased awareness.
BUSINESS STRATEGY
The bottled water distribution market is highly fragmented and composed of
many small regional companies as well as a few larger companies which own
several brands. The Company's strategy is to capitalize on the growing demand
for high quality drinking water resulting from the increasing public concern
about the taste and safety of municipal water supplies and the desire among
today's increasingly diet and health conscious consumers for an "ideal" beverage
through the expansion of its existing customer base and through the acquisition
of regional water bottlers and distributors in targeted geographic markets. In
addition, management continually seeks to grow revenues by increasing route
density through the acquisition and consolidation of new routes within its
existing route structure, thereby minimizing distribution and administration
costs. The continued consolidation of production and distribution capabilities
is a key component of the Company's operating plans, both within its current
markets and any additional markets it may enter.
In support of its growth strategy the Company is continuing to pursue the
acquisition of regional water bottlers and distributors, as well as mergers with
certain members of the Cooperative. As of the date of this Prospectus, the
Company has thirteen companies under active review as candidates for acquisition
or merger, although the Company has no agreements, commitments or arrangements
with respect to any proposed mergers or acquisitions. As consideration for any
future acquisitions, the Company may pay cash, incur indebtedness or issue debt
or equity securities. Such acquisitions could result in material changes in the
Company's financial condition and operating results. There can be no assurance
that suitable merger or acquisition opportunities will be available to the
Company or that the Company will be able to consummate any mergers or
acquisitions on satisfactory terms. In addition, there can be no assurance that
the Company will be able to integrate or manage successfully other acquired
businesses.
25
<PAGE>
BOTTLED WATER PROCESSING
The Company employs a broad spectrum of treatment technologies for its
various bottled waters, ranging from minimum treatment of its natural spring
waters, to extensive treatment of public water sources for its distilled and
drinking waters. Manufacturing practices, quality standards, and labeling of the
Company's bottled water products are regulated by the Federal Food and Drug
Administration ("FDA") as well as the states and some localities in which the
water is distributed. In addition, the Company participates in the International
Bottled Water Association's inspection program which incorporates quality
standards stricter than those prescribed by law.
NATURAL SPRING WATER: As "natural" waters, the Company's state-certified
spring sources may not be subjected to any treatment which alters the mineral
composition of the product. Spring water, by law, may not be derived from a
municipal system or public water supply, and must be derived from an underground
source, free of surface water influence, which flows continuously to the surface
under its own pressure. A hydrogeological report must validate the integrity of
the source and safety of the water-collection operations before any groundwater
source can be certified as a spring. Regular bacteriological and chemical
compliance monitoring of the Company's springs assures that these sources remain
uncontaminated.
The Company's water sources, at Mountainwood Spring and Indian Camp Spring
are located in remote, pristine environments where the spring's recharge areas
have not been encroached by industry, agriculture or housing development.
Consequently, the spring water must be transported to the Company's plants by
stainless steel tanker trucks used solely for its water. At the spring source
the water is filtered and ozonated (see below) prior to loading. This disinfects
the spring water, and the residual ozone in the water disinfects the inside of
the tanker, thereby insuring that bacteria are not transferred from the spring
or the tanker to the Company's bottling plants. Samples for each tanker load are
tested for bacterial safety, consistency, and ozone residual.
Sanitary bulk, stainless tanks at the Company's bottling plants protect the
spring water while it is again ozonated and finally filtered through one-micron
absolute filters immediately before being bottled in sanitized containers. The
Company employs this "multiple barrier" approach to protect its natural spring
water from contaminants, including dangerous protozoan cysts such as
Cryptosporidium which can survive municipal tap water disinfection with
chlorine.
DISTILLED WATER: The Company uses more extensive treatment techniques for
its processed waters. For example, the Company's distilled water is produced by
the recapture of condensed steam, one of the oldest water purification
mechanisms known. Automated distillation units at the Company's East Orange
bottling plant vaporize the local municipal water through heating, leaving
behind impurities of minerals and other compounds. The condensed water vapor
produces a water of extremely high purity and very low mineral content
(typically less than 10mg/liter of total dissolved solids). This level of purity
enables distilled water to be used for pharmaceutical purposes, photographic
processes, humidifiers, and similar applications as well as for drinking.
DRINKING WATER: The processes involved in producing the Company's drinking
waters include particle filtration, carbon adsorption (molecular adhesion),
ultraviolet disinfection, deionization, one-micron absolute filtration, and
ozonation. Public water is initially filtered using a five micron filter to
remove sedimentation. The water is then processed through an activated carbon
bed to remove organic compounds and associated tastes and odors. This step also
removes chlorine which is added as a disinfectant to public supplies. The
by-products of chlorine disinfection, such as trihalomethanes, are also removed
by activated carbon adsorption. Ultraviolet treatment is a precaution against
any microbial contamination which might be transported further along in the
production line. Deionization is used at the Company's East Orange plant to
reduce dissolved minerals in the final drinking water. As is the case with all
of the Company's waters, a one-micron absolute filter is the final filtration
stage prior to ozonation and bottling.
26
<PAGE>
Ozonation involves a special form of oxygen, ozone (O(3)), which is the
strongest disinfectant and oxidizing agent available for water treatment. It is
the standard disinfectant for bottled water processing. A highly unstable gas,
ozone must be generated on site, prior to transport at the spring locations, and
at the Company's bottling plants. Because it is only partially soluble in water,
sufficient ozone contact with the water is established by special contact tanks
and mixing vessels. These extended contact times and the closely monitored ozone
concentrations are the reason that properly ozonated bottled water can be
assured to be free of chlorine-resistant organisms such as the recently
publicized parasitic cyst, Cryptosporidium. A special "hyperozonator" provides a
final disinfecting rinse of ozonated water in the bottle washing and sanitizing
machines at both of the Company's plants.
After the appropriate treatments, the product water is piped to the Clean
Room, which houses the automatic filing and capping equipment. Its design
mandated by the FDA, the Clean Room is totally enclosed with a positive-pressure
ventilation system which feeds filtered, sterilized air into the room. This room
and its equipment are sanitized every day. The final product, whether natural
spring water, distilled, or drinking water, is a high quality, clean bottled
water that is one of the most strictly regulated and reliable pure food products
available to the American consumer.
BOTTLING AND DISTRIBUTION FACILITIES
The Company's offices and plants are located in East Orange, New Jersey,
Commack, Long Island, New York and Maspeth, New York. The following table sets
forth certain information relating to the leased and owned space for each
location.
<TABLE>
<CAPTION>
APPROXIMATE #
OF SQUARE
FEET
LOCATION OF FACILITY OF SPACE LEASE TERM MONTHLY RENT EXPIRES
- ------------------------------------------------------------------ ------------- ---------- ------------ -------
<S> <C> <C> <C> <C>
East Orange, New Jersey........................................... 48,000 10 years $10,000 2007
Commack, Long Island, New York.................................... 23,000 5 years $10,200 2001
Maspeth, New York (1)............................................. 24,000 -- -- --
</TABLE>
- ------------------------
(1) The Company owns this facility and is mortgagee with respect to a mortgage
covering the Maspeth, New York facility. This mortgage requires monthly
payments of $9,941, including interest at an annual rate of 10.75%. The
mortgage provides for a balloon payment of the entire principal, $886,873,
on June 1, 1998.
At the East Orange, New Jersey, facility the Company bottles spring,
purified and distilled water in five and one gallon sizes. This modern
production plant features high-speed sanitizing and filling equipment.
Management believes that this facility contains the only fully automatic five
gallon bottle rack loader in the metropolitan New York area. At present, the
five gallon line is running at approximately 45% capacity of one 40 hour shift.
The one-gallon line is currently running at approximately 33% capacity of one 40
hour shift. Additional bottling volume can be added at low incremental
production cost for both lines.
The Company's most recent 1996 plant inspection at East Orange resulted in a
sanitary compliance rating in excess of 97%, making the facility eligible to
receive the International Bottled Water Association's EXCELLENCE IN
MANUFACTURING recognition.
In addition, the Company performs water cooler servicing and refurbishment
activities at this facility including warranty repairs, filtration system
installation, and renovation of rental units for placement back in service in
the field. This facility services the Company's bottled water and water cooler
customers in Manhattan, the Bronx, Staten Island and New Jersey.
The Company's Long Island bottling plant in Commack was opened in the summer
of 1996 with a modern high-speed five gallon sanitizing and filling line for
spring and purified drinking water. This facility, which replaced a smaller
plant in Port Jefferson, Long Island, New York, serves the Company's Brooklyn,
Queens and Long Island customers and is currently operating at approximately 43%
capacity of one 40 hour shift.
27
<PAGE>
The Company currently utilizes its Maspeth, New York facility for servicing
of water coolers, limited water distribution and corporate headquarters. The
Company expects to sell its facility in Maspeth, New York. Upon such sale, the
Company intends to move its corporate headquarters to its Commack, Long Island,
New York facility and the business currently conducted from its Maspeth, New
York facility will be allocated between its Commack, Long Island, New York and
East Orange, New Jersey facilities. The Company believes its facilities are
adequate for its present needs.
WATER SUPPLY AGREEMENTS
SPRING WATER SUPPLIERS: On June 13, 1996, the Company entered into a
long-term spring water supply contract for its Commack, Long Island, New York,
bottling facility with Shawangunk Bulk Spring Water. This agreement provides for
"most-favored-customer" treatment with respect to pricing and priority water
rights to the Indian Camp Spring source in the foothills of the Catskill
Mountains in New York for the next forty-five years.
On June 27, 1996, the Company entered into a long-term spring water supply
contract for its East Orange, New Jersey bottling facility with its primary bulk
spring water supplier, Mountainwood. The agreement provides for
"most-favored-customer" treatment with respect to priority water rights over a
forty-three year period. Management believes that Mountainwood's spring source,
in the foothills of the Kittatinny Mountains near the Delaware Water Gap, is
considered the highest volume, free flowing certified natural spring water
source in the northeastern United States. Effective July 1, 1996, the Company
also acquired Mountainwood's five-gallon bottled water direct delivery and
bottled water cooler rental routes.
PURIFIED WATER SUPPLIERS: The Company obtains the water for distilled and
purified drinking water from public water sources. The public water source for
the Company's East Orange, New Jersey facility is the East Orange public water
supply and the public water source for the Company's Commack Long Island, New
York facility is the Suffolk County Water Authority.
DRINKING WATER SYSTEMS
In addition to the rapid growth in bottled water consumption, the past
decade has also seen the emergence of water treatment technologies which can
produce high quality water economically at the point of use. These technologies,
including micron filtration, have had a major impact on the growth and
development of water processed at the point of use (rather than delivered in
bottles). The Company's non-bottled water dispensing systems are equipped with
filtration systems which remove substantial amounts of the chlorine, dirt
particles, rust, lead, and other objectionable materials from the source tap
water.
The Company believes that it is the only full-service provider in its market
able to provide its customers with a "one-stop" solution to drinking water
needs. If a customer has neither the space nor the budget for bottled water, the
Company can provide a wide variety of filtration and treatment units to meet any
drinking water needs. A staff of installers and plumbers will assume
responsibility for survey, equipment selection, installation, contract
maintenance, and rental/service. As a factory authorized sales and service
center for all of the major types of drinking fountains and coolers, the Company
can offer the customer a complete choice of models: wall-hung, recessed,
stand-alone, handicapped, under the sink, drainless, counter-top, etc. A
computerized follow-up system insures that cartridge changes and routine service
are performed on a timely basis by the Company's field staff. This reliance upon
the Company for installation, equipment, and maintenance is a firm basis for the
long-term relationship that the Company enjoys with its point of use customers.
Most of the Company's equipment is placed in the customer's home or office
under a standard two-year rental contract which is renewable thereafter on a
month to month basis and is terminable by either party upon 30 days' notice. The
attachment of its point of use equipment to the plumbing makes it less likely
that a customer will request that the equipment be removed.
28
<PAGE>
EQUIPMENT SUPPLY, ASSEMBLY AND RENTAL SERVICES
The Company purchases the various water treatment systems and bottled water
dispensers used in its home and office equipment from major suppliers such as
EBCO Manufacturing Company and Sunroc Corp. through the Cooperative. Once a
customer has chosen a water treatment system and a dispenser, the two components
are connected as a unit, tested and installed by the Company's service
personnel. The Company is not dependent on any single supplier for any of these
components.
The Company rents a broad range of water treatment and dispensing units to
commercial and residential customers. The Company generally rents such units to
customers at prices ranging from $6.00 to $45.00 per month depending on the
components selected. As of September 30, 1996, the Company had in excess of
25,000 water treatment and dispensing units in service, located in the
metropolitan New York area, which accounted for approximately 19% of the
Company's revenues. In addition, from time to time the Company has sold water
treatment and dispensing units to customers upon request; such outright sales
have accounted for less than 5% of revenues in the twelve months ended September
30, 1996.
The Company uses its factory authorized warranty and repair facilities to
recondition most of the rental water coolers which have been returned from the
field. The cost associated with this refurbishment of returned rental units is
expensed on a current basis. The reconditioned units are available for rental
placement in the field at a cost lower than that of newly purchased coolers.
SALES AND MARKETING
The Company markets its commercial and residential water treatment and
dispensing units to commercial customers that are using or have used bottled
water coolers as an alternative to providing tap water to their employees, and
to residential customers who have been introduced to the Company's water
treatment and bottled water units through the Company's commercial customers.
The Company markets its products principally through the effort of salaried and
independent sales personnel as well as through print advertising, telemarketing,
trade shows, its internet website, sponsored community events, field
delivery/service personnel and customer referrals. To date, the Company has
concentrated its marketing efforts on targeting commercial customers in the
metropolitan New York markets where demographic, economic and water consumption
trends, as well as the overall quality of municipal water supplies, indicate a
growing demand for affordable, high quality drinking water. Upon consummation of
this Offering, the Company expects to increase its marketing efforts,
principally through increased print and broadcast media advertising, additional
sales personnel and attendance at additional trade-shows.
CUSTOMERS
Since 1994, the Company has grown from approximately 5,000 water customers
to in excess of 25,000 currently served. The Company's customer base for its
bottled water and water treatment and dispensing units is currently comprised of
approximately 90% commercial accounts and approximately 10% residential
accounts. Through its American Eagle Spring and Lectro-Still retail brands the
Company markets one-gallon natural spring and distilled waters in supermarkets
and pharmacies in the northeastern United States.
In addition, the Company has been selected by several distributors to bottle
under their own label on a contract basis. Given the Company's ability to absorb
such additional volume at its plants with little marginal cost and no disruption
to existing business, management will continue to do such private label bottling
for selected accounts. In the past two years, such five-gallon private label
bottling relationships have resulted in the Company being able to acquire a
number of the distributor's routes and blend them into the Company's route
structure. The East Orange, New Jersey facility will also continue to provide
one-gallon private label water bottling on a select basis for local supermarket
chains and health care stores so long as there is no adverse impact on the
Company's production of its own brands.
COMPETITION
The Company competes with numerous well-established companies, including
Nestle's Perrier group (whose brands in the Company's market include Poland
Spring, Great Bear and Deer Park), which distribute
29
<PAGE>
drinking water sold off the shelf at retail (primarily supermarket) locations.
Many of the Company's competitors have achieved significant national, regional
and local brand name and product recognition and additional competitors have
sought to enter the drinking water market.
In recent years, several companies have introduced drinking water products
positioned to capitalize on the growing consumer preference for purified and
aesthetically pleasing water. It can be expected that the Company will be
subject to increasing competition from companies whose products or marketing
strategies address these consumer preferences. Some of the Company's competitors
and potential competitors possess substantially greater financial, personnel,
marketing and other resources that the Company and have established reputations
for success in the sale of purified water products. The Company believes that it
competes on the basis of quality of service, convenience and price.
SEASONALITY
The revenues of the Company have been subject to seasonal variations with
decreased revenues during cold weather months and increased revenues during the
hot weather months.
PATENTS AND TRADEMARKS
The Company holds two patents related to bacteriostatic carbon formulation
and production.
The Company has registered the Puro trademark and service mark in the United
States Patent and Trademark Office. The Company acquired the American Eagle
Spring Water trademark among others in its acquisition of the assets of
Electrified. The Company has no reason to believe that there are any conflicting
rights which might impair the Company's use of its marks outside the United
States; however, there can be no assurance that such conflicting rights do not
exist. The Company believes that the trademarks and service mark are valuable to
the operation of it business. The Company's policy is to pursue registration of
its marks whenever possible and to oppose vigorously any infringement of its
mark.
As is typically the case with drinking water treatment components, the
Company does not believe its business is materially dependent upon obtaining
patent protection for its various systems.
REGULATION
The Company's business is subject to various federal, state and local laws
and regulations, which require the Company, among other things, to obtain
licenses for its business and equipment, to pay annual license and inspection
fees, to comply with certain detailed design and quality standards regarding the
Company's bottling plant and equipment, and to continuously control the quality
and quantity of the water dispensed. Several states have regulations that
require the Company to obtain certification for its bottled water. The Company
believes that it is currently in compliance with these laws and regulations and
has passed all regulatory inspections. In addition, the Company does not believe
that the cost of compliance with applicable government laws and regulations is
material to its business. However, recent media attention has been given to the
health and safety standards and to the degree of governmental oversight in the
drinking water industry. To the extent that additional regulations are imposed
as a result of these or other concerns and such regulations are unreasonably
burdensome, such regulations could significantly increase the costs of
compliance and reduce the ability of the Company to maintain or increase its
customer base.
PRODUCT LIABILITY AND INSURANCE
The Company is engaged in a business which could expose it to possible
claims for personal injury resulting from contamination of water produced by its
bottling plants or dispensing equipment. While the Company believes that,
through regular testing, it carefully monitors the quality of water produced by
its plants, it may be subject to exposure in the case of customer misuse of a
cooler or bottle storage. The Company maintains blanket "claims made" product
liability insurance against liability resulting from certain types of injuries
in amounts that it believes to be adequate. Additionally, the Company maintains
an umbrella policy that it believes to be adequate to cover claims above the
limits of the product liability insurance. Although no claims have been made
against the Company or any of its customers to date and the
30
<PAGE>
Company believes that its current level of insurance is adequate for its present
business operations, there can be no assurance that such claims will not arise
in the future or that the proceeds of the Company's policy will be sufficient to
pay such claims.
EMPLOYEES
As of September 30, 1996, the Company had 110 employees, of which five are
in executive positions, 45 in distribution, 11 in maintenance and service, 5 in
sales, 14 in manufacturing and 30 in administration. Certain of the Company's
employees are represented by Teamsters, Chauffeurs, Warehousemen & Helpers Local
Union No. 560. The Company is a party to a collective bargaining agreement
expiring February 28, 1999. The Company considers its employee relations to be
good.
LITIGATION
The Company is not a party to any legal proceedings which individually or in
the aggregate are believed to be material to the Company's business.
31
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers, their ages and present
positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Peter T. Dixon............................. 66 Chairman of the Board
Scott Levy................................. 39 Chief Executive Officer and Director
Jack C. West............................... 55 President and Director
James G. Botti............................. 33 Chief Financial Officer
Stephen Edberg*............................ 44 Director
Wilmer J. Thomas, Jr....................... 69 Director
Len Rosinski*.............................. 45 Director
</TABLE>
- ------------------------
* These individuals will become directors of the Company upon consummation of
this Offering.
All directors hold office until the next annual meeting of stockholders or
the election and qualification of their successors. The officers of the Company
are elected by and serve at the discretion of the Board of Directors until their
successors are duly chosen and qualified.
The following is a brief summary of the background of each director and
executive officer of the Company:
PETER T. DIXON
Mr. Dixon has served as Chairman of the Board of Directors of the Company
since January 1994. He was the Senior Executive Vice President of Loeb Partners
Corporation, a private investment banking firm from June 1986 to December 1993.
From 1981 to May 1986, Mr. Dixon was Senior Vice President of Shearson, Lehmann
Brothers, and, prior thereto, a partner in Loeb, Rhoades. Mr. Dixon was Chairman
of the Board of Directors and a principal stockholder of Glacier Water Services,
Inc., a public company traded on the American Stock Exchange under the Symbol
HOO, from February 1993 to May 1993, when he sold his stock in Glacier Water
Services, Inc.
SCOTT LEVY
Mr. Levy has been Chief Executive Officer of the Company since November 1,
1996 and a director of the Company since January 1994. From January 1994 to
October 1996, Mr. Levy was Co-President and Co-Chief Executive Officer of the
Company. In 1980, Mr. Levy founded LSL Hydro Systems, and was the President of
LSL Hydro Systems from 1980 to January 1994. LSL Hydro Systems specialized in
point-of-use drinking water systems sales, rentals, installation, service,
bottled water and plumbing contracting. The Company acquired LSL Hydro Systems,
Inc. in January 1994. Mr. Levy is active in the National Coffee Service
Association and instrumental in the administration of the Cooperative.
JACK C. WEST
Mr. West has been President of the Company since November 1, 1996 and a
director of the Company since January 1994. From January 1994 to October 1996,
Mr. West was Co-President and Co-Chief Executive Officer of the Company. Mr.
West was a principal stockholder and vice president of Puro Corporation of
America (New York) from 1979 to January 1994. He is a past president and
director of the International Bottled Water Association (IBWA). He is currently
Vice Chairman of the Drinking Water Research Foundation; Chairman of the New
York Water Bottlers Committee; Chairman of the IBWA Government Relations
Committee; Vice President and Director of the Cooperative; and Member of the
Bottled Water Industry Forum of the National Sanitation Foundation.
JAMES G. BOTTI, CPA
Mr. Botti has been Chief Financial Officer of the Company since October
1996. From October 1995 to October 1996 he was Chief Financial Officer of
Hampshire Securities Corp. in New York City, an investment bank and securities
broker dealer. From April 1992 to October 1995 he was Controller of Laidlaw
Holdings, Inc., an affiliate of the Underwriter. He was manager of Financial
Reporting for Needham & Company, Inc., from 1991 to 1992, and prior to that
worked in the public accounting firms of Anchin, Block & Anchin, and Pustorino,
Puglisi and Co. as an accountant.
32
<PAGE>
STEPHEN C. EDBERG, PHD
Dr. Edberg will become a director of the Company upon consummation of this
Offering. Since 1992, Dr. Edberg has been the Chairman of the Education Policy
and Curriculum Committee of the Yale University School of Medicine where he is a
professor in the Departments of Laboratory Medicine and Internal Medicine. He
also directs the Clinical Microbiology Laboratory of Yale-New Haven Hospital. He
is the inventor of Defined Substrate Technology, the major iteration of which is
Colilert, an EPA-approved test system for monitoring of bacterial contamination
in the nation's drinking water supplies. Since 1990, Dr. Edberg has been a
consultant to IDEXX, Inc., an invitro diagnostics company, the common stock of
which trades on the Nasdaq National Market under the symbol IDXX. Dr. Edberg has
been a Trustee of the Drinking Water Research Foundation since 1991, and has
authored more than 150 publications in the scientific literature.
WILMER J. THOMAS, JR.
Mr. Thomas has been a director of the Company since December 1995. Mr.
Thomas has been a private investor for at least the past five years and is a
member of the Board of Directors of Great Dane Corp., Savannah, Georgia and of
Moore Medical Corp., New Britain, Connecticut.
LEN ROSINSKI
Mr. Rosinski will become a director of the Company upon consummation of this
Offering. Since March, 1996, Mr. Rosinski has been President and Chief Executive
Officer of In-Store Opportunities, Guilford, Connecticut, a third-party
merchandising firm specializing in frozen food. From January 1994 to March 1996,
Mr. Rosinski was Vice-President and Chief Operating Officer of Pure Fill
Corporation, a bottled water vending company in California and Florida. From
July 1990 to December 1993, Mr. Rosinski was the President of National Water
Services, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has authorized two standing committees: Audit
Committee and Compensation Committee. Only independent directors will be
appointed to these Committees.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors will review
the results and scope of the annual audit and other services provided by the
Company's independent accountant, review and evaluate the Company's internal
audit and control functions, and monitor transactions between the Company and
its employees, officers and directors.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors will review and approve the compensation and benefits of the Company's
executive officers and administer the Stock Option Plan.
The number of directors of the Company is currently set at four. All
directors serve terms of one year and hold office until the next annual meeting
of stockholders or until their respective successors are duly elected and
qualified.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chairman, Chief Executive Officer and President during the
fiscal year ended December 31, 1995 (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
NAME AND PRINCIPAL POSITION SALARY
- ---------------------------------------------------------------------------------------------- --------------------
<S> <C>
Peter T. Dixon, Chairman(1)................................................................... $ 12,000
Scott Levy, Chief Executive Officer........................................................... $ 187,000
Jack C. West, President....................................................................... $ 100,000
</TABLE>
- ------------------------
(1) Mr. Dixon has a consulting agreement with the Company pursuant to which he
is paid $1,000 per month.
33
<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENTS
Prior to consummation of this Offering, the Company will enter into an
employment agreement with each of Messrs. West, Levy and Botti. Mr. West's
agreement will provide that he shall be employed as President of the Company on
a full time basis for a term of five years. Mr. West's agreement may be extended
at the sole discretion of the Board of Directors upon the same terms and
conditions. Mr. West will receive an annual base salary of $100,000 for the term
of his agreement. In the event that the Board of Directors does not extend the
term of the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
Mr. West will be entitled to a severance payment equal to two times his annual
base salary. Mr. West's employment agreement will contain a covenant not to
compete for a period of one year after the expiration or termination of such
employment agreement along with confidentiality and non-solicitation
undertakings. Mr. West shall be required to devote substantially all of his time
and attention to the affairs of the Company, and shall be entitled to receive
such benefits as are generally provided from time to time by the Company to its
senior management employees.
Mr. Levy's agreement will provide that he shall be employed as Chief
Executive Officer of the Company on a full time basis for a term of five years.
Mr. Levy's agreement may be extended at the sole discretion of the Board of
Directors upon the same terms and conditions. Mr. Levy will receive an annual
base salary of $187,000 for the term of his agreement. In the event that the
Board of Directors does not extend the term of the agreement and a mutually
acceptable alternative agreement cannot be negotiated with the Board of
Directors upon the expiration of this agreement, Mr. Levy will be entitled to a
severance payment equal to three times his annual base salary. Mr. Levy's
employment agreement will contain a covenant not to compete for a period of one
year after the expiration or termination of such employment agreement along with
confidentiality and non-solicitation undertakings. Mr. Levy shall be required to
devote substantially all of his time and attention to the affairs of the
Company, and shall be entitled to receive such benefits as are generally
provided from time to time by the Company to its senior management employees.
Mr. Botti's agreement will provide that he shall be employed as Chief
Financial Officer of the Company on a full time basis for a term continuing to
October 1997. Mr. Botti will receive an annual base salary of $100,000 for the
term of his employment, subject to review of the Board of Directors. Mr. Botti
will receive stock options covering 35,000 shares of Common Stock subject to a
five-year vesting period. Mr. Botti shall be required to devote substantially
all of his time and attention to the affairs of the Company, and shall be
entitled to receive such benefits as are generally provided from time to time by
the Company to employees on a comparable level.
On January 28, 1994, the Company entered into a consulting agreement with
Mr. Dixon pursuant to which Mr. Dixon provides certain consulting services to
the Company. The Company pays Mr. Dixon $1,000 per month pursuant to the
consulting agreement. The consulting agreement expires in January 1999.
The Company has key-person life insurance policies on the lives of Messrs.
West and Levy in the amount of $500,000 per person. Prior to consummation of
this Offering, the Company will have key-person life insurance policies on the
lives of Messrs. West and Levy in the amount of $1,000,000 per person. The
Company is the sole beneficiary under these policies and the Company will keep
such policies in force for a minimum of three years from the completion of this
Offering.
1996 STOCK OPTION PLAN
In 1996, the Company's stockholders approved the Company's 1996 Stock Option
Plan (the "Stock Option Plan"). The purpose of the Stock Option Plan is to
promote the success of the Company by providing a method whereby eligible
employees of the Company may be awarded additional remuneration for services
rendered, thereby increasing their personal interest in the Company. The Stock
Option Plan is also intended to aid in attracting persons of suitable ability to
become employees of the Company and its subsidiaries.
The Stock Option Plan provides that the maximum number of shares of Common
Stock reserved for awards thereunder shall be 400,000. The Stock Option Plan
provides for the grant of options that are not
34
<PAGE>
intended to qualify as incentive stock options within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended. The exercise price of
options granted under the Stock Option Plan may be more than or equal to the
fair market value of such shares on the date of grant. Any options granted under
the Stock Option Plan that shall expire, terminate or otherwise be annulled for
any reason without having been exercised shall again be available for purposes
of the Stock Option Plan.
The Stock Option Plan is to be administered by the Compensation Committee
(the "Committee"), each member of which shall be a member of the Company's Board
of Directors who during the one year period prior to service on the Committee
was not, and during such service is not, granted or awarded any equity
securities pursuant to the Stock Option Plan or any other plan of the Company if
such grant or award or participation on such Stock Option Plan would prevent
such member from being a "disinterested person" with respect to the Stock Option
Plan for purposes of Rule 16b-3 under the Exchange Act. The Committee will have
the power and authority to grant to eligible persons options to purchase shares
of the Company's Common Stock under the Stock Option Plan and to determine the
restrictions, terms and conditions of all such options granted as well as to
interpret the provisions of the Stock Option Plan, any agreements relating to
awards granted under the Stock Option Plan, and to supervise the administration
of the Stock Option Plan.
Subject to the provisions of the Stock Option Plan with respect to death,
retirement and termination of employment, the term of each option shall be for
such period as the Committee shall determine as set forth in the applicable
option agreement, but not more than ten years from the date of grant.
DIRECTORS' COMPENSATION
Except for an option in favor of Edberg Associates L.P., of which Stephen C.
Edberg, who will become a director of the Company upon consummation of this
Offering, is a partner, to purchase 49,284 shares of Common Stock of the
Company, directors of the Company do not receive fixed compensation for their
services as directors. However, the Board of Directors may authorize the payment
of a fixed sum to directors for their attendance at regular and special meetings
of the Board of Directors 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.
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
Pursuant to the Company's Bylaws, the Company must, to the fullest extent
permitted by the Delaware General Corporations Law, as amended from time to time
(the "GCL"), indemnify all persons (e.g., directors and officers) whom it may
indemnify pursuant thereto and to advance expenses incurred in defending any
proceeding for which such right to indemnification is applicable, provided that,
if the GCL so requires, the indemnitee must provide the Company with an
undertaking to repay all amounts advanced if so determined by a final judicial
decision. The Company's Certificate of Incorporation contains a provision
eliminating, to the full extent permitted by Delaware law, the personal
liability of the Company's directors for monetary damages for breach of a
fiduciary duty. By virtue of this provision, under current Delaware law, a
director of the Company will not be personally liable for monetary damages for
breach of his fiduciary duty as director, except for liability for (i) any
breach of his duty of loyalty to the Company or to its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) dividends or stock purchases or redemptions that
are unlawful under Delaware law and (iv) any transactions from which he derives
an improper personal benefit. This provision of the Company's Certificate of
Incorporation pertains only to breaches of duty by directors as directors and
not in any other corporate capacity such as officers, and limits liability only
for breaches of fiduciary duties under Delaware corporate law and not for
violations of other laws such as the federal securities laws. As a result of the
inclusion of such provision, stock holders may be unable to recover monetary
damages against directors for actions taken by them that constitute negligence
or gross negligence or that are in violation of their fiduciary duties, although
it may be possible to obtain injunctive or other equitable relief with respect
to such actions. The inclusion of this provision in the Company's Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefitted the Company and its
stockholders.
35
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth information as of the date of this Prospectus
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person (including any group) known to the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, (ii) each director of the
Company, (iii) each executive officer of the Company and (iv) all directors and
executive officers of the Company as a group. Except as may be indicated in the
footnotes to the table, each such person has the sole voting and investment
power with respect to the shares owned, subject to applicable community property
laws.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF CLASS(3)
NATURE OF ------------------------
BENEFICIAL BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Peter T. Dixon(4).............................................................. 1,084,926 49.3% 30.6%
The Trusts Under Article 16 of the Will of W. Palmer Dixon for the Benefit of
Peter T. and Palmer Dixon (the "Dixon Trusts")(5)............................. 981,429 45.1% 27.8%
Beth and Scott Levy............................................................ 425,814 20.0% 12.2%
Jack C. West................................................................... 394,272 18.5% 11.3%
Thomas Limited Partnership(6).................................................. 197,136 9.3% 5.7%
Edberg Associates Limited Partnership(7)....................................... 147,852 6.8% 4.2%
All directors and executive officers as a group (5 persons).................... 2,250,000 100.0% 62.5%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address of each beneficial owner is c/o the
Company, 56-45 58th Street, Maspeth, New York 11378.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities and includes options exercisable within 60 days of the date of
this Prospectus. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(3) The percentage of class is calculated in accordance with Rule 13d-3 under
the Exchange Act and assumes that the beneficial owner has exercised any
options or other rights to subscribe which are exercisable within 60 days
and that no other options or rights have been exercised by anyone else.
(4) These shares consist of (i) 78,855 shares of Common Stock held by Peter T.
Dixon, (ii) 932,145 shares of Common Stock held by the Dixon Trusts, and
(iii) 73,926 shares of Common Stock issuable upon the exercise of options
currently outstanding, of which options to purchase 24,642 shares of Common
Stock are held by Peter T. Dixon and options to purchase 49,284 shares of
Common Stock are held by the Dixon Trusts, which shares represent a
one-third interest in options in favor of Peter T. Dixon and the Dixon
Trusts, jointly.
(5) These shares consist of (i) 932,145 held by the Dixon Trusts, and (ii)
49,284 shares of Common Stock issuable upon the exercise of options
currently outstanding, which shares represent a two-thirds interest in
options in favor of Peter T. Dixon and the Dixon Trusts, jointly.
(6) Wilmer J. Thomas, Jr., a partner of Thomas Limited Partnership, is a
director of the Company.
(7) Dr. Stephen C. Edberg, a partner of Edberg Associates Limited Partnership,
will become a director of the Company upon consummation of this Offering.
These shares consist of (i) 98,568 shares of Common Stock, and (ii) 49,284
shares of Common Stock issuable upon the exercise of options currently
outstanding.
36
<PAGE>
CERTAIN TRANSACTIONS
On January 28, 1994, the Dixon Trusts loaned the Company $300,000 to be used
for working capital. This loan is callable on demand and bears annual interest
at the rate of prime +.75%. The founders of the Company are Peter T. Dixon, the
Trusts under Article 16 of the Will of Palmer Dixon for the benefit of Peter T.
and Palmer Dixon, Scott and Beth Levy, and Jack C. West. Peter T. Dixon and the
Dixon Trusts purchased from the issuer 1,010,999 shares of Common Stock. In
connection with the acquisition of LSL Hydro Systems, Inc., the Company issued
to Scott and Beth Levy 425,814 shares of Common Stock. In connection with the
acquisition of Puro Corporation of America (New York), the Company issued to
Jack West 394,272 shares of Common Stock. No assets are being acquired from any
of the founders.
On January 28, 1994, the Company entered into a consulting agreement with
Peter T. Dixon, pursuant to which Mr. Dixon provides certain consulting services
to the Company. The Company pays Mr. Dixon $1,000 per month pursuant to the
consulting agreement. The consulting agreement expires in January 1999.
In connection with the Electrified transaction in January 1996, the Company
obtained a letter of credit in the amount of $3,500,000 from European American
Bank to secure seller financing of a like amount. Peter T. Dixon secured the
letter of credit with personal assets. In connection with the Mountainwood
transaction in June 1996, the Company obtained a letter of credit in the amount
$500,000 from European American Bank to secure seller financing of a like
amount. Mr. Dixon also secured that letter of credit with personal assets. In
consideration of pledging his personal assets as described above, the Company
issued to Mr. Dixon and the Dixon Trusts options to purchase 73,926 shares of
Common Stock.
All future transactions and loans with officers, directors and principal
stockholders of the Company will be on terms no less favorable than could be
obtained from independent third parties and will be approved by a majority of
the disinterested directors of the Company.
DESCRIPTION OF SECURITIES
COMMON STOCK
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation, as amended.
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 10,000,000 shares of Common Stock, $.0063 par value. As of the date
of this Prospectus, there were 2,126,789 shares of the Company's Common Stock
issued and outstanding. There will be 3,476,789 shares of Common Stock
outstanding after giving effect to the Offering (3,679,289 if the Underwriter's
over-allotment option is exercised in full). All outstanding shares of Common
Stock are, and the Shares offered hereby will be, validly issued, fully paid and
non-assessable. Holders of Common Stock are entitled to share ratably in such
dividends and distributions as may from time to time be declared by the Board of
Directors of the Company from funds legally available therefor and upon
liquidation will be entitled to share ratably in any assets of the Company
legally available for distribution to holders of the Common Stock. The Company's
Certificate of Incorporation, as amended, and By laws do not confer any
preemptive, subscription, redemption or conversion rights on the holders of
Common Stock. Holders of Common Stock are entitled to cast one vote for each
share held of record on each matter submitted to a vote of stockholders. There
is no cumulative voting, which means that holders of a majority of the voting
power may elect all of the directors.
OPTIONS AND CONVERTIBLE SECURITIES
Peter T. Dixon and the Dixon Trusts hold two options which are presently
exercisabe to purchase an aggregate of 73,926 shares of Common Stock at a price
per share equal to the initial public offering price less underwriting discounts
and commissions. These options were issued in consideration of the
collateralization by the Dixon Trusts of certain debt obligations of the Company
in connection with the Electrified and Mountainwood business acquisitions. The
option to purchase 24,642 shares of Common Stock will expire in April 2001. The
option to purchase 49,284 shares of Common Stock will expire in August 2001.
Edberg Associates L.P. holds an option which is presently exercisable to
purchase 49,284 shares of Common Stock at
37
<PAGE>
a price per share equal to the initial public offering price less underwriting
discounts and commissions. This option was issued in November 1996 as an
inducement for an equity investment by said entity in the Company and to induce
Dr. Stephen C. Edberg to serve as a director of the Company. This option to
purchase 49,284 shares of Common Stock will expire in May 2001. In addition, the
holder of a purchase money note arising out of the Nature's Way acquisition has
the option to purchase that number of shares of Common Stock of the Company
equal to the outstanding principal amount of a convertible note ($269,992.82 as
of November 1, 1996, which amount is reduced by $1,428.58 per month) divided by
the initial public offering price per share less underwriting discounts and
commissions reserved for issuance upon conversion of such note.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock will be Continental
Stock Transfer and Trust Company, New York, New York.
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the GCL ("Section 203") provides, in general, that a
stockholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Stockholder"), but less than
85% of such shares, may not engage in certain "Business Combinations" (as
defined below) with the corporation for a period of three years subsequent to
the date on which the stockholder became an Interested Stockholder unless (i)
prior to such date the corporation's Board of Directors approved either the
Business Combination or the transaction in which the stockholder became an
Interested Stockholder or (ii) the Business Combination is approved by the
corporation's Board of Directors and authorized by a vote of at least two thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which the
Interested Stockholder receives or could receive a benefit on other than on a
PRO RATA basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest of
the Interested Stockholder or transactions in which the Interested Stockholder
receives certain other benefits.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to the Certificate of Incorporation or Bylaws of the Company, may
elect not to be governed by Section 203, effective twelve months after adoption.
Neither the Certificate of Incorporation nor the Bylaws of the Company currently
excludes the Company from the restrictions imposed by Section 203.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 3,476,789 Shares to be outstanding immediately after this Offering,
the 1,350,000 Shares offered hereby will be freely tradeable. The holders of all
of the remaining shares have agreed not to sell such shares for a period of
eighteen months after the date of this Prospectus pursuant to the terms of
lock-up agreements with the Underwriter. Immediately after such period,
2,069,929 shares of Common Stock will immediately be available for sale and on
October 1, 1998, 56,860 shares of Common Stock will become available for sale,
in each case subject to the resale conditions of Rule 144 promulgated under the
Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares for at
least two years, including an affiliate, is entitled to sell within any
three-month period that number of shares equal to the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the number
of shares for sale, notice and availability of current public information
regarding the Company. A person who has not been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned shares for at least three years, is entitled to sell such shares under
Rule 144 without regard to the volume limitations, manner of sale provisions or
notice or current public information
38
<PAGE>
requirements. Affiliates, however, continue to be subject to such volume
limitations and other requirements. As defined in Rule 144, an affiliate of an
issuer is a person who directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
such issuer and generally includes members of the Board of Directors and senior
management. In addition, the Commission has proposed revisions to Rule 144 and
Rule 144(k), the effect of which would be to shorten the holding period under
Rule 144 from two years to one year and to shorten the holding period under Rule
144(k) from three years to two years. The foregoing is a summary of Rule 144 and
is not intended to be a complete description.
Prior to this Offering, there has been no public market for the Common Stock
and no prediction can be made as to the effect, if any that market sales of
shares of Common Stock or the availability of such shares for sale to the public
will have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock following this Offering could adversely affect the
market price of Common Stock.
REGISTRATION RIGHTS
The holders of the Company's outstanding shares of Common Stock have certain
rights to require the Company to register their shares of Common Stock for sale
to the public under the Act. If the Company proposes to register any of its
shares of Common Stock under the Act, such stockholders will be entitled to
require the Company to include all or a portion of their shares in such
registration, provided that the underwriter of any such offering may limit the
number of such shares so registered. In addition, such holders have certain
demand registration rights. See "Shares Eligible for Future Sale" and
"Underwriting".
UNDERWRITING
The Underwriter has agreed, subject to the terms and conditions contained in
the Underwriting Agreement between the Company and the Underwriter (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriter, the Shares at the price set forth on the
cover page of this Prospectus.
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriter are subject to
certain conditions. The Underwriter shall be obligated to purchase all of the
Shares if any are purchased.
The Underwriter has advised the Company that it proposes to offer the Shares
to the public at the public offering price set forth on the cover page of this
Prospectus and that it may allow to certain dealers who are members of the NASD,
and to certain foreign dealers, concessions of not in excess of $ per
share, of which amount a sum not in excess of $ per share may in turn be
reallowed by such dealers to other dealers who are members of the NASD and to
certain foreign dealers. After the commencement of this Offering, the
concessions and the reallowances may be changed by the Underwriter.
The offering price of the Shares was determined by negotiation between the
Company and the Underwriter. Among the factors considered in such negotiations
were (i) assessment of the Company's future prospects, (ii) the experience of
the Company's management, (iii) the current financial position of the Company,
and (iv) the prevailing conditions in the securities markets, including the
market value of the Company's Common Stock, the market value of publicly-traded
common stock of companies in similar industries, the market conditions for new
offerings of securities and the demand for similar securities of comparable
companies.
The Company has agreed to pay to the Underwriter an expense allowance, on a
non-accountable basis, equal to 3.0% of the gross proceeds derived from the sale
of the Shares. The Company has paid an advance on such allowance in the amount
of $50,000. The Company has also agreed to pay all its expenses in connection
with this Offering, including expenses in connection with qualifying the Shares
offered hereby for sale under the laws of such states as the Underwriter may
designate. In addition, the Company will sell to the Underwriter, and to its
designees, for nominal consideration, warrants to purchase an aggregate of
135,000 shares of Common Stock exercisable at 120% of the offering price. See
"Underwriting -- Underwriter's
39
<PAGE>
Warrants." The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Act, and to contribute to payments
the Underwriter may be required to make in respect thereof.
All directors, officers, and stockholders of the Company have agreed not to
sell or otherwise dispose of their shares of Common Stock to the public without
the prior consent of the Underwriter for a period of eighteen (18) months from
the date of this Prospectus. In addition, the Company has agreed that for a
period of eighteen (18) months after the date of this Prospectus, it will not
sell any shares of Common Stock, or options to purchase Common Stock other than
options to purchase shares of Common Stock which may be granted under the Stock
Option Plan without the Underwriter's prior consent. For an eighteen (18) month
period commencing on the date of this Prospectus, the Company and its
stockholders have granted the Underwriter the right of first refusal to act as
lead manager, placement agent or investment banker with respect to any proposed
underwritten public distribution or private placement of the Company's
securities or any merger, acquisition or disposition of assets of the Company,
if the Company uses a lead manager, placement agent or investment banker or
person performing such functions for a fee.
OVER-ALLOTMENT OPTION
The Company has granted the Underwriter an option, exercisable during the
45-day period commencing on the date of this Prospectus to purchase up to
202,500 shares of Common Stock solely to cover over-allotments. The purchase
price per share will be the public offering price, less underwriting discounts
and the non-accountable expense allowance. After the commencement of this
Offering, the Underwriter may confirm sales of shares of Common Stock subject to
the over-allotment option.
UNDERWRITER'S WARRANTS
In connection with this Offering, the Company has agreed to sell to the
Underwriter, for nominal consideration, the Warrants to purchase 135,000 shares
of Common Stock. The Underwriter's Warrants are exercisable for a period of four
years commencing one year from the date hereof at an exercise price per share
("Exercise Price") of 120% of the public offering price per share. The
Underwriter's Warrants may not be sold, transferred, assigned, pledged, or
hypothecated for a period of twelve (12) months from the date of this Prospectus
except to officers or partners of the Underwriter and other members of the
underwriting or selling group and officers or partners thereof in compliance
with the applicable provisions of the Corporate Financing Rules of the NASD. The
Underwriter's Warrants contain anti-dilution provisions providing for adjustment
of the Exercise Price upon the occurrence of certain events, including
recapitalizations, mergers, consolidations and combinations. The holders of the
Underwriter's Warrants have no voting, dividend, or other rights as stockholders
of the Company with respect to shares of Common Stock underlying the
Underwriter's Warrants, unless the Underwriter's Warrants have been exercised.
A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the shares of Common Stock issuable upon exercise
of the Underwriter's Warrants (the "Warrant Shares"). The Company has agreed, on
one occasion when requested and at its expense, to make all necessary filings to
permit a public offering of the Warrant Shares during the period beginning one
year after the date hereof and ending four years thereafter and to use its best
efforts to cause such filing to become effective under the Act and remain
effective under such Act for a period of at least twelve (12) months. In
addition, the Company has agreed for the period starting at the beginning of the
second year after the date hereof and ending at the conclusion of the fifth year
after the date hereof to give advance notice to holders of the Underwriter's
Warrants and Warrant Shares of its intention to file a registration statement,
and in such case, the Underwriter shall have the right to require the Company to
include the Underwriter's Warrants and Warrant Shares in such registration
statement at the Company's expense.
During the period that the Underwriter's Warrants are exercisable, the
Underwriter and any transferee will have the opportunity to profit from a rise
in the market price of Common Stock with a resulting dilution in the interest of
other stockholders. In addition, the terms of which the Company will be able to
obtain additional capital during the exercise period may be adversely affected
insofar as the Underwriter is likely to
40
<PAGE>
exercise the Underwriter's Warrants at a time when the Company would, in all
likelihood, be able to obtain capital by a new offering of securities on terms
more favorable than those provided by the terms of the Underwriter's Warrants.
OBSERVER OF THE BOARD OF DIRECTORS
In connection with this Offering, the Company has agreed that, for the
three-year period commencing on the date of this Prospectus, the Underwriter has
the right to appoint a designee as an observer at all meetings of the Company's
Board of Directors. This designee has the right to attend all meetings of the
Board of Directors and shall be entitled to receive the same reimbursement for
all expenses of attendance at such meetings. The Underwriter has not yet
selected a designee and the Underwriter may designate different individuals to
serve in this capacity from time to time. In addition, the Company has agreed to
purchase directors and officers liability insurance in an amount not less than
$1,000,000.
The foregoing summary of the principal terms of the Underwriting Agreement
and the Underwriter's Warrants does not purport to be complete and is qualified
in its entirety by reference to the form of Underwriting Agreement and the form
of Underwriter's Warrants, which have been filed as exhibits to the Registration
Statement.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Lev, Berlin & Dale, P.C.,
Norwalk, Connecticut. Certain legal matters relating to the Offering will be
passed upon for the Underwriter by Olshan Grundman Frome & Rosenzweig LLP, New
York, New York.
EXPERTS
The financial statements and schedules included in this Prospectus and
included elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Certain items are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules files as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and, in each
instance, if such contract or document is filed as an exhibit, reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to such exhibit. The Registration Statement, including exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite
1300, New York, NY 10048, and copies of all or any part thereof may be obtained
from such office after payment of fees prescribed by the Commission. Such
material may also be accessed electronically by the means of the Commission's
home page on the Internet at http://www.sec.gov. In addition, application has
been made to have the Common Stock listed on the American Stock Exchange (AMEX).
Reports and other information concerning the Company may be inspected at the
offices of AMEX, 86 Trinity Street, New York, New York 10006.
41
<PAGE>
The Company intends to furnish its stockholders with annual reports
containing financial statements which will be audited on by its independent
public accounting firm, and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PURO WATER GROUP, INC.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets............................................................................................. F-3
Statements of Operations................................................................................... F-4
Statements of Stockholders' Equity......................................................................... F-5
Statements of Cash Flows................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
ELECTRIFIED COMPANIES, INC.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-16
Balance Sheet.............................................................................................. F-17
Statements of Operations................................................................................... F-18
Statements of Stockholders' Equity......................................................................... F-19
Statements of Cash Flows................................................................................... F-20
Notes to Financial Statements.............................................................................. F-21
</TABLE>
F-1
<PAGE>
After the reverse stock split discussed in Note 13 to the Puro Water Group,
Inc.'s financial statements is effected, we expect to be in a position to render
the following audit report.
Arthur Andersen LLP
November 13, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Puro Water Group, Inc.:
We have audited the accompanying balance sheet of Puro Water Group, Inc. (a
Delaware corporation) as of December 31, 1995, and the related statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1995 and for the period from inception (February 1, 1994) to December 31, 1994.
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, the financial statements referred to above present fairly,
in all material respects, the financial position of Puro Water Group, Inc. as of
December 31, 1995 and the results of its operations and its cash flows for the
year ended December 31, 1995 and for the period from inception (February 1,
1994) to December 31, 1994, in conformity with generally accepted accounting
principles.
New York, New York
May 1, 1996 (except for the
matters described in Note 13,
as to which the date
is )
F-2
<PAGE>
PURO WATER GROUP, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1995 1996
----------------- -------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash............................................................................... $ 689,332 $ 326,285
Accounts receivable, less allowance for doubtful accounts of $195,905 and $157,320,
respectively..................................................................... 1,149,187 2,495,156
Inventory.......................................................................... 348,960 442,592
Prepaid expenses................................................................... 89,912 314,003
----------------- -------------
Total current assets............................................................. 2,277,391 3,578,036
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $385,044 and
$734,763, respectively (Note 4).................................................... 3,404,240 5,652,429
INTANGIBLE ASSETS, net of accumulated amortization of $285,619 and $687,948,
respectively (Note 5).............................................................. 2,607,336 7,644,390
DEFERRED REGISTRATION COSTS -- 198,800
OTHER ASSETS......................................................................... 61,359 179,212
----------------- -------------
TOTAL ASSETS..................................................................... $8,350,326 $ 17,252,867
----------------- -------------
----------------- -------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable................................................................... $ 288,810 $ 619,106
Accrued expenses and other current liabilities..................................... 191,074 316,442
Deferred income.................................................................... 116,466 248,874
Short-term borrowings (Note 6)..................................................... 50,000 1,050,000
Current portion of long-term debt (Note 7)......................................... 415,775 1,380,726
Current portion of capital lease obligations (Note 10)............................. 166,262 210,865
----------------- -------------
Total current liabilities........................................................ 1,228,387 3,826,013
LONG-TERM LIABILITIES:
Long-term debt (Note 7)............................................................ 2,505,090 7,687,589
Capital lease obligations (Note 10)................................................ 317,423 234,731
Deferred tax liability............................................................. 372,000 603,655
Other liabilities.................................................................. 412,584 371,248
----------------- -------------
Total long-term liabilities...................................................... 3,607,097 8,897,223
COMMITMENTS (Note 12)
STOCKHOLDERS' EQUITY:
Common stock, $.0063 par value, 10,000,000 shares authorized; and 1,971,361 and
2,069,929 shares issued and outstanding, respectively............................ 12,420 13,041
Additional paid-in capital......................................................... 2,842,694 3,342,073
Retained earnings.................................................................. 659,728 1,174,517
----------------- -------------
Total stockholders' equity....................................................... 3,514,842 4,529,631
----------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $8,350,326 $ 17,252,867
----------------- -------------
----------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION FOR THE FOR THE FOR THE
(FEBRUARY 1, 1994) YEAR NINE MONTHS NINE MONTHS
TO DECEMBER 31, ENDED ENDED ENDED
1994 DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
REVENUE:
Bottled water sales and other
revenue.............................. $ 2,918,844 $ 4,175,395 $ 3,121,054 $ 6,383,653
Rental revenue....................... 1,135,624 1,325,769 992,157 1,684,092
------------------- ----------------- ------------------ ------------------
4,054,468 5,501,164 4,113,211 8,067,745
COST OF GOODS SOLD:
Cost of goods sold (excluding
depreciation)........................ 1,146,789 1,615,228 1,262,876 2,292,550
Depreciation......................... 106,178 237,518 130,160 336,440
------------------- ----------------- ------------------ ------------------
GROSS PROFIT........................... 2,801,501 3,648,418 2,720,175 5,438,755
OPERATING EXPENSES:
Operating expenses (excluding
depreciation and amortization)....... 1,196,894 1,305,786 1,013,959 1,523,137
General and administrative
expenses............................. 948,358 1,309,478 917,177 1,892,384
Depreciation and amortization........ 113,112 213,855 148,714 422,277
------------------- ----------------- ------------------ ------------------
Total operating expenses............. 2,258,364 2,829,119 2,079,850 3,837,798
------------------- ----------------- ------------------ ------------------
INCOME FROM OPERATIONS................. 543,137 819,299 640,325 1,600,957
OTHER INCOME (EXPENSE):
Other income (expense)............... 46,933 118,577 107,520 (5,335)
Interest expense..................... (130,245) (302,973) (220,864) (541,264)
Plant relocation charges............. -- -- -- (250,000)
------------------- ----------------- ------------------ ------------------
(83,312) (184,396) (113,344) (796,599)
------------------- ----------------- ------------------ ------------------
INCOME BEFORE PROVISION FOR INCOME
TAXES................................ 459,825 634,903 526,981 804,358
PROVISION FOR INCOME TAXES............. 204,000 231,000 189,713 289,569
------------------- ----------------- ------------------ ------------------
NET INCOME............................. $ 255,825 $ 403,903 $ 337,268 $ 514,789
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------
PER SHARE INFORMATION:
Earnings per share (Note 2).......... $ 0.15 $ 0.22 $ 0.19 $ 0.23
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------
Weighted average common shares
outstanding (Note 2)................. 1,744,839 1,829,094 1,744,839 2,194,151
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL
NUMBER OF PAID-IN- RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION
(February 1, 1994)............................ -- $ -- $ -- $ -- $ --
Issuance of common stock (Note 1).............. 1,577,089 9,936 845,178 -- 855,114
Net income..................................... -- -- -- 255,825 255,825
---------- ----------- ------------ ------------ ------------
BALANCE, December 31, 1994..................... 1,577,089 9,936 845,178 255,825 1,110,939
Issuance of common stock....................... 394,272 2,484 1,997,516 -- 2,000,000
Net income..................................... -- -- -- 403,903 403,903
---------- ----------- ------------ ------------ ------------
BALANCE, December 31, 1995..................... 1,971,361 12,420 2,842,694 659,728 3,514,842
Issuance of common stock (Note 13)............. 98,568 621 499,379 -- 500,000
Net income (unaudited)......................... -- -- -- 514,789 514,789
---------- ----------- ------------ ------------ ------------
BALANCE, September 30, 1996 (unaudited)........ 2,069,929 $ 13,041 $ 3,342,073 $ 1,174,517 $ 4,529,631
---------- ----------- ------------ ------------ ------------
---------- ----------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE
FROM INCEPTION YEAR FOR THE FOR THE
(FEBRUARY 1, 1994) ENDED NINE MONTHS NINE MONTHS
TO DECEMBER ENDED ENDED
DECEMBER 31, 1994 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 255,825 $ 403,903 $ 337,268 $ 514,789
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 219,290 451,373 278,874 758,717
Deferred taxes............................. 185,000 187,000 40,980 231,655
Provision for allowance for doubtful
accounts................................. 86,920 (11,026) 20,978 (38,585)
Changes in Assets and Liabilities..........
Decrease (increase) in accounts
receivable............................. 10,214 (535,069) (450,063) (1,307,384)
Increase in inventory.................... (52,242) (91,960) (4,100) (93,632)
Increase in prepaid expenses and other
assets................................. (114,755) (36,516) (33,487) (341,944)
Increase in deferred registration
costs.................................. -- -- -- (198,800)
Increase (decrease) in accounts payable,
accrued expenses and other
liabilities............................ 198,072 (1,363) 247,733 414,328
(Decrease) increase in deferred income... (561,174) 26,386 (28,157) 132,408
-------- ----------- ------------------ ------------------
Net cash provided by operating
activities........................... 227,150 392,728 410,026 71,552
-------- ----------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment................................ (453,540) (1,143,105) (629,628) (2,517,503)
Net assets acquired........................ -- (1,683,135) (999,051) (5,446,052)
-------- ----------- ------------------ ------------------
Net cash (used in) investing
activities........................... (453,540) (2,826,240) (1,628,679) (7,963,555)
-------- ----------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings...................... 150,000 (100,000) 400,000 1,000,000
Repayment of capital lease obligations..... (36,465) (149,623) (140,638) (118,494)
Repayment of long-term debt................ (211,262) (373,517) (280,138) (280,138)
Proceeds from long-term debt............... 277,040 1,686,386 1,249,799 6,427,588
Proceeds from sale of common stock......... -- 2,000,000 -- 500,000
-------- ----------- ------------------ ------------------
Net cash provided by financing
activities........................... 179,313 3,063,246 1,229,023 7,528,956
-------- ----------- ------------------ ------------------
NET (DECREASE) INCREASE IN CASH.............. (47,077) 629,734 10,370 (363,047)
CASH, beginning of period.................... 106,675 59,598 59,598 689,332
-------- ----------- ------------------ ------------------
CASH, end of period.......................... $ 59,598 $ 689,332 $ 69,968 $ 326,285
-------- ----------- ------------------ ------------------
-------- ----------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest................................... $ 146,995 $ 302,973 $ 182,214 $ 521,019
Income taxes............................... $ 6,887 $ 121,039 $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
ACTIVITIES:
Capital lease obligations incurred......... $ 415,728 $ 113,041 $ 113,041 $ 80,405
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995
1. ORGANIZATION AND BUSINESS
Puro Water Group, Inc. (the "Company"), a Delaware corporation, formerly The
Puro Corporation of America, is a bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company markets its drinking water under the brand names Puro,
American Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. The
Company also rents and services water coolers, filtration systems, and
plumbed-in fountains located in businesses, factories and homes in the
metropolitan New York area.
On February 1, 1994, the Company, a holding company, completed the
acquisition of all of the outstanding common stock of The Puro Corporation of
America, a New York corporation ("Puro NY"), and LSL Hydro Systems, Inc.
("Hydro"). Immediately prior to the acquisition, Puro NY and Hydro purchased
stock owned by certain stockholders which represented ownership of 50% of each
of the companies for cash of $1,000,000 and the issuance of $100,000 in notes
payable. The transaction was accounted for under the purchase method and
reflects a fair market value of approximately $1,500,000 which generated an
excess purchase price over net assets acquired in the amount of approximately
$1,200,000. This excess reflects carryover basis relating to 25% of Puro NY and
27% of Hydro in the amount of approximately $31,000. The purchase has been
allocated to the fair market value of the assets acquired and liabilities
assumed which resulted in goodwill of approximately $1,200,000. This amount is
being amortized over fifteen years. The individual predecessor financial
statements as of and for the one month ended January 31, 1994 are not presented
as this information is not material to the Company's overall results of
operations.
2. SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORY
Inventory is stated at the lower of cost or market and cost is determined
using the first-in, first-out method. Inventory is comprised of water coolers
and parts, office refreshment supplies and water.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost. The building is
depreciated utilizing the straight-line method over 40 years and equipment is
depreciated utilizing the straight-line method over the estimated useful lives
of 8 to 25 years. Equipment held under capital leases are amortized utilizing
the straight-line method over the lesser of the lease or estimated useful life
of the asset in accordance with Statement of Financial Accounting Standards
("SFAS") No. 13 "Accounting for Leases."
INTANGIBLE ASSETS
Intangible assets are recorded based on the value of certain assets obtained
in the acquisition of other companies and are amortized on the straight-line
method over the following periods:
<TABLE>
<S> <C>
Goodwill........................................ 15 years
Customer lists.................................. 6 years
Covenants-not-to-compete........................ 3 - 7 years
</TABLE>
F-7
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Subsequent to its acquisitions, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of the intangible assets may warrant revision or that the remaining
balance may not be recoverable. When factors indicate that intangible assets
should be evaluated for possible impairment, the Company uses an estimate of the
undiscounted net income over the remaining life of the intangible assets in
measuring whether it is recoverable.
REVENUE RECOGNITION
Revenue on sales of bottled water and coolers is recognized upon delivery.
Leases of water coolers and filters are accounted for under the operating method
and, accordingly, rental income is reported over the terms of the leases.
INCOME TAXES
The Company accounts for its income taxes under SFAS No. 109, "Accounting
for Income Taxes", which requires recognition of deferred tax liabilities and
assets for the estimated future tax effects of events that have been recognized
in the financial statements or income tax returns. Under this method, deferred
tax liabilities and assets are determined based on differences between the
financial accounting and income tax bases of assets and liabilities, and the use
of carryforwards, if any, using enacted tax rates in effect for the years in
which the differences and carryforwards are expected to reverse and be utilized.
EARNINGS PER SHARE
Earnings per share was computed by dividing net income by the weighted
average number of common shares and common share equivalents outstanding during
the respective periods, which includes for all periods, (i) the retroactive
effect of the April 1996 stock split (Note 13) and the reverse stock split,
which will occur prior to the consummation of the Company's initial public
offering (Note 13), (ii) the impact of options, held by two stockholders, to
purchase 123,210 shares of Common Stock at the initial offering price, less
underwriting discounts and commissions (Note 13) and (iii) the impact of the
exercise of 56,860 warrants (Note 13).
NEW ACCOUNTING PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is effective for the fiscal year
beginning after December 15, 1995. The Company does not expect the adoption of
this standard to have a material effect on the Company's financial position or
results of operations.
During October 1995, the FASB issued SFAS No. 123, "Accounting for Stock
Based Compensation". This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123 requires
pro forma disclosures of net income and net income per common share in the notes
to financial statements. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years that begin after
December 15, 1995, though they may be adopted on issuance. The disclosure
requirements of SFAS No. 123 are effective for financial statements for fiscal
years
F-8
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
beginning after December 15, 1995, or for an earlier fiscal year for which SFAS
No. 123 is initially adopted for recognizing compensation cost. The Company does
not expect the adoption of this statement to have a material effect on the
Company's financial position or results of operations.
INTERIM PERIODS PRESENTED
The interim financial statements for the nine months ended September 30,
1996 and the nine months ended September 30, 1995 are unaudited. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principals for complete financial statements. In the opinion
of the Company, these unaudited financial statements reflect all adjustments
necessary, consisting of normal recurring adjustments, for a fair presentation
of such data on a basis consistent with that of the audited data presented
herein. The results of operations for interim periods are not necessarily
indicative of the results for a full year.
3. ACQUISITIONS
During 1994 and 1995, the Company acquired certain assets and assumed
certain liabilities of several companies operating in the bottled water
industry. The acquisitions were paid for with cash and the issuance of notes
(Note 7). All acquisitions have been accounted for under the purchase method and
therefore operations of the companies acquired have been included in the
accompanying Statements of Operations from their respective dates of
acquisition. Although the individual acquisitions were not material to the
Company's financial position or results of operations, the total purchase price
for all of the Company's 1995 acquisitions was approximately $2,200,000. Pro
Forma results of operations have not been provided as the information was not
material to the Company's overall results of operations. Additionally, the
Company incurred certain non-recurring expenses associated with these
acquisitions which have been reflected in the Company's Statements of Operations
for the years ended December 31, 1995 and for the period from inception to
December 31, 1994.
In accordance with one of the purchase agreements, the seller has the option
to convert the unpaid principal of the note into shares of Common Stock of the
Company in the event of an Initial Public Offering ("IPO") of the Common Stock
of the Company, at the Offering price less underwriting discounts and
commissions.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following as of December
31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Land and building.............................................................. $ 946,088
Building improvements.......................................................... 67,488
Rental equipment............................................................... 1,418,106
Vehicles held under capital leases............................................. 669,775
Vehicles....................................................................... 126,826
Bottles and crates............................................................. 304,388
Machinery and equipment........................................................ 128,585
Furniture and fixtures......................................................... 128,028
-------------
3,789,284
Less: Accumulated depreciation................................................. 385,044
-------------
Property, plant and equipment, net......................................... $ 3,404,240
-------------
-------------
</TABLE>
F-9
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Depreciation aggregated $262,074 and $122,970, respectively, for the year ended
December 31, 1995 and for the period from inception to December 31, 1994.
5. INTANGIBLE ASSETS
Intangible assets are comprised of the following as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Goodwill........................................................................ $2,290,408
Covenants-not-to-compete........................................................ 338,333
Customer lists.................................................................. 264,214
------------
2,892,955
Less: Accumulated amortization.................................................. 285,619
------------
Intangible assets, net...................................................... $2,607,336
------------
------------
</TABLE>
Amortization on intangible assets aggregated $189,299 and $96,320, respectively,
for the year ended December 31, 1995 and for the period from inception to
December 31, 1994.
6. SHORT-TERM BORROWINGS
The Company has a line of credit available with a bank for $1,000,000 at
December 31, 1995. There were no amounts outstanding on the $1,000,000 line of
credit as of December 31, 1995. The outstanding amounts on short-term borrowings
as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Demand notes with stockholder with interest at prime plus .75%................. $ 50,000
-------------
-------------
</TABLE>
The prime rate was 8.50% as of December 31, 1995.
7. LONG-TERM DEBT
Long-term debt consists of the following as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
BANK FINANCING
Mortgage payable, due in monthly installments of $9,941 including interest at
10.75%, balloon payment of $886,873 due June 1, 1998........................... $ 939,190
Promissory note payable to bank, bearing interest at prime plus 1.50%, due in
monthly installments through February 1999..................................... 257,291
Promissory note payable to bank, bearing interest at prime plus 1.50%, due in
monthly installments through April 1999........................................ 52,500
ACQUISITION FINANCING (NOTE 3)
Notes payable associated with 1995 and 1994 acquisition financing, bearing
interest at rates ranging from 8-9% (certain non-interest bearing notes include
interest at rates reflecting the Company's incremental borrowing rate), due in
monthly installments through January 2001...................................... 1,345,334
</TABLE>
F-10
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
7. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
STOCKHOLDER NOTES PAYABLE
Loan from stockholder, bearing interest at prime plus .75% due
in equal monthly installments commencing April 1997 through
January 2001................................................... $ 250,000
Notes payable to former stockholders, non-interest bearing, due
in three equal installments of $33,333, through February
1997........................................................... 66,667
OTHER
Other notes payable bearing interest at 9%, due in monthly
varying installments through January 1998...................... 9,883
-----------
Total........................................................... 2,920,865
Less: current portion........................................... 415,775
-----------
Long-term debt.................................................. $2,505,090
-----------
-----------
</TABLE>
Maturities of long-term debt over the next five years are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996.................................................. $ 415,775
1997.................................................. 492,383
1998.................................................. 1,369,363
1999.................................................. 341,631
2000 and thereafter................................... 301,713
---------
$2,920,865
---------
---------
</TABLE>
8. INCOME TAXES
Components of the income tax provision for the year ended December 31, 1995
and from the period from inception (February 1, 1994) through December 31, 1994
are as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
1995:
Federal......................................... $ 20,000 $ 152,000 $ 172,000
State and local................................. 24,000 35,000 59,000
--------- ---------- ----------
$ 44,000 $ 187,000 $ 231,000
--------- ---------- ----------
--------- ---------- ----------
1994:
Federal......................................... $ -- $ 149,000 $ 149,000
State and local................................. 19,000 36,000 55,000
--------- ---------- ----------
$ 19,000 $ 185,000 $ 204,000
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
F-11
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
8. INCOME TAXES (CONTINUED)
The actual tax expense differed from the "expected" amounts by applying the U.S.
Federal income tax rate of 34% as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal income tax at statutory rate............................................ 34% 34%
Purchase accounting............................................................. (3) --
State income taxes net of federal...............................................
income tax benefit.......................................................... 6 8
Other........................................................................... (1) 2
---- ----
Actual income tax provision................................................. 36% 44%
---- ----
---- ----
</TABLE>
The net deferred tax liability at December 31, 1995 primarily consists of the
differences between depreciation recorded for tax and book purposes.
9. STOCKHOLDERS' EQUITY
In October 1995, the Company entered into a Stock Purchase Agreement with
certain stockholders of the Company to purchase 394,272 shares of the Company's
stock for an aggregate purchase price of $2,000,000.
10. CAPITAL LEASE OBLIGATIONS
The Company is the lessee of certain fixed assets under capital leases
expiring through 1999. The assets and liabilities under capital leases are
recorded at the lower of the present value of minimum lease payments or the fair
market value of the asset. The assets are depreciated over their estimated
useful lives. Interest rates on capital leases vary from 3.5% to 7.0%.
Future minimum payments under these lease agreements for the next four years
are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996.......................................... $ 188,363
1997.......................................... 188,363
1998.......................................... 144,237
1999.......................................... 10,868
---------
Total minimum lease payments.......................... 531,831
Less: Amount representing interest.................... 48,146
---------
Present value of net minimum lease payments....... $ 483,685
---------
---------
</TABLE>
11. BENEFIT PLANS
The Company's noncontributory pension plan provides benefits upon the death
or retirement of eligible employees. The Company's policy is to fund the annual
amount deductible for Federal income tax purposes. During 1995, the Company
elected to freeze the plan and, accordingly, no further contributions will be
made on behalf of the Company.
F-12
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
11. BENEFIT PLANS (CONTINUED)
The Company maintains a defined contribution pension plan for eligible
employees pursuant to Section 401(k) of the Internal Revenue Code ("IRC").
Pursuant to the plan, employees can contribute a maximum established by the IRC.
Although the Company is not obligated to contribute to the plan, for the year
ended December 31, 1995, the Company contributed approximately $2,300.
12. COMMITMENTS
LEASES
As of December 31, 1995, the Company had leased certain office and warehouse
space. Leases for this space expire through March 2001, and call for annual rent
with insignificant escalations through the end of the leases. The Company has
also entered into several operating leases for office equipment.
Future minimum payments for operating leases at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996............................................. $ 64,000
1997............................................. 64,533
1998............................................. 67,760
1999............................................. 71,148
2000 and thereafter.............................. 92,610
</TABLE>
Rental expense for the year ended December 31, 1995 and the period from
inception to December 31, 1994 was $139,660 and $42,381, respectively.
EMPLOYMENT AGREEMENTS
Prior to the consummation of the initial public offering (Note 13), the
Company will enter into employment agreements with its President and Chief
Executive Officer. The President's agreement will provide for an annual base
salary of $100,000 for a term of five years. The agreement may be extended at
the sole discretion of the Board of Directors upon the same terms and
conditions. In the event that the Board of Directors does not extend the term of
the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
the President will be entitled to a severance payment equal to two times his
annual base salary. The Chief Executive Officer's agreement will provide for an
annual base salary of $187,000 for a term of five years. The agreement may be
extended at the sole discretion of the Board of Directors upon the same terms
and conditions. In the event that the Board of Directors does not extend the
term of the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
the Chief Executive Officer will be entitled to a severance payment equal to
three times his annual base salary.
13. SUBSEQUENT EVENTS
ACQUISITION
On January 31, 1996, the Company acquired the net assets of Electrified
Companies, Inc., a company operating in the bottled water industry. The purchase
agreement called for total payments to be made to the seller in the aggregate
amount of $5,000,000, including payments totaling $437,801 to satisfy two bank
loans of the seller and certain consideration for other outstanding liabilities.
The $5,000,000 is to be paid through a cash payment of $1,000,000 at the
closing, a $500,000 note payable, which has been paid, and two notes
F-13
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
13. SUBSEQUENT EVENTS (CONTINUED)
payable for $2,900,000 and $600,000, respectively, bearing interest at the prime
rate. Interest payments only are due through February 1997, and then equal
monthly installments will be made from March 1997 through February 2000.
Summarized below is the unaudited pro forma results of operations of the
Company for the year ended December 31, 1995 as though this acquisition had
occurred on January 1, 1995. Adjustments have been made for pro forma income
taxes, amortization of intangible assets related to this acquisition and
interest expense as a result of this acquisition. Pro Forma results of
operations of the Company, for the nine months ended September 30, 1996, are not
provided as the information was not material to the Company's overall results of
operations.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
Pro Forma:
Revenues................................................................ $ 10,659,418
Net income.............................................................. $ 7,000
Earnings per share...................................................... $ $0.00
</TABLE>
These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition been
made at the beginning of 1995, or of results which may occur in the future.
On June 27, 1996, the Company entered into an agreement to acquire certain
assets of Mountain Spring Water Co., Inc., and White Mountain Company, Inc.,
(collectively "Mountainwood") both operating in the bottled water industry.
Under the terms of the agreement, the acquisition is effective as of July 1,
1996. The purchase agreement called for total payments to be made to the seller
in the aggregate amount of $1,250,000. The $1,250,000 purchase price is
comprised of a cash payment of $500,000 at the closing on June 27, 1996, and two
separate notes payable for $500,000 and $250,000 bearing interest at 8%. The
note of $500,000 will have interest payments only through July 1, 1999, at which
time a $125,000 principal payment will be made. Thereafter, through July 1,
2003, monthly principal payments of $10,000 will be paid. The principal and
interest on the $250,000 note shall be paid through monthly payments of interest
only through June 30, 1999, at which time the entire unpaid principal and
interest is due. The $500,000 cash payment was borrowed from the Company's
majority shareholder and is included in short-term borrowings in the
accompanying balance sheet (unaudited) as of September 30, 1996.
In connection with these two acquisitions, the Company incurred certain
non-recurring expenses of approximately $47,000, which have been reflected in
the Company's unaudited Statement of Operations for the nine months ended
September 30, 1996.
INITIAL PUBLIC OFFERING
The Company is pursuing an initial public offering of its securities. The
proposed offering presently contemplates the sale of 1,350,000 shares of common
stock at $6.00 per share. The Company plans to use a portion of the proceeds of
the proposed offering to repay approximately $5,500,000 of the acquisition and
bank financing, described in Note 7, outstanding at September 30, 1996. The
supplementary earnings per share for the nine months ended September 30, 1996
(unaudited), which follows, gives supplemental effect to the issuance of 586,359
shares of common stock for the entire period during which the acquisition and
bank financing was outstanding, which is the number of shares to be issued in
the proposed initial public offering, the proceeds of which would be used to
repay approximately $5,500,000 of debt outstanding at
F-14
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
13. SUBSEQUENT EVENTS (CONTINUED)
September 30, 1996, as well as to effect the reduction of related interest
expense in that period. These shares are presumed outstanding for supplementary
purposes only, and were neither issued nor outstanding for any purpose during
the nine months ended September 30, 1996.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
------------------------
<S> <C>
(UNAUDITED)
Supplementary earnings per share............................... $ 0.29
-----------
-----------
Supplementary weighted average common shares
outstanding.................................................. 2,780,510
-----------
-----------
</TABLE>
STOCK SPLIT
In April 1996, the Company approved an increase in the amount of authorized
common stock from 2,000,000 to 10,000,000 shares and a change in the Common
Stock par value from $.01 to $.003125. Immediately thereafter, the Company
authorized a 3.2 for 1 stock split on all common stock outstanding. All
information in the accompanying financial statements has been retroactvely
restated to give effect to the stock split.
SALE OF COMMON STOCK
In May, 1996, a third party investor purchased 98,568 shares of Common Stock
for an aggregate purchase price of $500,000. In November 1996, the investor was
also granted options to purchase 49,284 shares of the Company's Common Stock at
the IPO price less underwriting discounts and commissions in the event of an
initial public offering. These options are still outstanding.
STOCK OPTION GRANTS
In November 1996, the Company granted options to purchase 49,284 shares of
Common Stock and 24,642 shares of Common Stock, respectively, to the Chairman of
the Board of Directors and a principal stockholder of the Company and entities
controlled by him. These options may be exercised over fifty-four and
fifty-seven month periods from the grant date and are exercisable at the IPO
price per share of the Company's Common Stock less underwriter's discounts and
commissions. All of these options are still outstanding.
EXERCISE OF STOCK WARRANTS
In October 1996, certain entities, under the control of the Chairman of the
Board of Directors and a principal stockholder of the Company, exercised stock
warrants for an aggregate 2.5% of the outstanding Common Stock and stock options
of the Company, immediately after said exercise, for a total of $1,000. After
the exercise of the aforementioned warrants, the stockholder received a total of
56,860 shares of Common Stock.
REVERSE STOCK SPLIT AND RECAPITALIZATION
In connection with the pending initial public offering described above, the
Company will effect a recapitalization whereby the presently outstanding Common
Stock will be converted to shares of Common Stock on a .4928 to 1 share basis
and the common stock par value will be converted from $.003125 to $.0063. All
information contained in the accompanying financial statements and footnotes has
been retroactively restated to give effect to these transactions.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Electrified Companies, Inc.:
We have audited the accompanying balance sheet of Electrified Companies,
Inc. (a New Jersey corporation) as of December 31, 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1995 and 1994. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Electrified Companies, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the years ended December 31, 1995 and 1994 in conformity with generally
accepted accounting principles.
New York, New York Arthur Andersen LLP
May 1, 1996
F-16
<PAGE>
ELECTRIFIED COMPANIES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................................... $ 10,459
Accounts receivable, less allowance for doubtful accounts of $116,112......... 361,420
Inventory..................................................................... 112,240
Note receivable, current portion.............................................. 37,308
Other current assets.......................................................... 7,495
---------
Total current assets...................................................... 528,922
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $4,463,494 (Note 4)........................................... 1,444,527
NOTE RECEIVABLE, net of current portion......................................... 112,151
OTHER ASSETS.................................................................... 4,736
---------
TOTAL ASSETS.............................................................. $2,090,336
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 208,426
Accrued expenses and other current liabilities................................ 28,284
Deferred income............................................................... 144,982
Short-term borrowings (Note 5)................................................ 5,000
Current portion of long-term debt (Note 6).................................... 189,125
---------
Total current liabilities................................................. 575,817
OTHER LIABILITIES:
Long-term debt (Note 6)....................................................... 262,218
Other liabilities............................................................. 81,607
---------
Total liabilities..................................................... 919,642
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY:
Common stock, $100 par value; 2,000 shares authorized; 1,860 shares
issued and outstanding...................................................... 186,000
Retained earnings............................................................. 984,694
---------
Total stockholders' equity................................................ 1,170,694
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $2,090,336
---------
---------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-17
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
REVENUE:
Bottled water sales and other revenue............................................... $ 4,339,486 $ 4,425,501
Rental revenue...................................................................... 691,656 732,753
------------ ------------
5,031,142 5,158,254
COST OF GOODS SOLD.................................................................... 2,500,949 2,615,267
------------ ------------
GROSS PROFIT.......................................................................... 2,530,193 2,542,987
OPERATING EXPENSES:
Operating expenses.................................................................. 1,381,882 1,478,912
General and administrative expenses................................................. 994,872 883,160
Depreciation and amortization....................................................... 448,128 447,118
------------ ------------
Total operating expenses.......................................................... 2,824,882 2,809,190
------------ ------------
Loss from operations.................................................................. (294,689) (266,203)
OTHER INCOME (EXPENSE)
Other income........................................................................ 165,888 310,023
Interest expense.................................................................... (54,433) (53,116)
------------ ------------
111,455 256,907
------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAX.................................................. (183,234) (9,296)
PROVISION FOR INCOME TAXES............................................................ 1,332 9,366
------------ ------------
NET LOSS.............................................................................. $ (184,566) $ (18,662)
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
<S> <C> <C> <C> <C>
NUMBER OF
SHARES PAR VALUE RETAINED EARNINGS TOTAL
----------- ---------- ----------------- ------------
BALANCE, January 1, 1994................................ 1,860 $ 186,000 $ 1,210,547 $ 1,396,547
Net (loss)............................................ -- -- (184,566) (184,566)
----- ---------- ----------------- ------------
BALANCE, December 31, 1994.............................. 1,860 186,000 1,025,981 1,211,981
Dividend distribution................................. -- -- (22,625) (22,625)
Net (loss)............................................ -- -- (18,662) (18,662)
----- ---------- ----------------- ------------
BALANCE, December 31, 1995.............................. 1,860 $ 186,000 $ 984,694 $ 1,170,694
----- ---------- ----------------- ------------
----- ---------- ----------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $ (184,566) $ (18,662)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 448,128 447,118
Provision for allowance for doubtful accounts......................................... 133,329 (17,217)
Gain on sale of fixed assets.......................................................... (153,000) --
Changes in assets and liabilities:
Decrease in accounts receivable....................................................... 28,095 82,649
Decrease in inventory................................................................. 40,155 297
(Increase) decrease in other current assets........................................... (3,415) 115
Decrease in accounts payable.......................................................... (74,404) (57,261)
Decrease in accrued expenses and other current liabilities............................ (83,261) (18,143)
Increase in other liabilities......................................................... 57,334 3,445
Increase (decrease) in deferred income................................................ 160,050 (15,068)
----------- -----------
Net cash provided by operating activities....................................... 368,445 407,273
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net........................................ (721,619) (217,739)
Payments received on note receivable.................................................. 11,687 38,854
----------- -----------
Net cash used in investing activities........................................... (709,932) (178,885)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net............................................................ 35,000 (35,000)
Repayment of long-term debt........................................................... (382,782) (189,125)
Proceeds from long-term debt.......................................................... 686,500 --
Dividend distributions................................................................ -- (22,625)
----------- -----------
Net cash (used in) provided by financing activities............................. 338,718 (246,750)
----------- -----------
NET DECREASE IN CASH.................................................................... (2,769) (18,362)
CASH, BEGINNING OF YEAR................................................................. 31,590 28,821
----------- -----------
CASH, END OF YEAR....................................................................... $ 28,821 $ 10,459
----------- -----------
----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................................................ $ 54,433 $ 53,115
Taxes............................................................................... -- --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
In 1994, the Company sold the fixed assets associated with its ice machine business in
exchange for a note receivable in the amount of $200,000.
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995
1. ORGANIZATION AND BUSINESS:
Electrified Companies, Inc. (the "Company") is engaged in the sale of
purified bottled water and related activities including sales and rentals of
water coolers and sales of coffee and office refreshment supplies throughout the
New Jersey - New York metropolitan area. The Company's sales and rentals are
divided among residential and corporate customers.
2. SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORY
Inventory is stated at the lower of cost or market and cost is determined
using the first-in, first-out method. Inventory is comprised of water coolers
and parts, office refreshment supplies and water.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost and is
depreciated on the straight-line basis and accelerated methods based on the
estimated useful lives.
REVENUE RECOGNITION
Revenue on sales of bottled water and coolers is recognized upon delivery.
Leases of water coolers and filters are accounted for under the operating
method and, accordingly, rental income is reported over the terms of the leases.
INCOME TAXES
The Company accounts for its income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the estimated
future tax effects of events that have been recognized in the financial
statements or income tax returns. Under this method, deferred tax liabilities
and assets are determined based on differences between the financial accounting
and income tax bases of assets and liabilities, and the use of carry-forwards,
if any, using enacted tax rates in effect for the years in which the differences
and carry-forwards are expected to reverse and be utilized.
The Company operates under Subchapter S of the Internal Revenue Code and,
consequently, is not subject to Federal and certain state income taxes. The
stockholders include their pro rata share of the Company's income in their
personal income tax returns. It is the Company's policy to reimburse its
stockholders for any tax liability resulting from their inclusion of the
Company's income in their respective tax returns. The amounts distributed for
such purposes in 1995 and 1994 were $22,625 and $-0-, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is effective for fiscal years
beginning after December 15, 1995. The Company does not expect the adoption of
this standard to have a material effect on its financial position or results of
operations.
F-21
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
3. SALE OF ICE MACHINE BUSINESS:
On June 1, 1994, the Company sold the assets relating to its ice machine
business with a book value of approximately $41,000 for $200,000. The Company
received a promissory note for $200,000, payable monthly, plus interest at 2%
above the prime rate for a period of 60 months. The note is secured by the
assets sold and all other assets of the purchaser.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is comprised of the following as of December
31, 1995:
<TABLE>
<S> <C>
Leasehold improvements........................................... $ 136,279
Rental equipment................................................. 1,710,333
Vehicles......................................................... 1,017,078
Machinery and equipment.......................................... 2,649,752
Furniture and fixtures........................................... 394,579
----------
5,908,021
Less: Accumulated depreciation................................... 4,463,494
----------
Fixed assets, net.............................................. $1,444,527
----------
----------
</TABLE>
Depreciation aggregated $446,041 and $448,128, respectively, for the years
ended December 31, 1995 and 1994.
5. SHORT-TERM BORROWINGS:
The Company has a line of credit available with a bank for $100,000, as of
December 31, 1995. There were no outstanding amounts as of December 31, 1995.
The outstanding amounts on all other short-term borrowings as of December
31, 1995 are as follows:
<TABLE>
<S> <C>
Shareholder loan.................................................... $ 5,000
---------
---------
</TABLE>
The prime rate was 8.50% as of December 31, 1995.
6. LONG-TERM DEBT:
A summary of long-term debt follows as of December 31, 1995:
<TABLE>
<CAPTION>
DESCRIPTION INTEREST RATE
- -------------------------------------------------------------- -----------------
<S> <C> <C>
Installment note, payable monthly through September 1998 .5% over prime
($9,510 per month plus interest)............................ $ 313,843
Installment note, payable monthly through October, 1997 .5% over prime
($6,250 per month, plus interest) collateral-vehicles used
in business................................................. 137,500
----------
451,343
Less: current portion......................................... 189,125
----------
$ 262,218
----------
----------
</TABLE>
All of the bank obligations are guaranteed by the officers of the Company.
F-22
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995
6. LONG-TERM DEBT: (CONTINUED)
Maturities of long-term debt over the next three years are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1996............................................................ $ 189,125
1997............................................................ 176,625
1998............................................................ 85,593
---------
$ 451,343
---------
---------
</TABLE>
7. RELATED PARTY TRANSACTIONS:
The Company rents, on a year-to-year basis, its premises from a partnership,
the partners of which are the stockholders of the Company. Rent expense was
$60,000 and $64,000 for the years ended December 31, 1995 and 1994,
respectively.
8. BENEFIT PLANS:
The Company maintains a profit sharing plan which covers those employees not
covered by the union negotiated contract. Contributions to the plan are at the
discretion of the Board of Directors. Contributions to the plan for each of the
years ended December 31, 1995 and 1994 amounted to approximately $40,000,
respectively.
9. COMMITMENTS:
As of December 31, 1995, the Company had entered into operating leases for
warehouse space and office equipment.
Future minimum payments for operating leases at December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Year Ended December 31,
1996............................................................ $ 110,000
1997............................................................ 120,000
1998............................................................ 120,000
1999............................................................ 120,000
2000 and thereafter............................................. 850,000
</TABLE>
Rent expense, excluding the amounts discussed in Note 7, for the years ended
December 31, 1995 and 1994 was $65,599 and $65,163, respectively.
10. SUBSEQUENT EVENTS:
On January 31, 1996, all of the Company's assets were acquired and certain
liabilities assumed by Puro Water Group, Inc. The purchase agreement called for
total payments to be made to the owners of the Company in the aggregate amount
of $5,000,000, payments totaling $437,801 to satisfy two bank loans of the
Company and certain consideration for other outstanding liabilities. The
$5,000,000 is to be paid via a cash payment of $1,000,000 at the closing and
three notes payable for $2,900,000, $600,000 and $500,000, respectively, bearing
interest at the prime rate, for which only interest payments are due through
February 1997 and then equal monthly installments commencing March 1997 through
February 2000.
F-23
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES OR AN OFFER IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 11
Dividend Policy................................ 11
Dilution....................................... 12
Capitalization................................. 13
Pro Forma Financial Information................ 14
Selected Financial Data........................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business....................................... 23
Management..................................... 32
Security Ownership of Management and Others.... 36
Certain Transactions........................... 37
Description of Securities...................... 37
Shares Eligible for Future Sale................ 38
Underwriting................................... 39
Legal Matters.................................. 41
Experts........................................ 41
Additional Information......................... 41
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[LOGO]
PURO WATER GROUP, INC.
1,350,000 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
LAIDLAW EQUITIES, INC.
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PURO WATER GROUP, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article 7 of the Company's Certificate of
Incorporation provides as follows: "A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the 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 the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit." This provisions does not
eliminate a director's fiduciary duty, and in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Company for acts and omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provisions also do not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws. In
addition, the Company has obtained liability insurance for its officers and
directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses (other than underwriting
discounts and commissions) which will be paid by the Registrant in connection
with the issuance and distribution of the securities being registered. With the
exception of the SEC registration fee and the NASD filing fee, all amounts shown
are estimates.
<TABLE>
<CAPTION>
SEC registration fee............................................. $3,377.08
<S> <C>
NASD filing fee.................................................. 1,509.13
Nasdaq listing expenses.......................................... *
Blue Sky fees and expenses (including legal and filing fees)..... *
Printing expenses (other than stock certificates)................ *
Printing and engraving of stock certificates..................... *
Transfer and Registrar fees and expenses......................... *
Accounting fees and expenses..................................... *
Legal fees and expenses (other than Blue Sky).................... *
Miscellaneous expenses........................................... *
---------
Total............................................................ $ *
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment.
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the last three years, the Company has issued and sold the following
securities (as adjusted to reflect a 3.2 to 1 stock split effected as of April
29, 1996 and a .4928 to 1 stock split to be effected prior to the effectiveness
hereof):
1. On January 28, 1994, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 378,470 shares
of common stock, (ii) The Trust Under Article 16 of the Will of W. Palmer Dixon
for the benefit of Palmer Dixon 378,470 shares of common stock; (iii) Scott and
Beth Levy 425,779 shares of common stock, and (iv) Jack West 394,240 shares of
common voting stock. No underwriter was used for these transactions. The
foregoing transaction was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.
2. On October 16, 1995, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 98,560 shares
of common stock; (ii) The Trust Under Article 16 of the Will of W. Palmer Dixon
for the benefit of Palmer Dixon 19,712 shares of common stock; (iii) Peter T.
Dixon 78,848 shares of common stock. The consideration for this issuance was One
Million Dollars ($1,000,000). No underwriter was used for these transactions.
The foregoing transation was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.
3. On December 29, 1995, the Company issued to Thomas Limited Partnership
197,120 shares of common stock. The consideration for this issuance was One
Million Dollars ($1,000,000). No underwriter was used for this transaction. The
foregoing transaction was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.
4. On May 1, 1996, the Company issued to Edberg Associates Limited
Partnership 98,560 shares of common stock. The consideration for this issuance
was Five Hundred Thousand Dollars ($500,000). No underwriter was used for this
transaction. The foregoing transaction was exempt from registration under the
Act based upon section 4(2) thereof and Rule 152.
5. On October 1, 1996, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 28,430 shares
of common stock; and (ii) The Trust Under Article 16 of the Will of W. Palmer
Dixon for the benefit of Palmer Dixon 28,430 shares of common stock, each
issuance being pursuant to the exercise of Warrants issued on January 28, 1994.
The aggregate consideration for this issuance was One Thousand Dollars ($1,000).
No underwriter was used for these transactions. The foregoing transaction was
exempt from registration under the Act based upon section 4(2) thereof and Rule
152.
II-2
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL DATA SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1. Form of Underwriting Agreement between the Company and Laidlaw Equities, Inc.
*1.2 Form of Selected Dealer Agreement.
3.1 Certificate of Incorporation of the Company, as amended.
3.2 Amended and Restated By-laws of the Company.
*4.1 Specimen Certificate of the Company's Common Stock.
4.2 Form of Underwriter's Common Stock Purchase Warrant.
*4.3 1996 Stock Option Plan.
4.4 Stockholders Agreement dated January 28, 1994, as amended by First Amendment to Stockholders
Agreement dated as of October 16, 1995, Second Amendment to Stockholders Agreement dated as of
December 29, 1995, Third Amendment to Stockholders Agreement dated as of May 1, 1996, and Fourth
Amendment to Stockholders Agreement dated as of November 11, 1996.
*5.1 Opinion of Lev, Berlin & Dale, P.C.
10.1 Asset Purchase Agreement between the Company and Glenn Downing, Gary Downing and Downmorr Water
Corporation dated August 26, 1995.
10.2 Amendment to Asset Purchase Agreement by Glenn Downing and Gary Downing dated November 12, 1996.
10.3 Asset Purchase Agreement between the Company and Kenneth Gelber and Bark Water Company Ltd. d/b/a/
Nature's Way dated January 30, 1995.
10.4 Amendment to Asset Purchase Agreement by Kenneth Gelber and Bark Water Company Ltd. dated November
14, 1996.
10.5 Asset Purchase Agreement between the Company and Edward and Rita Worfler and National Ozone Water
Corp. dated April 28, 1995.
10.6 Asset Purchase Agreement between the Company and Peter Nicholas, Anthony Bonventure and Nature's
Best Water Company, Inc. dated April 28, 1995.
10.7 Waiver of right to convert debt issued in connection with the Asset Purchase Agreement by Nature's
Best Water Company, Inc. dated November 8, 1996.
10.8 Asset Purchase Agreement between the Company and Waters Filter & Cooler, Inc. and Transition
Agreement between Alan Waters and the Company, each dated October 31, 1995, as amended pursuant
to Amendment dated March 29, 1996, as revised pursuant to Revision dated May 23, 1996.
10.9 Asset Purchase Agreement between the Company and Rainbow Coffee Service Inc. d/b/a/ Rainbow Water
Service dated October 31, 1995, as amended by Amendment dated March 29, 1996.
10.10 Asset Purchase Agreement between the Company and Mountainwood Spring Water Co., Inc. and White
Mountain Co., Inc. dated as of June 30, 1995.
10.11 Waiver of option granted in connection with the Asset Purchase Agreement by Mountainwood Spring
Water Co., Inc. and White Mountain Co., Inc. dated November 7, 1996.
10.12 Asset Purchase Agreement between the Company and Robert Brundage, Lyle Brundage and Electrified
Companies, Inc. dated January 31, 1996.
10.13 Net Lease, dated January 31, 1996, between the Company and R&L Properties Company covering premises
in East Orange, New Jersey.
*10.14 Employment Agreement between the Company and Jack West dated , 1996.
*10.15 Employment Agreement between the Company and Scott Levy dated , 1996.
*10.16 Employment Agreement between the Company and James Botti dated , 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
10.17 Lease, dated October 9, 1995, between the Company and Stabal Realty Corp. covering 76-78 Mall
Drive, Commack, Long Island, New York facility, as modified by Lease Modification dated February
15, 1996.
<C> <S>
10.18 Balloon Mortgage on the Maspeth, New York facility dated May 24, 1988, with Bond and Extension and
Consolidation Agreement of same date.
10.19 Supply Agreement dated June 27, 1996 between the Company and Mountainwood Spring Water Co., Inc.
10.20 Long-term Supply Agreement dated June 13, 1996 between the Company and Shawangunk Bulk Springwater
Corp.
10.21 Stock Purchase Agreement dated as of December 29, 1995 between the Company and Thomas Limited
Partnership.
10.22 Stock Purchase Agreement dated as of May 1, 1996 between the Company and Edberg Associates Limited
Partnership.
10.23 Stock Purchase Agreement dated as of October 16, 1995 between the Company and Peter T. Dixon and
the Trust under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and Palmer
Dixon.
10.24 Registration Rights Agreement dated as of December 29, 1995 between the Company and Thomas Limited
Partnership.
10.25 Registration Rights Agreement dated as of May 1, 1996 between the Company and Edberg Associates
Limited Partnership.
10.26 Registration Rights Agreement dated as of October 16, 1995 between the Company and Peter T. Dixon
and the Trusts Under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and
Palmer Dixon.
10.27 Registration Rights Agreement dated January 28, 1994 between the Company and the Trusts Under
Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and Palmer Dixon.
10.28 Registration Rights Agreement dated January 28, 1994 between the Company and Jack C. West and Scott
and Beth Levy.
10.29 Master Note in principal amount of $2 million with European American Bank dated September 13, 1996.
10.30 Commercial Note in the original principal amount of $1.5 million with European American Bank dated
September 13, 1996.
10.31 General Security Agreement with European American Bank dated July 31, 1996.
10.32 Agreement of Subordination and Assignment dated as of January 31, 1996 between the Trusts under
Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer Dixon, and
the Company in favor of European American Bank.
10.33 Pledge Agreement dated January 31, 1996 between the Trusts under the Will of W. Palmer Dixon for
the benefit of Peter T. Dixon and Palmer Dixon in favor of European American Bank.
10.34 Guaranty of All Liability dated as of February 5, 1996, by Peter T. Dixon in favor of European
American Bank.
10.35 Secured Note in original principal amount of $250,000 dated January 28, 1994 in favor of the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
10.36 Standby Secured Note in orginal principal amount of $50,000 dated January 28, 1994 in favor of the
Trusts under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and
Palmer Dixon.
10.37 Letter of Credit in the amount of $500,000 with European American Bank dated June 27, 1996.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
10.38 Letter of Credit in the amount of $4,000,000 with European American Bank dated January 31, 1996.
<C> <S>
10.39 Consulting Agreement between the Company and Peter T. Dixon dated January 28, 1994.
10.40 Waiver of Transaction Fee by Peter T. Dixon dated November 14, 1996.
10.41 Option to Purchase Common Stock dated November 9, 1996 in favor of Edberg Associates Limited
Partnership.
10.42 Option to Purchase Common Stock dated November 9, 1996 in favor of Peter T. Dixon and the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
10.43 Option to Purchase Common Stock dated November 9, 1996 in favor of Peter T. Dixon and the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
11.1 Supplemental Earnings Per Share Computation.
*23.1 Consent of Lev, Berlin & Dale, P.C. (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Dr. Stephen C. Edberg.
23.4 Consent of Leonard Rosinski.
24.1 Powers of Attorney (included on the signature page to this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The Company hereby undertakes that it will: 1. file, during any period in
which it offers or sells securities, a post-effective amendment to this
Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information on the registration
statement; and 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 the volume and price represent no more than a Twenty Percent (20%)
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) include any additional or changed material information on the plan of
distribution. 2. for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering. 3. file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering. 4. provide
to the underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the By-laws of the Company, or otherwise, the Company 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 such indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or
II-5
<PAGE>
paid by a director, officer or controlling person of the Company 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
offered hereunder, the Company 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that it will:
(i) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(i), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective;
(ii) for determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in that registration
statement, and that offering such securities at that time as the initial bona
fide offering of these securities; and
(iii) provide to the Underwriter at the closing of the Offering certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized 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 this 15th day of
November 1996.
PURO WATER GROUP, INC.
By: /s/ JACK C. WEST
------------------------------------------
Jack C. West
President
By: /s/ SCOTT LEVY
------------------------------------------
Scott Levy
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack West and Scott Levy, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) 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, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or either of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------
<S> <C> <C>
/s/ JACK C. WEST President and Director (principal executive
---------------------------------- officer) November 15, 1996
Jack C. West
/s/ SCOTT LEVY
---------------------------------- Chief Executive Officer and Director November 15, 1996
Scott Levy
/s/ PETER T. DIXON
---------------------------------- Chairman of the Board November 15, 1996
Peter T. Dixon
/s/ JAMES G. BOTTI Chief Financial Officer (principal financial
---------------------------------- and accounting officer) November 15, 1996
James G. Botti
/s/ WILMER J. THOMAS
---------------------------------- Director November 15, 1996
Wilmer J. Thomas
</TABLE>
II-7
<PAGE>
EX-1.1
Underwriting Agreement between Company & Laidlaw
UNDERWRITING AGREEMENT
between
PURO WATER GROUP, INC.
and
LAIDLAW EQUITIES, INC.
Dated: ________, 1996
<PAGE>
1,350,000 SHARES
PURO WATER GROUP, INC.
Common Stock
UNDERWRITING AGREEMENT
New York, New York
________, 1996
Laidlaw Equities, Inc.
100 Park Avenue
New York, New York 10017
Dear Sirs:
The undersigned, Puro Water Group, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with you (the "Underwriter" or "you")
as follows:
1. Purchase and Sale of Securities.
1.1 Firm Shares.
1.1.1 Purchase of Firm Shares. On the basis of the representations
and warranties and subject to the terms and conditions contained herein, the
Company agrees to issue and sell to the Underwriter 1,350,000 shares (the "Firm
Shares") of the Company's Common Stock, [$.003125] par value per share (the
"Common Stock"), and the Underwriter agrees to purchase from the Company the
Firm Shares, at a purchase price of [ ] per Firm Share.
1.1.2 Delivery and Payment. Delivery and payment for the Firm Shares
shall be made at 10:00 A.M., New York time, on or before the third full business
day following the effective date (the "Effective Date") of the Registration
Statement (as hereinafter defined), or at such other time as shall be agreed
upon by the Underwriter and the Company, at the offices of Laidlaw Equities,
Inc. or at such other place as shall be agreed upon by the Underwriter and the
Company. The date of delivery and payment for the Firm Shares is called the
"Closing Date." Payment for the Firm Shares shall be made on the Closing Date by
certified or bank cashier's check(s) in New York Clearing House (next day)
funds, payable to the order of the Company upon delivery to the Underwriter of
certificates (in form and substance complying with applicable law) representing
the Firm Shares. The Firm Shares shall be registered in such names and shall be
in such denominations as the Underwriter may request in writing at least
<PAGE>
two (2) full business days prior to the Closing Date. The Company shall permit
the Underwriter to examine and package the Firm Shares for delivery, at least
one (1) full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Shares, except upon tender of payment by
the Underwriter for all the Firm Shares.
1.2 Overallotment Option.
1.2.1 Grant of Option. For the purposes of covering any
overallotments in connection with the distribution and sale of the Firm Shares,
the Underwriter is hereby granted an option (the "Overallotment Option") to
purchase up to an additional 202,500 shares of Common Stock (the "Option
Shares") from the Company. The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares." The purchase price to be paid for each
Option Share shall be the same as the price paid for each Firm Share pursuant to
Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Overallotment Option may be exercised
by the Underwriter as to all or any part of the Option Shares at any time, from
time to time, within forty-five (45) days after the Effective Date. The
Underwriter shall not be under any obligation to purchase any Option Shares
prior to the exercise of the Overallotment Option. The Overallotment Option
granted hereby may be exercised by the giving of written or telegraphic notice
to the Company by the Underwriter setting forth the number of Option Shares to
be purchased, the date and time for delivery of and payment for the Option
Shares and stating that the Option Shares referred to therein are to be used for
the purpose of covering overallotments in connection with the distribution and
sale of the Firm Shares. If such notice is given two (2) full business days
prior to the Closing Date, the date set forth therein for such delivery and
payment shall be the Closing Date. If such notice is given thereafter, the date
set forth therein for such delivery and payment shall not be earlier than three
(3) full business days after the date of the notice. If such delivery and
payment for the Option Shares does not occur on the Closing Date, the date and
time of the closing for such Option Shares shall be as set forth in the notice
(the "Option Closing Date"). Upon exercise of the Overallotment Option, the
Company shall become obligated to convey to the Underwriter the number of Option
Shares specified in such notice.
1.2.3 Delivery and Payment. Payment for the Option Shares shall be
made by certified or bank cashier's check(s) in New York Clearing House (next
day) funds, payable to the order of the Company and shall be made at the offices
of Laidlaw Equities, Inc. or at such other place as shall be agreed upon by the
Underwriter and the Company, upon delivery to you of certificates representing
the Option Shares being purchased. The certificates representing the Option
Shares to be delivered shall be in such denominations
-2-
<PAGE>
and registered in such names as the Underwriter requests not less than two (2)
full business days prior to the Closing Date or the Option Closing Date, as the
case may be, and shall be made available to the Underwriter for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one (1) full business day prior to such Closing
Date.
1.3 Underwriter's Warrants.
1.3.1 Purchase and Sale. The Company hereby agrees to issue and to
sell to you and/or to such persons as you may designate, on the Closing Date,
warrants for the purchase of an aggregate of 135,000 shares of Common Stock (the
"Underwriter's Warrants") for an aggregate purchase price of $135.00. The
Underwriter's Warrants and the shares of Common Stock issuable upon exercise of
the Underwriter's Warrants are hereinafter referred to collectively as the
"Underwriter's Securities." The Shares and the Underwriter's Securities are
hereinafter referred to collectively as the "Securities."
1.3.2 Delivery and Payment. Delivery and payment for the
Underwriter's Warrants shall be made on the Closing Date. The Company shall
deliver to the Underwriter, upon payment therefor, certificates for the
Underwriter's Warrants in the name or names and in such denominations as the
Underwriter may request. The Underwriter's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year after the Effective Date at an
initial exercise price per share of 120% of the per share initial public
offering price for the Shares and shall be substantially in the form of the
Underwriter's common stock purchase warrant filed as an exhibit to the
Registration Statement.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriter that:
2.1 Filings under Securities Laws.
2.1.1 Pursuant to the Act. The Company has filed with the Securities
and Exchange Commission (the "Commission") a registration statement and an
amendment or amendments thereto, on Form SB-2 (Registration No. ________),
including any related preliminary prospectus (a "Preliminary Prospectus"), for
the registration of the Securities under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act (the "Regulations").
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a
-3-
<PAGE>
part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the
Regulations), is hereinafter called the "Registration Statement," and the form
of the final prospectus dated the Effective Date (or, if applicable, the form of
final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus."
2.1.2 Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A Registration Statement (File No. _______) providing for
the registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of the shares of Common Stock. The registration of the Common
Stock has been or will be declared effective by the Commission on the date
hereof.
2.2 No Stop or Other Orders. Neither the Commission, nor any state
regulatory authority, has issued any order preventing or suspending the use of
any Preliminary Prospectus or has instituted or threatened to institute any
proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 Representation as to Contents. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date and any Option Closing Date, the Registration Statement and the Prospectus
shall contain all material statements that are required to be stated therein in
accordance with the Act and the Regulations, and shall in all material respects
conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto. The Company acknowledges that such information
consists solely of the information under the heading "Underwriting" in the
Prospectus.
2.3.2 Disclosure Regarding Contracts. The description in the
Registration Statement and the Prospectus of contracts, instruments and other
documents is accurate in all material respects. There are no contracts,
instruments or other documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed with the Commission as
exhibits to the Registration Statement, which have
-4-
<PAGE>
not been so described or filed. Each contract, instrument and other document
(however characterized or described) to which the Company is a party or by which
its property or business is or may be bound or affected and which is referred to
in the Prospectus, or is material to the Company's business, has been duly and
validly executed, is in full force and effect and is enforceable against the
parties thereto in accordance with its terms. Neither the Company nor, to the
best knowledge of the Company, any other party thereto is in default thereunder
and no event has occurred which, with the lapse of time or the giving of notice,
or both, would constitute a default by the Company thereunder.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company, within three (3) years prior to the date hereof, except as disclosed in
the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, assets, properties, business or business prospects of the Company,
including, but not limited to, any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, whether or not arising in the ordinary course of business, and
(ii) there have been no transactions entered into by the Company, other than
those in the ordinary course of business, which are material with respect to the
condition, financial or otherwise, or to the results of operations, business or
business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
2.5 Independent Accountants. To the best knowledge of the Company, Arthur
Andersen LLP, whose report is filed with the Commission as part of the
Registration Statement, are independent accountants as required by the Act and
the Regulations. The
-5-
<PAGE>
statements included in the Registration Statement with respect to such
accountants are true and correct in all material respects.
2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules, if any, included in the Registration Statement
and Prospectus fairly present the financial position, the results of operations
and cash flows of the Company at the dates and for the periods to which they
apply; and, except as otherwise indicated in the Registration Statement, such
financial statements have been prepared in conformity with United States
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules, if any, included in the
Registration Statement present fairly the information required to be stated
therein. No other financial statements or schedules are required to be included
in the Registration Statement. The selected financial data set forth in the
Prospectus under the captions "Summary Financial Information," "Capitalization",
"Pro Forma Financial Information" and "Selected Financial and Operating Data"
fairly present the information set forth therein on the basis stated in the
Registration Statement.
2.7 Capitalization. The Company had at the date or dates indicated in the
Registration Statement and Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date and
any Option Closing Date, there will be no options, warrants, or other rights to
purchase or otherwise acquire any authorized but unissued shares of Common
Stock, preferred stock of the Company, if any, or any security convertible into
shares of Common Stock or preferred stock, or any contracts or commitments to
issue or sell shares of Common Stock or preferred stock or any such options,
warrants, rights or convertible securities.
2.8 Representations Regarding Securities.
2.8.1 Outstanding Securities. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holder of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants,
if any, to purchase shares of Common Stock constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
authorized Common
-6-
<PAGE>
Stock and any outstanding options and warrants to purchase shares of Common
Stock conform to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock, and any options and warrants to purchase shares of Common Stock, were at
all relevant times either registered under the Act and applicable state
securities or Blue Sky Laws or were exempt from such registration requirements.
2.8.2 Securities Sold Hereunder. The Securities have been duly
authorized and, when issued and paid for, will be validly issued, fully paid and
non-assessable and the holders thereof are not and will not be subject to
personal liability by reason of being such holders; the Securities are not and
will not be subject to the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company; and all
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. When issued, the
Underwriter's Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Underwriter's Warrants are enforceable against the Company in accordance with
their respective terms.
2.9 No Registration Rights. No holder of any securities of the Company or
of any options or warrants of the Company exercisable for or convertible or
exchangeable into securities of the Company has the right to require the Company
to register any such securities of the Company under the Act or to include any
such securities in a registration statement to be filed by the Company,
including the Registration Statement, except as disclosed in the Prospectus.
2.10 Representations Regarding This Agreement and the Underwriter's
Warrant Agreement. The Company has full power and authority, corporate and
otherwise, to enter into this Agreement and the agreement governing the
Underwriter's Warrants (the "Underwriter's Warrant Agreement") and to carry out
the provisions and conditions hereof and thereof. This Agreement and the
Underwriter's Warrant Agreement have been duly and validly authorized by the
Company and constitute, or when executed and delivered, will constitute valid
and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws offering
creditors' rights generally, (b) as enforceability of any indemnification and
contribution provision may be limited under the federal and state securities
laws, and (c) that, the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
-7-
<PAGE>
The execution, delivery and performance by the Company of this Agreement and the
Underwriter's Warrant Agreement, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms and conditions hereof and thereof have been duly authorized by
all necessary corporate action and do not and will not, with or without the
giving of notice or the lapse of time or both, (i) result in a breach of, or
conflict with any of the terms and provisions of, or constitute a default under,
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any indenture, mortgage, deed of trust, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company is subject; (ii) result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (iv) have a material adverse
effect on any permit, license, certificate, registration, approval, consent or
franchise concerning the Company.
2.11 No Improper Payments. Neither the Company nor, to the Company's
knowledge, any director, officer, employee or agent of the Company has made any
payment of funds of the Company or received or retained any funds in violation
of any law, rule or regulation or of a character required to be disclosed in the
Prospectus.
2.12 No Defaults; Violations. Except as set forth in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or By-Laws. The
Company is not in violation of any franchise, license, permit, applicable law,
rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which violation would result in a material adverse
change in the condition (financial or other), business, prospects or properties
of the Company.
-8-
<PAGE>
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease its properties and conduct its business as
described in the Prospectus, and the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations.
2.13.2 Required Consents. The Company has obtained all consents,
authorizations, approvals and orders required in connection with the execution
and delivery of this Agreement and the Underwriter's Warrant Agreement and the
performance of its obligations hereunder and thereunder. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery of the
Securities pursuant to this Agreement and the Underwriter's Warrant Agreement
and as contemplated by the Prospectus, except those required under applicable
federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus. The Company has adequately insured its properties against loss
or damage by fire or other casualty and maintains such other insurance as is
usually maintained by companies engaged in the same business or in similar
businesses.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or the
operation or the properties or the business of the Company, or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement. There are no outstanding orders, judgments or decrees of any
court, governmental agency or other tribunal naming the Company and enjoining
the Company from taking, or requiring the Company to take, any action, or to
which the Company, its properties or business, is bound or subject.
2.16 Organization; Good Standing. The Company has been duly organized and
is validly existing as a corporation and is in good
-9-
<PAGE>
standing under the laws of its state of incorporation. The Company is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which ownership or leasing of any properties or the character of
its operations requires such qualification or licensing.
2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. No issues
have been raised (and are currently pending) by any taxing authority in
connection with any of the returns or taxes asserted as due from the Company,
and no waivers of statutes of limitation with respect to the returns or
collection of taxes have been given by or requested from the Company or any
subsidiary. The term "taxes" means all federal, state, local, foreign, and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges or any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finders' Fees. Except as described in the Prospectus, there
are no claims, payments, issuances, arrangements or understandings for services
in the nature of finders' or origination fees with respect to the sale of the
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. (the "NASD").
2.18.2 Payments Within Twelve (12) Months. The Company has not made
any direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, investing fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to any NASD member, or (iii) to any person
or entity that has any direct or indirect affiliation within the twelve month
period to ___________, 1996, the date on which the Registration Statement was
filed with the Commission (the "Filing Date") or thereafter, other than payments
to the Underwriter.
-10-
<PAGE>
2.18.3 Use of Proceeds. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any of its
affiliates.
2.18.4 Insiders' NASD Affiliation. No officer, director or holder of
five percent (5%) or more of any class of securities of the Company has any
direct or indirect affiliation or association with any NASD member. No
beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member.
2.19 Internal Accounting Controls. The Company maintains a system of
internal accounting control sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2.20 AMEX Listing. As of the Effective Date, the Shares have been approved
for listing on the American Stock Exchange ("AMEX").
2.21 Intangibles. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights and other rights (collectively, the
"Intangibles") owned or used by it. The Company's Intangibles which have been
registered in the United States Patent and Trademark Office and/or the United
States Copyright office have been fully maintained and are in full force and
effect. There is no claim or action by any person, or proceeding pending or, to
the Company's knowledge, threatened, and the Company has not received any notice
of conflict with the asserted rights of others, which challenges the exclusive
right of the Company with respect to any Intangibles used in the conduct of the
Company's business. Neither the Company's Intangibles, nor the Company's current
products, services and processes infringe on any Intangibles held by any third
party. No others have infringed or are infringing upon the Intangibles of the
Company.
2.22 Employee Matters.
2.22.1 Relations With Employees. The Company has generally enjoyed a
satisfactory relationship with its employees and is in compliance with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. There are no pending investigations
-11-
<PAGE>
involving the Company by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state or local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any predecessor entity, and none has ever occurred.
No issue concerning representation exists respecting the employees of the
Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending or threatened under any expired or existing collective
bargaining agreement of the Company, if any.
2.22.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to maintain, sponsor or contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" (each, an "ERISA Plan") as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company does
not, and has at no time, maintained or contributed to a defined benefit plan, as
defined in Section 3(35) of ERISA. If the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which could subject the Company to any tax penalty for
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."
2.23 Investment Company Representations. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
2.24 Officers' Certificate. Any Certificate signed by any duly authorized
officer or the Company and delivered to you or to your counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
-12-
<PAGE>
2.25 Lock-Up Agreements With Insiders. The Company has caused to be duly
executed a legally binding and enforceable agreement pursuant to which all
officers, all directors, all stockholders who own 5% or more of the outstanding
Common Stock of the Company or options, warrants or other securities convertible
into 5% or more of the Company's Common Stock and Edberg Associates, LP and
their family members and affiliates (as defined in the securities laws),
(collectively, the "Insiders") agree not to sell any shares of Common Stock or
warrants or options to purchase Common Stock or securities convertible into
Common Stock owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of eighteen (18) months following the Effective Date,
except with the consent of the Underwriter (other than by the laws of descent
and distribution). In order to enforce such agreements, the Company shall impose
stop transfer instructions with respect to all such shares of Common Stock or
warrants or options to purchase Common Stock or securities convertible into
Common Stock until the end of such period.
2.26 No Stabilization or Manipulation. Neither the Company, nor any of its
officers, directors or controlling persons, has taken or will take, directly or
indirectly, any action designed, or which reasonably might be expected, to cause
or result, under the Act or otherwise, in, or that has constituted,
stabilization or manipulation of the price of any Security or to facilitate the
sale or resale of the Shares.
2.27 Subsidiaries. The representations and warranties made by the Company
in this Agreement shall, in the event that the Company has one or more
subsidiaries (the "subsidiaries") also apply and be true with respect to each
subsidiary, individually (except as the context otherwise requires) and taken as
a whole with the Company and all other subsidiaries, as if each representation
and warranty contained herein made specific reference to each subsidiary each
time the term "Company" was used. Except as described in the Prospectus, the
Company does not own any interest in any corporation, partnership, joint
venture, trust or other business entity.
3. Covenants of the Company. The Company hereby covenants and agrees with the
Underwriter as follows:
3.1 Amendments to Registration Statement. The Company shall deliver to the
Underwriter, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and shall
not file any such amendment or supplement to which the Underwriter shall
reasonably object.
3.2 Federal Securities Laws.
-13-
<PAGE>
3.2.1 Compliance. During the time when a Prospectus is required to
be delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Shares in accordance with the provisions hereof and the Prospectus. If at
any time when a Prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriter, the
Prospectus, as then amended or supplemented, includes any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company shall notify the Underwriter
promptly and prepare and file with the Commission, subject to Section 3.1
hereof, an appropriate amendment or supplement in accordance with Section 10 of
the Act.
3.2.2 Filing of Final Prospectus. The Company shall file the Final
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from the
Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of the Exchange Act.
3.3 Blue Sky Filings. The Company shall endeavor in good faith, in
cooperation with the Underwriter and its counsel, at or prior to the time the
Registration Statement becomes effective, to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or would be required to qualify to do business as a
foreign corporation. In each jurisdiction where such qualification shall be
effected, the Company shall, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may be required by the
laws of such jurisdiction.
3.4 Delivery of Filings to Underwriter. The Company shall deliver to the
Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act, such number of copies of
each Preliminary Prospectus and the Prospectus as the Underwriter may reasonably
request and, immediately after the Registration Statement or any amendment or
-14-
<PAGE>
supplement thereto is filed, deliver to the Underwriter two (2) original
executed Registration Statements, including exhibits, and all post-effective
amendments thereto and copies of documents filed therewith or incorporated
therein by reference and all original executed consents of certified experts.
3.5 Effectiveness and Events Requiring Notice to the Underwriter. The
Company shall cause the Registration Statement to remain effective until the
later of the completion by the Underwriter of the distribution of the Shares
(but in no event more than 9 months after the date on which the Registration
Statement shall have been declared effective) or 25 days after the date on which
the Registration Statement shall have been declared effective and shall notify
the Underwriter immediately and shall promptly confirm the notice in writing of
(i) the effectiveness of the Registration Statement and any amendment thereto,
(ii) the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceeding for that purpose, (iii) the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Shares for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) the
mailing and delivery to the Commission for filing of any amendment or supplement
to the Registration Statement or Prospectus, (v) the receipt of any comments or
request for any additional information from the Commission, and (vi) the
happening of any event during the period described in Section 3.4 hereof that
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Commission
or any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company shall make every reasonable effort to
obtain promptly the lifting of such order.
3.6 Unaudited Financials. The Company shall furnish to the Underwriter as
early as practicable prior to the date hereof and the Closing Date, but no later
than two (2) full business days prior thereto, a copy of the latest available
unaudited interim financial statements (the "Unaudited Financials") of the
Company (which in no event shall be as of a date more than ninety (90) days
prior to the Effective Date) which have been read by the Company's independent
accountants, as stated in their letter to be furnished pursuant to Section 4.3
hereof.
3.7 Reports to the Underwriter.
3.7.1 Periodic Reports, Etc.. For a period of five years from the
Effective Date, the Company will furnish to the Underwriter copies of such
financial statements and other periodic and special reports as the Company from
time to time furnishes
-15-
<PAGE>
generally to holders of any class of its securities, and promptly furnish to the
Underwriter (i) a copy of each periodic report the Company shall be required to
file with the Commission, (ii) a copy of every press release and every news item
and article with respect to the Company or its affairs which was released by the
Company, (iii) copies of each Form SR, (iv) a copy of each Form 8-K or Schedules
13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, and (v) such
additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Underwriter may from time to
time reasonably request.
3.7.2 Transfer Sheets. For a period of three years from the Closing
Date, the Company will furnish to the Underwriter, at the Company's sole expense
such transfer sheets of the Company's securities as the Underwriter may request,
including the daily, weekly and monthly consolidated transfer sheets of the
transfer agent of the Company.
3.8 Delivery of Underwriter's Warrants. On the Closing Date, the Company
shall execute and deliver to the Underwriter the Underwriter's Warrants
substantially in the form filed as an exhibit to the Registration Statement.
3.9 Payment of Expenses.
3.9.1 General Expenses. The Company shall pay on each of the Closing
Date and any Option Closing Date to the extent not paid at the Closing Date, all
expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, (i) the preparation, printing,
filing and mailing (including the payment of postage with respect to such
mailing) of the Registration Statement, the Preliminary Prospectuses and the
Prospectus and the printing and mailing of this Agreement and related documents,
including the cost of all copies thereof and any amendments or supplements
thereto supplied to the Underwriter in quantities as may be required by the
Underwriter, (ii) the printing, engraving, issuance and delivery of the Shares
and the Underwriter's Warrants, including any transfer taxes and other taxes
payable thereon, (iii) the qualification of the Shares under state or foreign
securities or Blue Sky laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," and all amendments and supplements thereto,
fees and disbursements for the Underwriter's counsel and fees and disbursements
of local counsel, if any, retained for such purpose, (iv) costs associated with
applications for assignments of a rating of the Shares by qualified rating
agencies, (v) filing fees incurred in registering the offering with the NASD,
(vi) costs of placing "tombstone" advertisements in publications that shall be
selected by the Underwriter, (vii) fees and disbursements of the transfer agent,
(viii) the Company's expenses associated with "due diligence" meetings arranged
by the Underwriter and "road show"
-16-
<PAGE>
expenses; (ix) the preparation, binding and delivery of five (5) transaction
"bibles" for the Underwriter, (x) any listing of the Shares on the AMEX or any
listing in Standard & Poor's, and (xi) all other costs and expenses incident to
the performance of its obligations hereunder that are not otherwise specifically
provided for in this Section 3.9.1. Since an important part of the public
offering process is for the Company to appropriately and accurately describe
both the background of the principals of the Company and the Company's
competitive position in its industry, the Company has engaged and will pay for
an investigative search firm of the Underwriter's choice to conduct an
investigation of principals of the Company mutually selected by the Underwriter
and the Company. The Underwriter may deduct from the net proceeds of the
offering payable to the Company on the Closing Date or any Option Closing Date
the expenses set forth herein to be paid by the Company to the Underwriter
and/or to third parties. If this Agreement shall not be carried out for any
reason whatsoever, the Company shall remain liable for all of its actual
out-of-pocket expenses pursuant to this Section 3.9.1.
3.9.2 Underwriter's Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.9.1, upon the sale of the
Firm Shares or any of the Option Shares, it shall pay to the Underwriter, as a
non-accountable expense allowance, an amount equal to 3% of the gross proceeds
payable to the Company from the sale of the Firm Shares and the Option Shares,
if any are sold to the Underwriter, of which $50,000 has been paid to date, and
it shall pay the balance on the Closing Date as to the Firm Shares and any
Option Closing Date as to Option Shares, by certified or bank cashier's check
or, at the election of the Underwriter, by deduction from the proceeds of the
offering contemplated hereby. If the offering contemplated by this Agreement is
not consummated for any reason, the Company shall be liable for the accountable
expenses of the Underwriter, including, but not limited to, legal fees, Blue Sky
counsel fees, "road show" and due diligence expenses. The Underwriter shall
retain such part of the non-accountable expense allowance previously paid as
shall equal its actual out-of-pocket expenses. If the amount previously paid is
insufficient to cover such actual out-of-pocket expenses, the Company shall
remain liable for and promptly pay any other actual out-of-pocket expenses. If
the amount previously paid exceeds the amount of the actual out-of-pocket
expenses, the Underwriter shall promptly remit to the Company any such excess.
3.10 Application of Net Proceeds. The Company shall apply the net proceeds
from the offering received by it in a manner consistent with the application
described under the caption "Use of Proceeds" in the Prospectus and shall file
such reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule 463
under the Act.
-17-
<PAGE>
3.11 Delivery of Earnings Statements to Security Holders. The Company
shall make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve (12)
consecutive months beginning on the date immediately after the Effective Date.
3.12 Reservation of Shares. The Company shall reserve and keep available
that maximum number of its authorized but unissued shares of Common Stock as is
issuable upon the exercise of the Underwriter's Warrants.
3.13 Board of Directors. For a period of three (3) years after the
Effective Date, the Underwriter shall have the right to appoint a designee as an
observer to the Company's Board of Directors. Such observer shall have the right
to attend all meetings of the Board of Directors. Such observer shall be
entitled to receive reimbursement for all reasonable out-of-pocket expenses
incurred in attending such meetings, including, but not limited to, food,
lodging, transportation, and any fees paid to a non-management director for
attending meetings. The Underwriter shall be given notice of such meetings at
the same time and in the same manner as Directors of the Company are informed.
Subject to the provisions of applicable law, the Underwriter and such observer
shall be indemnified to the same extent as the other Directors. The Company
shall purchase Directors and Officers insurance in an amount of not less than
$2,000,000, with a deductible of not more than $250,000 and maintain such
insurance for a period of four years, provided, however, that the Company shall
not be required to pay more than $30,000 per year after the first year in order
to maintain such insurance, and if insurance in such amount is not available at
such cost, the Company shall purchase that amount of such insurance that is
available at a cost of $30,000 per year.
3.14 Press Releases. The Company shall not issue a press release or engage
in any other publicity until twenty-five (25) days after the Effective Date,
without the Underwriter's prior written consent, which consent shall not be
unreasonably withheld.
3.15 Secondary Market Trading and Standard & Poor's. The Company will take
all necessary and appropriate actions to be included in Standard and Poor's
Daily News and Corporation Records Corporate Descriptions for a period of five
years from the Effective Date, including the payment of any necessary fees and
expenses. The Company shall take such action as may be reasonably requested by
the Underwriter to obtain a secondary market trading exemption in such States as
may be requested by the Underwriter, including the payment of any necessary fees
and expenses and the
-18-
<PAGE>
filing of a Form (e.g., 25101(b)) for secondary market trading in the State of
California on the Effective Date.
3.16 AMEX Maintenance. For a period of five years from the date hereof,
the Company will use its best efforts to maintain the listing by AMEX of the
Common Stock.
3.17 Key Person Life Insurance. The Company will maintain key person life
insurance with an insurance company which is reasonably satisfactory to the
Underwriter in an amount no less than $2,000,000 on the lives of each of Messrs.
Peter Dixon, Jack West and Scott Levy, naming the Company as the sole
beneficiary thereof, for at least three years following the Effective Date.
3.18 Disqualification on Form S-1 (or other appropriate form). For a
period equal to seven years from the date hereof, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form S-1
(or other appropriate form) for the registration of the shares underlying
Underwriter's Warrants under the Act.
3.19 Accountants. For a period of three years from the Effective Date, the
Company will not effect a change in its accounting firm without the prior
written consent of the Underwriter, which consent will not be unreasonably
withheld, except that no such consent is required if the new firm is a member of
the so-called "Big-Six."
3.20 Sale of Securities. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for a period of 18 months following the Effective
Date without obtaining the prior written consent of the Underwriter.
3.21 Exercise Price of Options/Warrants. For a period of 24 months after
the Effective Date, the Company will not grant or issue options or warrants
except for options to purchase up to 400,000 shares of the Company's Common
Stock pursuant to the Company's Stock Option Plan, and the exercise price of
such options shall not be less than the fair market value of the Common Stock on
the date of the grant.
3.22 Right of First Refusal. During the eighteen (18) month period after
the Effective Date of the Registration Statement, the Underwriter shall have the
right of first refusal (the "Right of First Refusal") to act as lead manager,
placement agent or investment banker for any and all public or private offerings
of securities of the Company, or of any successor to or subsidiary of the
Company or other entity in which the Company has as equity interest (herein
referred to collectively as the "Company"), by the Company, or any merger,
acquisition or disposition of assets of the
-19-
<PAGE>
Company, if the Company uses an underwriter, placement agent or investment
banker or person performing such functions for a fee (the "Subsequent Company
Offering") or any secondary offering of the Company's securities by shareholders
(the "Principal Shareholders") owning five percent (5%) or more of the
outstanding Common Stock on the Effective Date (the "Secondary Offering") in
which an underwriter or placement agent is engaged. Accordingly, if during such
period, the Company intends to make a Subsequent Company Offering or the Company
receives notification from any of such Principal Shareholders of such holder's
intention to make a Secondary Offering, the Company shall notify the Underwriter
in writing of such intention and of the proposed terms of the transaction. The
Company shall thereafter promptly furnish the Underwriter with such information
concerning the business, condition and prospects of the Company as the
Underwriter may reasonably request. If within ten (10) business days after the
receipt of such notice of intention and statement of terms the Underwriter does
not accept in writing such offer to act as underwriter, agent or investment
banker with respect to such transaction upon the terms proposed, the Company and
each of the Principal Shareholders shall be free to negotiate terms with other
underwriters, agents or investment bankers with respect to such transaction and
to effect such transaction on such proposed terms within six (6) months after
the end of such ten (10) business days. Before the Company and/or any of the
Principal Shareholders shall accept any proposal modified in any material
respect from such underwriter, agent or investment banker, the Underwriter's
preferential right shall be reinstated and the same procedure with respect to
such modified proposal, as provided above, shall be adopted. The failure by the
Underwriter to exercise its Right of First Refusal in any particular instance
shall not affect in any way such right with respect to any other Subsequent
Company Offering or Secondary Offering. By execution and delivery of agreements
in form and substance satisfactory to the Underwriter, each of the Principal
Shareholders agrees to be held bound by the terms of this Section 3.22
concerning any proposed Secondary Offering of the Company's securities.
4. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Shares, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and any Option
Closing Date to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
-20-
<PAGE>
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by you, and, at each of the Closing Date and any Option Closing
Date, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for the purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Olshan Grundman Frome &
Rosenzweig LLP, counsel to the Underwriter.
4.1.2 NASD Clearance. On or before the Effective Date, the
Underwriter shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriter as described in the
Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Shares in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued either on the Closing Date or any Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 Company Counsel Matters.
4.2.1 Closing Date Opinion of Counsel. On the Closing Date, the
Underwriter shall have received the favorable opinion of Lev, Berlin & Dale,
P.C., counsel to the Company, dated the Closing Date, addressed to the
Underwriter and in form and substance satisfactory to Olshan Grundman Frome &
Rosenzweig LLP, counsel to the Underwriter, to the effect that:
(i) The Company and each of its subsidiaries has been duly
organized and is validly existing as a corporation and is in good standing under
the laws of its respective state of incorporation. The Company and each of its
subsidiaries is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any of its
respective properties or the character of its respective operations requires
such qualification or licensing (except where the failure to be so qualified or
licensed would not have a material adverse effect on the Company and its
subsidiaries (taken as a whole).
(ii) The Company and each of its subsidiaries has all
requisite corporate power and authority and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental or regulatory officials and bodies to own or lease its properties
and to conduct its business
-21-
<PAGE>
as described in the Prospectus, and the Company and each of its subsidiaries is
in compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations. The Company has all requisite corporate power and authority to
enter into this Agreement and to carry out the terms and conditions hereof. No
consents, approvals, authorizations or orders of, and no filing with any court
or governmental agency or body (other than such as may be required under the Act
and applicable Blue Sky laws), is required for the valid authorization,
issuance, sale and delivery of the Securities, and the consummation of the
transactions and agreements contemplated by this Agreement and the Underwriter's
Warrants, and as contemplated by the Prospectus or, if required, all such
authorizations, approvals, consents, orders, registrations, licenses and permits
have been duly obtained and are in full force and effect and have been disclosed
to the Underwriter.
(iii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The outstanding options and warrants, if any, to
purchase shares of Common Stock constitute the valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except (a)
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (b) as enforceability of
any indemnification and contribution provision may be limited under the federal
and state securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The offers and sales of the outstanding Common Stock and, if
any, options and warrants to purchase shares of Common Stock, have been at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and when issued
and delivered in accordance herewith will be, validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to personal
liability by reason of being such holders. The Securities are not and will not
be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. All corporate
action required to be taken for the authorization,
-22-
<PAGE>
issuance and sale of the Securities has been duly and validly taken. When
issued, the Underwriter's Warrants will constitute valid and binding obligations
of the Company to issue and sell, upon exercise thereof and payment therefor,
the number and type of securities of the Company called for thereby and the
Underwriter's Warrants, when issued, will be enforceable against the Company in
accordance with their terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification and contribution
provision may be limited under federal and state securities laws, and (c) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The certificates
representing the Securities are in due and proper form.
(v) Except as set forth in the Prospectus, no holders of any
securities of the Company or of any options, warrants or securities of the
Company exercisable for or convertible or exchangeable into securities of the
Company have the right to require the Company to register any such securities of
the Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
(vi) The Shares have been approved for listing on AMEX.
(vii) This Agreement and the Underwriter's Warrants have each
been duly and validly authorized and when executed and delivered by the Company
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification provisions may be limited under federal and state securities
laws and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(viii) The execution, delivery and performance of this
Agreement and the Underwriter's Warrants, the issuance and sale of the
Securities, the consummation of the transactions contemplated hereby and thereby
and the compliance by the Company with the terms and provisions hereof and
thereof, do not and will not, with or without the giving of notice or the lapse
of time, or both, (a) conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company
-23-
<PAGE>
pursuant to the terms of, any material mortgage, deed of trust, note, indenture,
loan, contract, commitment or other material agreement or instrument, to which
the Company is a party or by which the Company or any of its properties or
assets may be bound, (b) result in any violation of any of the provisions of the
Certificate of Incorporation or the By-Laws of the Company, (c) violate any
statute or any judgment, order or decree, rule or regulation applicable to the
Company of any court, domestic or foreign, or of any federal, state or other
regulatory authority or other governmental body having jurisdiction over the
Company, its properties or assets, or (d) have a material effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company.
(ix) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements and notes thereto and other financial data
included therein or omitted therefrom, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of the Act and
the Regulations. The Securities and all other securities issued or issuable by
the Company conform in all respects to the description thereof contained in the
Registration Statement and the Prospectus. All statements in the Prospectus
(other than those set forth under the caption "Underwriting"), insofar as they
refer to statements of law, descriptions of statutes, licenses, rules or
regulations have been reviewed by such counsel and are correct in all material
respects. No statute or regulation or legal or governmental proceeding required
to be described in the Prospectus is not described as required, nor are any
contracts, instruments or other documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement not so described or filed as required.
(x) Such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company, the Underwriter and counsel to the
Underwriter at which the contents of the Registration Statement and Prospectus
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise expressly set forth in its opinion), on the
basis of the foregoing (relying as to the factual matters upon the statements of
officers and other representatives of the Company and state officials) no facts
have come to the attention of such counsel that caused it to believe that the
Registration Statement as amended or supplemented (other than the financial
statements and notes thereto and other financial data included therein, or
omitted therefrom, as to which no opinion is requested or need be rendered) at
the time such
-24-
<PAGE>
Registration Statement became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Act) or the
Prospectus (other than the financial statements and notes thereto and other
financial data included therein, or omitted therefrom, as to which no opinion is
requested or need be rendered) as amended or supplemented, as of its date, the
date of this Agreement and as of the date of its opinion, contained an untrue
statement of material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(xi) The Registration Statement is effective under the Act and
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act or applicable state securities laws.
(xii) There is no claim or action by any person pertaining to,
or proceeding, pending or threatened, which challenges the exclusive rights of
the Company with respect to any Intangibles used in the conduct of its business
(including, but not limited to, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company).
(xiii) Except as described in the Prospectus, no default
exists in the due performance and observance of any term, covenant or condition
of any material license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other material agreement, instrument or other
document evidencing an obligation for borrowed money, or any other material
agreement, instrument or other document to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries may
be bound or to which any of the properties or assets of the Company or any of
its subsidiaries is subject. Neither the Company nor any of its subsidiaries is
in violation of any term or provision of its respective Certificate of
Incorporation or By-Laws, or any material franchise, license, permit, applicable
law, rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or businesses, except as
described in the Prospectus.
(xiv) There are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or financial consulting
arrangements or any other arrangements, agreements, understandings, payments or
-25-
<PAGE>
issuances that may affect the Underwriter's compensation, as determined by the
NASD.
(xv) Except as described in the Prospectus, the Company does
not own any interest in any corporation, partnership, joint venture, trust or
other business entity.
(xvi) Except as set forth in the Prospectus, there is no
action, suit or proceeding before or by any court of governmental agency or
body, domestic or foreign, now pending, or threatened against the Company or any
of its subsidiaries, which would have a material adverse effect on the Company.
(xvii) The Company and each of its subsidiaries owns or
possesses, free and clear of all liens or encumbrances and rights thereto or
therein by third parties, other than as described in the Prospectus, the
requisite licenses or other rights to use Intangibles owned or used by the
Company and each of its subsidiaries (including, but not limited to, any such
licenses or right described in the prospectus as being owned or possessed by the
Company); except as set forth in the Prospectus, there is no action, suite or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending, or threatened against the Company or any of its
subsidiaries, that might result in any material adverse change in the condition
(financial or other), business, prospects or properties of the Company and its
subsidiaries taken as a whole.
The opinion of counsel for the Company and any opinion relied
upon by such counsel shall include a statement to the effect that it may be
relied upon by counsel for the Underwriter in their opinion delivered to the
Underwriter.
4.2.2 Option Closing Date Opinion of Counsel. On the Option Closing
Date, if any, the Underwriter shall have received the favorable opinion of Lev,
Berlin & Dale, P.C., counsel to the Company, and dated the Option Closing Date,
addressed to the Underwriter and in form and substance reasonably satisfactory
to Olshan Grundman Frome & Rosenzweig LLP, counsel to the Underwriter,
confirming, as of the Option Closing Date, the statements made by such counsel
for the Company in their opinion delivered on the Closing Date.
4.2.3 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States, the laws of the State of New York, the Delaware General
Corporation Law and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to Underwriter's
counsel) of other counsel reasonably acceptable to Underwriter's counsel,
familiar with the applicable
-26-
<PAGE>
laws, and (ii) as to matters of fact, to the extent they deem proper, (a) on
certificates or other written statements of responsible officers of the Company
and (b) on certificates or other written statements of officers of departments
of various jurisdiction having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to Underwriter's counsel. Such
opinions of counsel shall include a statement to the effect that they may be
relied upon by counsel for the Underwriter. Such opinion may assume the due
authorization, execution and delivery of all documentation referred to therein
by the parties thereto other than the Company.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and any Option Closing Date, you shall have received a
letter, addressed to the Underwriter and in form and substance satisfactory in
all respects (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) to you and to Olshan Grundman Frome &
Rosenzweig LLP, counsel to the Underwriter, from Arthur Andersen LLP, dated,
respectively, as of the date of this Agreement, as of the Closing Date and as of
any Option Closing Date:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Regulations thereunder;
(iii) Stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available unaudited interim financial statements of the Company
(as defined in SAS No. 71 Interim Financial Interpretation) with an indication
of the date of such unaudited financial statements, a reading of the latest
available minutes of the stockholders and Board of Directors of the Company and
the various committees of the Board of Directors of the Company, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (a) the unaudited
financials of the Company included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Regulations or any material modification should be made to
the unaudited interim financial statements included in the Registration
Statement for them to be in conformity with generally accepted accounting
-27-
<PAGE>
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement, (b)
at a date not later than five (5) days prior to the Effective Date, Closing Date
or any Option Closing Date, as the case may be, there was any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in the most
recent balance sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was any
decrease, setting forth the amount of such decrease, and (c) during the period
from [January 1, 1996] to a specified date not later than five (5) days prior to
the Effective Date, Closing Date or Option Closing Date, if any, as the case may
be, there was any decrease in revenues, net earnings or net earnings per share
of Common Stock, in each case as compared with the corresponding period in the
preceding year, and as compared with the corresponding period in the preceding
quarter other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) Setting forth, at a date not later than five (5) days
prior to the Effective Date, the amount of liability of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 -- "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) Statements as to such other matters incident to the
transactions contemplated hereby as you may reasonably request.
4.4 Certificates.
-28-
<PAGE>
4.4.1 Officers' Certificates. At each of the Closing Date and any
Option Closing Date the Underwriter shall have received a certificate of the
Company signed by each of the President and the Chief Financial Officer of the
Company, dated the Closing Date or any Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or any Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
any Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In addition,
the Underwriter shall have received such other and further certificates of
officers of the Company as the Underwriter may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Underwriter shall have received a certificate
of the Company signed by the Secretary of the Company, dated the Closing Date or
any Option Closing Date, as the case may be, respectively, certifying (i) that
the Certificate of Incorporation and By-Laws, as amended, of the Company are
true and complete, have not been modified and are in full force and effect, (ii)
that the resolutions relating to the offering contemplated by this Agreement are
in full force and effect and have not been modified, (iii) all correspondence
between the Company or its counsel and the Commission, (iv) all correspondence
between the Company or its counsel and AMEX and (v) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and any
Option Closing Date, (i) there shall have been no material adverse change or
development involving a prospective material change in the condition or
prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and the Prospectus which is or might be
materially adverse to the Company, (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness
which default would have a material adverse effect on the Company, (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus, (v)
no action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company or affecting any of its property or business
-29-
<PAGE>
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (vi) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all material statements that are
required to be stated therein in accordance with the Act and the Regulations and
shall conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 Delivery of Underwriter's Warrants. The Company shall have delivered
to the Underwriter executed copies of the Underwriter's Warrants, registered in
such names and in such denominations as the Underwriter shall have requested.
4.7 Opinion of Counsel for the Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Olshan Grundman Frome & Rosenzweig LLP, counsel to the Underwriter, and you
shall have received from such counsel a favorable opinion, dated the Closing
Date and any Option Closing Date, with respect to such of these proceedings as
you may reasonably require. On or prior to the Effective Date, the Closing Date
and any Option Closing Date, as the case may be, counsel for the Underwriter
shall have been furnished with such documents, certificates and opinions as they
may reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in this Section 4.7, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriter.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, its directors,
officers and employees and each person, if any, who controls the Underwriter (a
"controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating,
-30-
<PAGE>
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) to which they or any of them may become subject under the Act,
the Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) the Registration
Statement, any Preliminary Prospectus or the Prospectus (as from time to time
each may be amended or supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriter's
Warrants; or (iii) any application or other document or written communication
(in this Section 5 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, or AMEX or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. The
Company agrees promptly to notify the Underwriter of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or the Prospectus.
5.1.2 Procedure. If any action is brought against the Underwriter or
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, the Underwriter shall promptly notify the
Company in writing of the institution of such action, but the failure to so
notify the Company shall not relieve it from any liability it may have
hereunder, unless such failure results in the forfeiture by the Company of
material substantive rights and defenses and the Company shall assume the
defense of such action, including the employment and fees of counsel (subject to
the reasonable approval of the Underwriter) and payment of actual expenses
incurred in connection therewith. The Underwriter or controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Underwriter or such
controlling person unless (i) the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action, (ii) the Company shall not have employed counsel to have charge of the
defense of such action, or (iii) such indemnified party or parties shall have
-31-
<PAGE>
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys selected by such
Underwriter and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. The Underwriter agrees to indemnify
and hold harmless the Company against any and all loss, liability, claim, damage
and expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment or supplement thereto or in any application in reliance upon, and
in strict conformity with, written information furnished to the Company by the
Underwriter expressly for use in such Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto or in any
such application. In case any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties given to the
Company, and the Company, and each other person so indemnified shall have the
rights and duties given to the Underwriter by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities,
-32-
<PAGE>
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Underwriter, as incurred, in such
proportions that the Underwriter is responsible for that portion represented by
that percentage that the underwriting discount appearing on the cover page of
the Prospectus bears to the initial offering price appearing thereon and the
Company is responsible for the balance; provided, however, that, no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of this
Section 5.3, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which the Underwriter has otherwise been required to pay
in respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section 5, each respective director, officer and employee of
the Underwriter, and each respective person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act shall have the same
rights to contribution as such Underwriter.
5.3.2 Contribution Procedure. Within fifteen (15) days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party (the
contributing party), notify the contributing party of the commencement thereof,
but the omission to so notify the contributing party will not relieve it from
any liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or its representative of the
commencement thereof within the aforesaid (15) fifteen days, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The contribution provisions contained in this Section 5 are intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.
6. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and
-33-
<PAGE>
any Option Closing Date, and such representations, warranties and agreements of
the Underwriter and the Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Shares to the Underwriter.
7. Effective Date of This Agreement and Termination Thereof.
7.1 Effective Date. This Agreement shall become effective upon its
execution, except that you may, at your option, delay its effectiveness until
11:00 A.M., New York time, on the first full business day following the
Effective Date or at the time of the initial public offering of the Shares,
whichever is earlier. The time of the initial public offering, for the purpose
of this Section 7 shall mean the time, after the Registration Statement becomes
effective, of the release by you for publication of the first newspaper
advertisement which is subsequently published relating to the Shares or the
time, after the Registration Statement becomes effective, when the Shares are
first released by you for offering by the Underwriter or dealers by letter or
telegram, whichever shall first occur. You may prevent this Agreement from
becoming effective without liability to any other party, except as noted below,
by giving the notice indicated below in this Section 7 before the time this
Agreement becomes effective. You agree to give the undersigned notice of the
commencement of the offering described herein.
7.2 Termination. You shall have the right to terminate this Agreement at
any time prior to the Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; (ii) if trading on the New York Stock Exchange or the American Stock
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required in the over-the-counter
market by the NASD or by order of the Commission or any other government
authority having jurisdiction, (iii) if the United States shall have become
involved in a war or material hostilities, (iv) if a banking moratorium has been
declared by a New York State or federal authority, (v) if a moratorium on
foreign exchange trading has been declared which materially adversely impacts
the United States securities market, (vi) if the Company shall have sustained a
material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Shares, (vii) if Peter Dixon, Jack
-34-
<PAGE>
West or Scott Levy shall no longer serve the Company in their present
capacities, (viii) if the Company has breached any of its representations,
warranties or obligations hereunder, or failed to expeditiously proceed with the
offering or to cooperate with you in requesting effectiveness of the
Registration Statement at such time as you may deem appropriate, or (ix) if the
Underwriter shall have become aware after the date hereof of such a material
adverse change in the condition (financial or otherwise), business or prospects
of the Company, or such material adverse change in general market conditions as
in your judgment would make it impracticable to proceed with the offering, sale
and/or delivery of the Shares or to enforce contracts made by the Underwriter
for the sale of the Shares.
7.3 Notice. If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 7, the Company shall
be notified on the same day as such election is made by you by telephone or
telecopy, confirmed by letter.
7.4 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.9 hereof.
7.5 Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
8. Miscellaneous.
8.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed:
If to the Underwriter:
Laidlaw Equities, Inc.
100 Park Avenue
New York, New York 10017
Attention: Andrew J. Cahill, Managing Director
Copy to: Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
-35-
<PAGE>
Attention: Stephen Irwin, Esq.
If to the Company:
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Attention: Jack West, President
Copy to: Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Duane L. Berlin, Esq.
8.2 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 Agreement.
8.3 Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
8.4 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
8.5 Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriter, the Company, and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
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 Agreement or any provisions herein
contained.
8.6 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws rules of such State. Any action, proceeding or claim
against any of the parties hereto arising out of, relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or the federal court for the Southern District of New York, and the parties
hereto irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The parties hereto hereby waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Except as
otherwise provided in this Agreement, the prevailing party(ies) in any such
action shall be entitled to recover from the other party(ies) all of its
-36-
<PAGE>
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
8.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
8.8 Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement 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, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
If the foregoing correctly sets forth the understanding among the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
PURO WATER GROUP, INC.
By:________________________________
Name: Jack West
Title: President
Accepted as of the date first above written.
New York, New York
LAIDLAW EQUITIES, INC.
By:_________________________________
Name: Andrew J. Cahill
Title: Managing Director
-37-
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Securities.......................................... 1
1.1 Firm Shares.................................................... 1
1.1.1 Purchase of Firm Shares........................................ 1
1.1.2 Delivery and Payment........................................... 1
1.2 Overallotment Option........................................... 2
1.2.1 Grant of Option................................................ 2
1.2.2 Exercise of Option............................................. 2
1.2.3 Delivery and Payment........................................... 2
1.3 Underwriter's Warrants......................................... 3
1.3.1 Purchase and Sale.............................................. 3
1.3.2 Delivery and Payment........................................... 3
2. Representations and Warranties of the Company............................ 3
2.1 Filings under Securities Laws.................................. 3
2.1.1 Pursuant to the Act............................................ 3
2.1.2 Pursuant to the Exchange Act................................... 4
2.2 No Stop or Other Orders........................................ 4
2.3 Disclosures in Registration Statement.......................... 4
2.3.1 Representation as to Contents.................................. 4
2.3.2 Disclosure Regarding Contracts................................. 4
2.3.3 Prior Securities Transactions.................................. 5
2.4 Changes After Dates in Registration Statement.................. 5
2.4.1 No Material Adverse Change..................................... 5
2.4.2 Recent Securities Transactions, Etc............................ 5
2.5 Independent Accountants........................................ 5
2.6 Financial Statements........................................... 6
2.7 Capitalization................................................. 6
2.8 Representations Regarding Securities........................... 6
2.8.1 Outstanding Securities......................................... 6
2.8.2 Securities Sold Hereunder...................................... 7
2.9 No Registration Rights......................................... 7
2.10 Representations Regarding This Agreement and the
Underwriter's Warrant Agreement................................ 7
2.11 No Improper Payments........................................... 8
2.12 No Defaults; Violations........................................ 8
2.13 Corporate Power; Licenses; Consents............................ 9
2.13.1 Conduct of Business............................................ 9
2.13.2 Required Consents.............................................. 9
2.14 Title to Property; Insurance................................... 9
2.15 Litigation; Governmental Proceedings........................... 9
2.16 Organization; Good Standing.................................... 9
2.17 Taxes.......................................................... 10
2.18 Transactions Affecting Disclosure to NASD...................... 10
2.18.1 Finders' Fees.................................................. 10
2.18.2 Payments Within Twelve (12) Months............................. 10
2.18.3 Use of Proceeds................................................ 11
2.18.4 Insiders' NASD Affiliation..................................... 11
2.19 Internal Accounting Controls................................... 11
2.20 AMEX Listing................................................... 11
2.21 Intangibles.................................................... 11
2.22 Employee Matters............................................... 11
(i)
<PAGE>
Page
----
2.22.1 Relations With Employees....................................... 11
2.22.2 Employee Benefit Plans......................................... 12
2.23 Investment Company Representations............................. 12
2.24 Officers' Certificate.......................................... 12
2.25 Lock-Up Agreements With Insiders............................... 13
2.26 No Stabilization or Manipulation............................... 13
2.27 Subsidiaries................................................... 13
3. Covenants of the Company................................................. 13
3.1 Amendments to Registration Statement........................... 13
3.2 Federal Securities Laws........................................ 13
3.2.1 Compliance..................................................... 14
3.2.2 Filing of Final Prospectus..................................... 14
3.2.3 Exchange Act Registration...................................... 14
3.3 Blue Sky Filings............................................... 14
3.4 Delivery of Filings to Underwriter............................. 14
3.5 Effectiveness and Events Requiring Notice to the
Underwriter.................................................... 15
3.6 Unaudited Financials........................................... 15
3.7 Reports to the Underwriter..................................... 15
3.7.1 Periodic Reports, Etc.......................................... 15
3.7.2 Transfer Sheets................................................ 16
3.8 Delivery of Underwriter's Warrants............................. 16
3.9 Payment of Expenses............................................ 16
3.9.1 General Expenses............................................... 16
3.9.2 Underwriter's Expenses......................................... 17
3.10 Application of Net Proceeds.................................... 17
3.11 Delivery of Earnings Statements to Security Holders............ 18
3.12 Reservation of Shares.......................................... 18
3.13 Board of Directors............................................. 18
3.14 Press Releases................................................. 18
3.15 Secondary Market Trading and Standard & Poor's................. 18
3.16 AMEX Maintenance............................................... 19
3.17 Key Person Life Insurance...................................... 19
3.18 Disqualification on Form S-1 (or other appropriate
form).......................................................... 19
3.19 Accountants.................................................... 19
3.20 Sale of Securities............................................. 19
3.21 Exercise Price of Options/Warrants............................. 19
3.22 Right of First Refusal......................................... 19
4. Conditions of the Underwriter's Obligations.............................. 20
4.1 Regulatory Matters............................................. 21
4.1.1 Effectiveness of Registration Statement........................ 21
4.1.2 NASD Clearance................................................. 21
4.1.3 No Blue Sky Stop Orders........................................ 21
4.2 Company Counsel Matters........................................ 21
4.2.1 Closing Date Opinion of Counsel................................ 21
4.2.2 Option Closing Date Opinion of Counsel......................... 26
4.2.3 Reliance....................................................... 26
4.3 Cold Comfort Letter............................................ 27
4.4 Certificates................................................... 28
4.4.1 Officers' Certificates......................................... 28
(ii)
<PAGE>
Page
----
4.4.2 Secretary's Certificate........................................ 29
4.5 No Material Changes............................................ 29
4.6 Delivery of Underwriter's Warrants............................. 30
4.7 Opinion of Counsel for the Underwriter......................... 30
5. Indemnification.......................................................... 30
5.1 Indemnification of the Underwriter............................. 30
5.1.1 General........................................................ 30
5.1.2 Procedure...................................................... 31
5.2 Indemnification of the Company................................. 32
5.3 Contribution................................................... 32
5.3.1 Contribution Rights............................................ 32
5.3.2 Contribution Procedure......................................... 33
6. Representations and Agreements to Survive Delivery....................... 33
7. Effective Date of This Agreement and Termination Thereof................. 34
7.1 Effective Date................................................. 34
7.2 Termination.................................................... 34
7.3 Notice......................................................... 35
7.4 Expenses....................................................... 35
7.5 Indemnification................................................ 35
8. Miscellaneous............................................................ 35
8.1 Notices........................................................ 35
8.2 Headings....................................................... 36
8.3 Amendment...................................................... 36
8.4 Entire Agreement............................................... 36
8.5 Binding Effect................................................. 36
8.6 Governing Law.................................................. 36
8.7 Execution in Counterparts...................................... 37
8.8 Waiver, Etc.................................................... 37
(iii)
<PAGE>
INDEX OF DEFINITIONS
Term Section
- ---- -------
Act...................................................................... 2.1.1
AMEX..................................................................... 2.2.0
Application.............................................................. 5.1.1
Closing Date............................................................. 1.1.2
Code..................................................................... 2.22.2
Commission............................................................... 2.1.1
Common Stock............................................................. 1.1.1
Company.................................................. Introductory Paragraph
Controlling Person....................................................... 5.1.1
Effective Date........................................................... 1.1.2
ERISA.................................................................... 2.22.2
ERISA Plan............................................................... 2.22.2
Exchange Act............................................................. 2.1.2
Filing Date.............................................................. 2.18.2
Firm Shares.............................................................. 1.1.1
Insiders................................................................. 2.25
Intangibles.............................................................. 2.21
NASD..................................................................... 2.18.1
Option Closing Date...................................................... 1.2.2
Option Shares............................................................ 1.2.1
Overallotment Option..................................................... 1.2.1
Preliminary Prospectus................................................... 2.1.1
Principal Shareholders................................................... 3.22
Prospectus............................................................... 2.1.1
Registration Statement................................................... 2.1.1
Regulations.............................................................. 2.1.1
Returns.................................................................. 2.17
Right of First Refusal................................................... 3.22
Secondary Offering....................................................... 3.22
Subsequent Company Offering.............................................. 3.22
Underwriter.............................................. Introductory Paragraph
Underwriter's Securities................................................. 1.3.1
Underwriter's Warrant Agreement.......................................... 2.10
Underwriter's Warrants................................................... 1.3.1
Securities............................................................... 1.3.1
Shares................................................................... 1.2.1
Subsidiaries............................................................. 2.27
Taxes.................................................................... 2.17
Unaudited Financials..................................................... 3.6
You...................................................... Introductory Paragraph
(iv)
<PAGE>
PAGE 1
EX-3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
----------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF INCORPORATION OF "PURO CORPORATION OF
AMERICA" FILED IN THIS OFFICE ON THE SEVENTH DAY OF JANUARY, A.D.
1994, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
/s/ WILLIAM T. QUILLEN
--------------------------------------
WILLIAM T. QUILLEN, SECRETARY OF STATE
AUTHENTICATION: *4234934
724007028 DATE: 01/10/1994
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PURO CORPORATION OF AMERICA
1. The name of the corporation is:
PURO CORPORATION OF AMERICA
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. 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 Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is Two Million (2,000,000) and the par value of each of
such shares is One Cent ($.01) amounting in the aggregate to Twenty Thousand
Dollars ($20,000.00).
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be by written
ballot.
6. The name and mailing address of the incorporator is:
M. A. Brzoska
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
7. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the 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 the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 7th day of January, 1994.
/s/ M. A. BRZOSKA
--------------------------
<PAGE>
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "PURO CORPORATION OF AMERICA", CHANGING ITS NAME FROM "PURO
CORPORATION OF AMERICA" TO "PURO WATER GROUP, INC." FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF JANUARY, A.D. 1996, AT 12:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2367445 8100 AUTHENTICATION: 7792780
960014352 DATE: 01-17-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
****
PURO CORPORATION OF AMERICA, a corporation organized and existing under
and by virture of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members filed with the minutes of the Board, adopted
a resolution proposing and declaring advisable the following amendment to
the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Puro Corporation of
America be amended by changing Article 1 thereof so that, as amended,
said Article shall be and read as follows:
"1. The name of the corporation is:
PURO WATER GROUP, INC."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
<PAGE>
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said Puro Corporation of America has caused this
certificate to be signed by Jack C. West, its Secretary, this 17th day of
November, 1995.
PURO CORPORATION OF AMERICA
By: /s/ JACK C. WEST
----------------------------
Its Hereunto Duly Authorized
Secretary
2
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "PURO WATER GROUP, INC.", FILED IN THIS OFFICE ON THE
TWENTY-NINTH DAY OF APRIL, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2367445 8100 AUTHENTICATION: 7925898
960122521 DATE: 04-29-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
0F
PURO WATER GROUP, INC.
PURO WATER GROUP, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members filed with the minutes of the Board, adopted
a resolution proposing and declaring advisable the following amendment to
the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Puro Water Group,
Inc. be amended by changing the Fourth Article thereof so that, as
amended, said Article shall be and read as follows:
"4. The total number of shares of stock which the corporation shall
have authority to issue is Ten Million (10,000,000) and the par value
of each of such shares is One Cent ($.01) amounting in the aggregate to
One Hundred Thousand Dollars ($100,000.00).
<PAGE>
SECOND: That in lieu of a meeting and vote of stockholders, the stockholders
have given written consent to said amendment in accordance with Section 228
of the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware and written notice has been given in accordance
with Section 228 of the General Corporate Law of the State of Delaware.
IN WITNESS WHEREOF, said Puro Water Group, Inc. has caused this
certificate to be signed by Jack C. West, a Co-President, as of the 17th day
of April, 1996.
PURO WATER GROUP, INC.
By: /s/ JACK C. WEST
------------------------
Jack C. West
Co-President
Hereunto Duly Authorized
2
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "PURO WATER GROUP, INC.", FILED IN THIS OFFICE ON THE
SIXTH DAY OF MAY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2367445 8100 AUTHENTICATION: 7934230
960129906 DATE: 05-06-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
0F
PURO WATER GROUP, INC.
PURO WATER GROUP, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said coporation, by the unanimous
written consent of its members filed with the minutes of the Board and a
majority of the shareholders adopted a resolution proposing and declaring
advisable an amendment to the Certificate of Incorporation of said
corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Board of Directors and a majority of the shareholders
agree to and approve a stock split such that immediately following same,
the holders of issued and outstanding common stock of the Corporation as
of the date described in the following paragraph shall be entitled to
three and two tenths (3.2) shares of stock for each share held by them
immediately prior to such date (the "Stock Split"); and be it further
RESOLVED, that the Stock Split shall be effective immediately upon the
receipt by the Corporation of written confirmation of the filing with the
Secretary of the State of Delaware of an Amendment to the Certificate of
Incorporation of the Corporation increasing the authorized capital stock
of the Corporation to Ten Million (10,000,000) shares; and be it further
<PAGE>
RESOLVED, that the Certificate of Incorporation of this Corporation be
amended by adding the following Article:
"8. Pursuant to resolution adopted unanimously by the Board of Directors
and by a majority of the stockholders of said corporation, all shares of
the common voting stock of the corporation issued and outstanding as of
April 29, 1996 shall be split so that the holders thereof shall receive
three and two tenths (3.2) shares of stock in exchange for and in
substitution of each share held by them on such date."
SECOND: That in lieu of a metting and vote of stockholders, the
stockholders have given majority written consent to said amendment in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware and written notice has been given in accordance
with Section 228 of the General Corporate Law of the State of Delaware.
IN WITNESS WHEREOF, said Puro Water Group, Inc. has caused this
certificate to be signed by Jack C. West, a Co-President, as of the 29th day
of April, 1996.
PURO WATER GROUP, INC.
BY: /s/ JACK C. WEST
-----------------------
Jack C. West
Co-President
Hereunto Duly Authorized
2
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "PURO WATER GROUP, INC.", FILED IN THIS OFFICE ON THE
TENTH DAY OF MAY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2367445 8100 AUTHENTICATION: 7942606
960137143 DATE: 05-13-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
0F
PURO WATER GROUP, INC.
PURO WATER GROUP, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members filed with the minutes of the Board and a
majority of the shareholders adopted a resolution proposing and declaring
advisable an amendment to the Certificate of Incorporation of said
corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that upon the filing of the Amendment to the Certificate of
Incorporation described below, the par value of the authorized common
voting stock of the Corporation shall be changed to $.003125 per share;
and be it further
RESOLVED, that upon the filing of such amendment, each of the shares of
common voting stock of the Corporation, par value $.01 per share, issued
and outstanding at the close of business on April 29, 1996 shall
forthwith be changed and reclassified into 3.2 common voting shares
having a par value of $.003125 per share; and be it further
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by amending and restating Article 4 as follows:
"4. The total number of shares of stock which the Corporation shall
have authority to issue is Ten Million (10,000,000) and the par value of
such shares is $.003125 per share amounting in the aggregate to Thirty
Thousand Dollars ($30,000)."; and be it further
<PAGE>
RESOLVED, that the Certificate of Incorporation of the Corporation be
further amended by deleting all references therein to "$.01" par value
common voting shares and inserting "$.003125" par value common voting
shares in lieu thereof; and be it further
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by amending and restating Article 8 as follows:
"8. Each share of the common voting stock of the corporation, par value
$.01 issued and outstanding as of April 29, 1996 is hereby changed into
three and two tenths (3.2) shares of common voting stock with a par
value of $.003125 per share. Holders thereof shall receive three and
two tenths (3.2) shares of stock in exchange for and in substitution of
each share held by them on such date."; and be it further
RESOLVED, that the stated capital of the Corporation shall remain
unchanged by virtue of said amendment.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given majority written consent to said amendment in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware and written notice has been given in accordance
with Section 228 of the General Corporate Law of the State of Delaware.
IN WITNESS WHEREOF, said Puro Water Group, Inc. has caused this
certificate to be signed by Jack C. West, a Co-President, as of the 30th day
of April, 1996.
PURO WATER GROUP, INC.
By: /s/ JACK C. WEST
----------------
Jack C. West
Co-President
Hereunto Duly Authorized
2
<PAGE>
EX-3.2
AMENDED AND RESTATED
BY-LAWS
of
PURO WATER GROUP, INC.
a Delaware Corporation
(Amended as of November 1, 1996)
ARTICLE I.
MEETINGS OF SHAREHOLDERS.
Sec. 1. ANNUAL MEETING. The annual meeting of shareholders shall be
held on the 15th day of Feb. of each year. If the day so designated
falls upon a Sunday or a legal holiday, then the meeting shall be held
upon the first business day thereafter.
Sec. 2. QUORUM. The presence, in person or by proxy, of the holders of
two-thirds (2/3rds) of the outstanding stock entitled to vote on the subject
matter shall be necessary to constitute a quorum for the transaction of
business, but a lesser number may adjourn to some future time not less than
seven (7) nor more than thirty (30) days later, and the Secretary shall
thereupon give at least seven (7) days notice by mail to each shareholder
entitled to vote who was absent from such meeting.
<PAGE>
Sec. 3. SPECIAL MEETINGS. Special meetings of shareholders may be called
at any time by the President. The President shall call a special meeting of
shareholders whenever so requested in writing by a majority of Directors or
by one or more shareholders representing not less than fifty percent of the
total number of shares of the issued and outstanding capital stock entitled
to vote at said meeting. No business other than that specified in the call
for the meeting shall be transacted at any such special meeting of the
shareholders.
Sec. 4. VOTING. At all meetings of the shareholders all questions, the
manner of deciding which is not specifically regulated by statute, shall be
determined by a majority vote of the shareholders present in person or by
proxy. Each shareholder present, in person or by proxy, shall be entitled to
cast one vote for each share of stock owned or represented by him.
Sec. 5. NOTICE. Written notice of the time and place and general purposes
of all annual and special meetings shall be mailed or otherwise given as
provided by law by the Secretary to each shareholder not less than seven
days, or more than fifty days prior to the date of the meeting. Annual and
special meetings of shareholders may be held at such time and place within or
without this State as the Directors shall determine.
Sec. 6. TRANSACTION OF BUSINESS WITHOUT MEETING. Any action which may be
authorized at a regularly constituted meeting of the Shareholders may be
authorized without such a meeting provided that, either prior to, or
subsequent to, the time such action is taken, written consent thereto is
signed by all of the persons who would be entitled to vote upon such action
at such a meeting, or by their duly authorized attorneys, and such consent is
filed with the Secretary of the Corporation as part of the corporate records.
<PAGE>
ARTICLE II.
DIRECTORS.
Sec. 1. NUMBER. The affairs and business of this Corporation shall be
managed by a Board of Directors elected by the Shareholders at their annual
meeting. The number of directorships at any time shall be fixed by
resolution, first, of the incorporators, and thereafter of the shareholders.
The corporation shall have at least three directorships except that, where
all issued and outstanding shares are owned beneficially and of record by
less than three shareholders, the number may be less than three but not less
than the number of shareholders.
Sec. 2. TERM OF OFFICE. The term of office of each of the Directors shall
be one year, and thereafter until his successor has been elected.
Sec. 3. DUTIES OF DIRECTORS. The Board of Directors shall have the
control and general management of the affairs, property and business of the
corporation.
Sec. 4. DIRECTORS' MEETINGS. Regular meetings of the Board of Directors
shall be held immediately following the annual meeting of the shareholders,
and at such other times as the Board of Directors may determine. Special
meetings of the Board of Directors may be called by the President at any
time, and shall be called by the President or the Secretary upon the written
request of a majority of the Directors. Any and all meetings may be held
within or without this State as the Directors shall determine.
<PAGE>
Sec. 5. QUORUM. At any meeting of the Board of Directors, a majority of
the Board shall constitute a quorum for the transaction of business; but in
the event of a quorum not being present, a lesser number may adjourn the
meeting to some future time, not more than thirty (30) days later. The act of
a majority of the Directors present at a meeting at which there is a quorum
shall be the act of the Board of Directors.
Sec. 6. VOTING. At all meetings of the Board of Directors, each director
is to have one vote, irrespective of the number of shares of stock that he
may hold.
Sec. 7. VACANCIES. Vacancies in the Board occurring between annual
meetings shall be filled for the unexpired portion of the term by the
concurring vote of a majority of the remaining Directors.
Sec. 8. REMOVAL OF DIRECTORS. Any one or more of the Directors may be
removed, either with or without cause, at any time by a vote of the
shareholders holding a majority of the stock, at any special meeting called
for the purpose.
Sec. 9. NOTICE. Written notice of all regular and special meetings shall
be mailed to each director by the Secretary not less than seven (7) days
prior to the date fixed for such meeting.
Sec. 10. TRANSACTION OF BUSINESS WITHOUT MEETING. Any corporate action
which can be authorized at a duly constituted regular or special meeting of
the Board of Directors or a Committee thereof may be authorized without such
a meeting, provided that all of the Directors or all members of the
Committee, as the case may be, consent in writing to such action before or
after the time such action is taken and the number of such Directors or
members constitutes a quorum for such action. The Secretary of the
Corporation shall file such consents with the minutes of the meetings of the
Board of Directors.
<PAGE>
Sec. 11. EXECUTIVE COMMITTEE; OTHER COMMITTEES. The Board of Directors
may by resolution adopted by the affirmative vote of directors holding a
majority of directorships, at a meeting at which a quorum is present,
designate two or more Directors as an executive committee or other
committees which shall have and may exercise all such authority of the Board
as shall be provided in such resolution.
<PAGE>
ARTICLE III.
OFFICERS.
Sec. 1. NUMBER. The officers of this corporation shall be a President,
Secretary and a Treasurer, and such other officers, such as Vice-Presidents,
Assistant Secretaries and Assistant Treasurers as are designated by the
Board of Directors.
Sec. 2. ELECTION. The Board of Directors, at its annual meeting held
immediately after the annual meeting of shareholders, shall elect from among
their number a President, and those other officers enumerated above, all of
whom shall serve for the term of one year and until their successors are duly
elected and qualified. Any two offices may be held by the same person,
except the offices of President and Vice-President or President and
Secretary.
Sec. 3. DUTIES OF OFFICERS. The duties and powers of the officers of the
corporation shall be as follows:
PRESIDENT.
The President shall preside at all meetings of the Directors and
Stockholders. He shall be the Chief Executive Officer of the Corporation and
shall have general charge and direction of the business of the Corporation
subject to the control of the Board of Directors.
<PAGE>
SECRETARY.
The Secretary shall keep the minutes of the meetings of the Board of
Directors and of the shareholders in appropriate books.
He shall give and serve all notices of the Corporation.
He shall be custodian of the records and of the seal, and affix the
latter when authorized and required.
He shall keep the stock and transfer books in the manner prescribed by
law.
He shall sign all certificates of stock.
He shall present to the Board of Directors at their stated meetings all
communications addressed to him officially by the President or any officer or
shareholder of the corporation.
He shall attend to all correspondence and perform all the duties incident
to the office of Secretary.
TREASURER.
The Treasurer shall have the care and custody of and be responsible for
the funds and securities of the corporation, and deposit all such funds in
the name of the corporation in such bank or banks, trust company or trust
companies or safe deposit vaults as the Board of Directors may designate.
In the absence of a resolution of the Directors to the contrary, he shall
sign, make and endorse in the name of the corporation, all checks, drafts,
notes and other evidences of debt.
He shall exhibit at all reasonable times the Balance Sheets and Profit
and Loss Statements of the corporation to any director or stockholder of the
corporation upon application at the office of the corporation during business
hours.
<PAGE>
He shall render a statement of the condition of the finances of the
corporation at each regular meeting of the Board of Directors, and at such
other times as shall be required of him.
He shall present a full financial report at the annual meeting of the
shareholders.
He shall keep, at the office of the corporation, correct books of
account of all its business and transactions and such other books of account
as the Board of Directors may require.
He shall perform all duties incident to the office of Treasurer.
Sec. 4. VACANCIES, HOW FILLED. All vacancies in any office shall be
filled by the Board of Directors without undue delay, at its regular
meeting, or at a meeting specially called for that purpose.
Sec. 5. COMPENSATION OF OFFICERS. The officers shall receive such salary
or compensation as may be determined by the Board of Directors.
Sec. 6. REMOVAL OF OFFICERS. The Board of Directors may remove any
officer, by a majority vote, at any time, with or without cause.
<PAGE>
ARTICLE IV.
CERTIFICATES OF STOCK.
Sec. 1. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock
shall be numbered and registered in the order in which they are issued. They
shall be signed by the President and by the Secretary and sealed with the
seal of the corporation. The certificates of stock shall agree with the
requirements as set forth in the Delaware Statutes for share certificates
and the By-Laws of the Corporation.
Sec. 2. TRANSFER OF STOCK. The stock of the corporation shall be
assignable and transferable on the books of the corporation only by the
person in whose name it appears on said books or his legal representatives. In
case of transfer by attorney, the power of attorney, duly executed and
acknowledged, shall be deposited with the Secretary. In all cases of
transfer, the former certificate must be surrendered up and cancelled before
a new certificate can be issued. No transfer shall be made upon the books of
the corporation within ten days next preceding the annual meeting of the
shareholders.
ARTICLE V.
DIVIDENDS.
Sec. 1. WHEN DECLARED. The Board of Directors may by vote declare
dividends from the unsecured and unrestricted earned surplus of the
corporation whenever, in their opinion, the condition of the corporation's
affairs will render it expedient for such dividends to be declared, pursuant
to law. No dividend shall be paid when the corporation is insolvent or when
the payment of the dividend would render the corporation insolvent.
<PAGE>
ARTICLE VI.
AMENDMENTS.
Sec. 1. HOW AMENDED. These By-Laws may be amended by an affirmative vote
of the shareholders representing a majority of the capital stock entitled to
vote, at an annual meeting or at a special meeting called for that purpose,
provided that written notice shall have been sent to each shareholder
entitled to receive such notice, which notice shall state the amendments
which are proposed to be made in such By-Laws. Only such changes as have been
specified in the notice shall be made. If, however, all the shareholders
shall be present at any regular or special meeting, these By-Laws may be
amended by a unanimous vote, without any previous notice; and furthermore,
these By-Laws may be amended by unanimous consent action of the shareholders
as provided in these By-Laws.
<PAGE>
EX-4.2
Underwriter's Common Stock Purchase Warrant
COMMON STOCK PURCHASE WARRANT
PURO WATER GROUP, INC.
Dated: _____ __, 1996
<PAGE>
THE REGISTERED HOLDER OF THIS WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT
WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN PROVIDED.
NOT EXERCISABLE PRIOR TO _____, 1997. VOID AFTER 5:00 P.M. EASTERN TIME, ______,
2001.
WU-1
COMMON STOCK PURCHASE WARRANT
For the Purchase of 135,000 Shares of Common Stock
of
PURO WATER GROUP, INC.
(A Delaware Corporation)
1. Warrant.
THIS CERTIFIES THAT, in consideration of $135.00 duly paid by or on
behalf of Laidlaw Equities, Inc. (or registered assigns succeeding to ownership
hereof pursuant to the provisions of Section 4.1 hereof) (the "Holder"), as
registered owner of this Warrant, to Puro Water Group, Inc. (the "Company"), the
Holder is entitled, at any time and from time to time on or after ______, 1997,
and at or before 5:00 p.m., Eastern Time, ______, 2001 (the "Expiration Date"),
but not thereafter, to subscribe for, purchase and receive, in whole or in part,
up to one hundred and thirty-five thousand (135,000) shares of Common Stock,
[$0.003125] par value (the "Common Stock"), of the Company. If the Expiration
Date is a day on which banking institutions are authorized by law to close, then
this Warrant may be exercised on the next succeeding day that is not such a day
in accordance with the terms hereof. During the period ending on the Expiration
Date, the Company agrees not to take any action that would terminate this
Warrant. This Warrant is initially exercisable as to each share of Common Stock
covered thereby at 120% of the offering price per share of Common Stock (the
"Exercise Price") set forth on the cover page of the prospectus pursuant to
which 1,350,000 shares of Common Stock of the Company are being offered to the
public (the "Prospectus"). 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 Warrant, together with warrants of like
tenor, was originally issued pursuant to an Underwriting Agreement dated ______,
1996 between the Company and Laidlaw Equities, Inc. (the "Underwriter").
<PAGE>
2. Exercise.
In order to exercise this Warrant, the exercise form attached hereto must
be duly executed, completed and delivered to the Company, together with this
Warrant and payment of the Exercise Price for the shares of the Common Stock
being purchased. If the rights represented hereby shall not be exercised at or
before 5:00 p.m., Eastern Time, on the Expiration Date, this Warrant shall
become and be void and without further force or effect and all rights
represented hereby shall cease and expire.
3. Cashless Exercise.
3.1 Determination of Amount. In lieu of the payment of the Exercise Price
in the manner required by Section 2, the Holder shall have the right (but not
the obligation) to pay the Exercise Price for the Shares of Common Stock being
purchased with this Warrant upon exercise by the surrender to the Company of any
exercisable but unexercised portion of this Warrant having a "Value" (as defined
below), at the close of trading on the last trading day immediately preceding
the exercise of this Warrant, equal to the Exercise Price multiplied by the
number of Shares of Common Stock being purchased upon exercise ("Cashless
Exercise Right"). The sum of (a) the number of Shares of Common Stock being
purchased upon exercise of the non-surrendered portion of this Warrant pursuant
to this Cashless Exercise Right and (b) the number of Shares of Common Stock
underlying the portion of this Warrant being surrendered, shall not in any event
be greater than the total number of Shares of Common Stock purchasable upon the
complete exercise of this Warrant if the Exercise Price were paid in cash. Upon
exercise of the conversion right, the Company shall deliver to the Holder
(without payment by the Holder of any of the Exercise Price) that number of
shares of Common Stock equal to the quotient obtained by dividing (x) the
"Value" (as defined below) of the portion of the Warrant being converted at the
time the conversion right is exercised by (y) the Exercise Price. The "Value" of
the portion of the Warrant being surrendered shall equal the remainder derived
from subtracting (a) the Exercise Price multiplied by the number of Shares of
Common Stock underlying the portion of this Warrant being surrendered from (b)
the Market Price of the Shares of Common Stock multiplied by the number of
Shares of Common Stock underlying the portion of this Warrant being surrendered.
As used herein, the term "Market Price" at any date shall be deemed to be the
last reported sale price of the Shares of Common Stock on such date, or, in case
no such reported sale takes place on such day, the average of the last reported
sale prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Shares of
Common Stock are listed or admitted to trading, or, if the Shares of Common
Stock are not listed or admitted to trading on any national securities exchange
or if any such exchange on which the shares of Common Stock are listed is not
its principal trading market, the
-2-
<PAGE>
last reported sale price as furnished by the NASD through the Nasdaq National
Market or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the
Shares of Common Stock are not listed or admitted to trading on the Nasdaq
National Market or SmallCap Market or OTC Bulletin Board or similar
organization, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
3.2 Mechanics of Cashless Exercise. The Cashless Exercise Right may be
exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date by delivering the Warrant with a duly
executed exercise form attached hereto with the cashless exercise section
completed to the Company, exercising the Cashless Exercise Right and specifying
the total number of Shares of Common Stock the Holder will purchase pursuant to
such Cashless Exercise Right.
4. Transfer
4.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it shall not sell, transfer or assign or
hypothecate this Warrant to anyone other than (i) an officer or partner or such
Holder, (ii) an officer of the Underwriter or an officer or partner of any
Selected Dealer in connection with the Company's public offering with respect to
which this Warrant has been issued, or (iii) any Selected Dealer or member of
the underwriting syndicate prior to the Commencement Date. In order to make any
permitted assignment, the Holder must deliver to the Company the assignment form
attached hereto duly executed and completed, together with this Warrant and
payment of all transfer taxes, if any, payable in connection therewith. The
Company shall immediately transfer the number of Warrants 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.
4.2 Restrictions Imposed by the Act. The securities purchased upon
exercise of this Warrant shall not be transferred unless and until (i) the
Company has received the opinion of counsel for the Holder (reasonably
acceptable to the Company and its counsel) that the securities may be sold
pursuant to an exemption from registration under the Securities Act of 1933, as
amended (the "Act"), the availability of which is established to the reasonable
satisfaction of the Company, or (ii) a registration statement relating to such
securities has been filed by the Company and declared effective by the
Securities and Exchange Commission (the "Commission").
-3-
<PAGE>
Each certificate for securities purchased upon exercise of this Warrant
shall bear a legend 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."
5. New Warrants to be Issued.
5.1 Partial Exercise or Transfer. Subject to the restrictions in Section 4
hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon surrender of this
Warrant for cancellation, together with the duly executed exercise or assignment
form and funds sufficient to pay any required transfer tax, the Company shall
cause to be delivered to the Holder without charge a new warrant or new warrants
of like tenor with this 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.
5.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of an
indemnification in favor of the Company, reasonably satisfactory to it, the
Company shall execute and deliver a new warrant of like tenor and date. Any such
new warrants executed and delivered as a result of such loss, theft, mutilation
or destruction shall constitute an additional contractual obligation on the part
of the Company.
6. Registration Rights.
6.1 Demand Registration.
6.1.1 Grant of Right. The Company, upon written demand (the "Initial
Demand Notice") of the Holder(s) of at least fifty-one percent (51%) of the
Warrants initially issued to the Underwriter and/or the underlying securities
(the "Majority Holders"), agrees to register on one occasion, all of the shares
of Common Stock underlying such Warrants (the "Registrable Securities"). On such
occasion, the Company shall file a Registration Statement covering the
Registrable Securities within thirty (30) days after receipt of the Initial
Demand Notice and shall use its best efforts to have such registration statement
declared effective promptly thereafter. The demand for registration may be made
at any time during a period of four years
-4-
<PAGE>
beginning one year after the date of the Prospectus (the "Effective Date"). The
Company covenants and agrees to give written notice of its receipt of any
Initial Demand Notice by any Holder(s) to all other registered Holders of the
Warrants and/or the Registrable Securities within five (5) days after the date
of the receipt of any such Initial Demand Notice.
6.1.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holder(s) shall pay any and
all underwriting commissions and the expenses of any legal counsel selected by
the Holder(s) to represent them in connection with the sale of the Registrable
Securities and any applicable transfer taxes. The Company agrees to use its
prompt best efforts to cause the filing required herein to become effective and
to qualify or register the Registrable Securities in such states as are
reasonably requested by the Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a state in
which such registration would cause (i) the Company to be obligated to qualify
to do business as a foreign corporation in such State or to pay income,
franchise or other similar taxes solely as a result of such registration or to
be subject to service of general process, or (ii) the principal stockholders of
the Company to be obligated to escrow their shares of capital stock of the
Company. The Company shall cause any registration statement filed pursuant to
the demand rights granted under Section 6.1.1 to remain effective for a period
of at least twelve (12) consecutive months after the effective date of such
registration statement. The terms of this Section 6.1 may not be modified,
amended or deleted without the prior consent of the Underwriter.
6.1.3 Repurchase of Warrants and Registrable Shares. Anything in
this Section 6.1 to the contrary notwithstanding, the Company shall have no such
obligation to prepare and file a registration statement as provided for in this
Section 6.1 if, within twenty (20) days after it receives a demand therefor, it
agrees to purchase the Warrants and/or the underlying Registrable Securities
from the Holder(s) thereof at a price, in the case of the Warrants, equal to the
difference between the Exercise Price and the then current market price of the
Common Stock and, in the case of the Registrable Securities, at the current
market price of the Common Stock. The current market price of the Common Stock
shall be the average of the closing bid and asked prices for the Common Stock
during the five (5) business day period preceding such demand for registration.
The Majority Holders may, at their option, demand the registration of the
Registrable Securities in a registration statement as contemplated by Section
6.1 or in connection with a request made pursuant to Section 6.2 prior to the
acquisition of the Registrable Securities upon exercise of the Warrants even
though any such Holder has not given notice of exercise of the Warrants. Any
such Holder may thereafter at its option, exercise the Warrants at any time or
from
-5-
<PAGE>
time to time subsequent to the effectiveness under the Act of the registration
statement in which the Registrable Securities were included.
6.2 "Piggy-Back" Registration.
6.2.1 Grant of Right. In addition to the demand right of
registration, the Holder(s) of the Warrants shall have the right for a period of
four (4) years beginning one year after the Effective Date, to include the
Registrable Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8), at the Company's sole
cost and expense, provided, however, that if, in the written opinion of the
Company's managing underwriter or underwriters, if any, for such offering, the
inclusion of the Registrable Securities, when added to the securities being
registered by the Company or the selling shareholder(s), will exceed the maximum
amount of the Company's securities that can be marketed (i) at a price
reasonably related to their then current market value, or (ii) without
materially and adversely affecting the entire terms of the offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holder(s) until 180 days after the registration statement for such
offering has become effective and provided further that, if any securities are
registered for sale on behalf of other shareholders in such offering and such
shareholders have not agreed to defer such sale until the expiration of such
180-day period, the number of securities to be sold by all shareholders in such
public offering during such 180-day period shall be apportioned pro rata among
all such selling shareholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company owned by
said selling shareholders, including all holders of the Registrable Securities.
6.2.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holder(s) shall pay any and
all underwriting commissions, the expenses of any legal counsel selected by the
Holder(s) to represent them in connection with the sale of the Registrable
Securities and applicable transfer taxes, if any. In the event of such a
proposed registration, the Company shall furnish the then Holder(s) of
outstanding Registrable Securities with not less than thirty (30) days' written
notice prior to the proposed date of filing of such registration statement. Such
notice to the Holder(s) shall continue to be given for each registration
statement filed by the Company until such time as all of the Registrable
Securities have been registered and sold. The holders of the Registrable
Securities shall exercise the "piggyback" rights provided for herein by giving
written notice, within twenty (20) days after the receipt of the Company's
notice of its intention to
-6-
<PAGE>
file a registration statement. The Company shall cause any registration
statement filed pursuant to the above "piggyback" rights to remain effective for
at least twelve (12) months from the date that such registration statement is
declared effective by the Commission. The terms of this Section 6.2 may not be
modified, amended or deleted without the prior consent of the Underwriter.
6.3 General Terms.
6.3.1 Indemnification. The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holder(s) 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"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter contained in Section 5 of the
Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold
pursuant to such registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holder(s), or their successors or assigns, in writing, for specific
inclusion in such registration statement to the same extent and with the same
effect as the provisions contained in Section 5 of the Underwriting Agreement
pursuant to which the Underwriter have agreed to indemnify the Company.
6.3.2 Exclusivity. The Company shall not permit the inclusion of any
securities other than the Registrable Securities to be included in any
registration statement filed pursuant to Section 6.1 hereof without the prior
written consent of the Majority Holders of the Registrable Securities.
6.3.3 Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such
-7-
<PAGE>
registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of closing under the underwriting
agreement) signed by independent public accountants who have issued a report on
the Company's financial statements included in such registration statement, in
each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities as appropriate for the form of registration statement
used. The Company shall also deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below and to
the managing underwriter copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
Following the effective date of any such registration, the Company shall upon
the request of any owner of Warrants and/or Registrable Securities forthwith
supply such a number of prospectuses meeting the requirements of the Act, as
shall be reasonably requested to make a public offering of the Registrable
Securities from time to time offered or sold by such owner.
6.3.4 Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s) selected by any
Holder(s) whose Registrable Securities are being registered pursuant to this
Section 6. Such agreement shall be reasonably satisfactory in form and substance
to the Company, each Holder and such managing underwriters, and shall contain
such representations, warranties and covenants by the Company and such other
terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holder(s) shall be parties to any underwriting
agreement relating to an underwritten sale of their Registrable Securities and
may, at their option, require that any or all of the representations, warranties
and covenants of the Company to or for the benefit of such underwriters shall
also be made to and for the benefit of such Holder(s). Such Holder(s) shall not
be required to make any representations or warranties to or agreements with the
Company or
-8-
<PAGE>
the underwriters except as they may relate to such Holder(s) and their intended
methods of distribution.
7. Adjustments to Exercise Price and Number of Securities.
7.1 Subdivision and Combination. In case the Company shall at any time
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.
7.2 Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 7, the number of shares of
Common Stock issuable upon the exercise of this 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 Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
7.3 Recapitalization. For the purpose of this 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.
7.4 Stock Dividends - Recapitalization, Reclassification, Split-Ups. If
after the date hereof the number of outstanding shares of Common Stock is
increased by a stock dividend payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of the Warrant shall be increased in
proportion to such increase in outstanding shares.
7.5 Aggregate of Shares. If after the date hereof, the number of
outstanding shares of Common Stock is decreased by a consolidation, combination
or reclassification of shares of Common Stock or other similar event, then, upon
the effective date thereof, the number of shares of Common Stock issuable on
exercise of the Warrant shall be decreased in proportion to such decrease in
outstanding shares.
7.6 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), the corporation
formed by such consolidation or merger shall execute and deliver to the
Holder(s) a supplemental warrant providing that
-9-
<PAGE>
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 7.
The above provision of this Section shall similarly apply to successive
consolidations or mergers.
7.7 No Adjustment of Exercise Price in Certain Cases. No adjustment of the
Exercise Price shall be made:
(i) Upon the issuance or sale of the shares of Common Stock issuable upon
the exercise of (i) this Warrant or (ii) the options granted under the stock
option plan described in the Prospectus; or
(ii) 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.
7.8 Redemption of Warrants. Except as provided in Section 6.1.3 hereof,
this Warrant cannot be redeemed by the Company without the prior written consent
of the Holder.
7.9 Changes in Form of Warrant This form of Warrant need not be changed
because of any change pursuant to this Section, and Warrants issued after such
change may state the same Exercise Price and the same number of shares of Common
Stock as are stated in the Warrants initially issued pursuant to this Agreement.
The acceptance by any Holder of the issuance of new Warrants reflecting a
required or permissive change shall not be deemed to waive any rights to a prior
adjustment or the computation thereof.
7.10 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 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.
-10-
<PAGE>
8. Reservation and Listing. 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 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 Warrant and
payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable, properties and rights upon such exercise shall be duly and
validly issued, fully paid and nonassessable and not subject to preemptive
rights of any stockholder. The Company further covenants and agrees that upon
exercise of this Warrant and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercises shall be duly
and validly issued, fully paid and nonassessable and not subject to preemptive
rights of any stockholder. As long as this Warrant shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon exercise of the Warrant to be listed (subject to official notice of
issuance) on all securities exchanges (or, if applicable on NASDAQ) on which the
Common Stock may then be listed and/or quoted.
9. Certain Notice Requirements.
9.1 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, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrant and its exercise, any of the events
described in Section 9.2 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.
9.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 9 upon one or more of the following events: (i)
if the Company shall take a record of 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, 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
-11-
<PAGE>
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.
9.3 Notice of Change in Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 7 hereof,
send notice to the Holders 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 Chief Financial Officer.
9.4 Transmittal of Notices. All notices, requests, consents and other
communications under this 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:
(i) If to the registered Holder of this Warrant, to:
Laidlaw Equities, Inc.
100 Park Avenue
New York, New York 10017
Attention: Andrew J. Cahill, Managing Director
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Stephen Irwin, Esq.
(ii) if to the Company, to:
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Attention: Jack West, President
with a copy to:
Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Duane L. Berlin, Esq.
Either of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 9.4.
-12-
<PAGE>
10. Miscellaneous.
10.1 Amendments. The Company and the Holder may from time to time
supplement or amend this Warrant without the approval of any other Holder in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Underwriter may deem necessary or desirable
and which the Company and the Underwriter deem shall not adversely affect the
interest of the Holder. All other modifications or amendments shall require the
written consent of the party against whom enforcement of the modification or
amendment is sought.
10.2 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 Warrant.
10.3 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
10.4 Binding Effect. This 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 Warrant or any provisions herein
contained.
10.5 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the laws of the State
of New York, without giving effect to conflict of laws. Any action, proceeding
or claim against the Company or the Holder arising out of, or relating in any
way to this 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 parties hereto 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.
-13-
<PAGE>
10.6 Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this 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 Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of any
breach, noncompliance or nonfulfillment of any of the provisions of this 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.
-14-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on the _______ day of ______, 1996.
PURO WATER GROUP, INC.
By:________________________________
Name: Jack West
Title: President
-15-
<PAGE>
Form to be used to exercise Warrant:
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Date: ________________, ____
The undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase __________ shares of Common Stock of Puro Water 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 Warrant is exercised in accordance with the instructions
given below.
OR
The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase __________ shares of Common Stock of Puro Water
Group, Inc. by surrender of the unexercised portion of the within warrant (with
a "Value" of $__________ based on a "Market Price" of $__________). Please issue
the Common Stock comprising the Warrant in accordance with the instructions
given below.
___________________________________
Signature
___________________________________
Signature Guaranteed
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 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.
-16-
<PAGE>
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby
sell, assign and transfer unto __________________________ the right to purchase
____________ shares of Common Stock of Puro Water Group, Inc. (the "Company")
evidenced by the within Warrant and does hereby authorize the Company to
transfer such right on the books of the Company.
Dated:__________________, ____
___________________________________
Signature
___________________________________
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within 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.
-17-
<PAGE>
EX-4.4
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of January 28, 1994 and entered into by and among
JACK C. WEST of 3207 Victoria Drive, Mt. Kisco, New York 10549 ("West"), The
Trust Under Article 16 of the Will of W. Palmer Dixon, for the Benefit of
Palmer Dixon and The Trust Under Article 16 of the Will of W. Palmer Dixon,
for the Benefit of Peter T. Dixon (collectively "Dixon") and SCOTT and BETH
LEVY of (collectively "Levy") (West,
Dixon and Levy are hereinafter collectively referred to as the
"Stockholders"), and PURO CORPORATION OF AMERICA, a Delaware corporation
(hereinafter the "Company").
WITNESSETH:
WHEREAS, the Company was incorporated under the laws of the State of
Delaware on January 28, 1994; and
WHEREAS, the total number of authorized shares of capital stock of the
Company (hereinafter referred to as the "Stock") consists of two million
(2,000,000) shares of common voting stock, $.01 par value (the "Common Stock"
or the "Stock") and
WHEREAS, two hundred fifty thousand (250,000) shares of the Company's
Common Stock have been issued to West; and
WHEREAS, four hundred eighty thousand (480,000) shares of the Company's
Common Stock have been issued to Dixon; and
<PAGE>
WHEREAS, Dixon has acquired that certain Warrant to Purchase the
Company's Common Stock dated January 28, 1994 (the "Warrant"); and
WHEREAS, two hundred seventy thousand (270,000) shares of the Common
Stock have been issued to Levy; and
WHEREAS, the parties hereto desire to provide for the composition of the
Board of Directors of the Company and certain other corporate matters
concerning the orderly operation and management of the Company, and to set
forth their respective rights and obligations in connection therewith; and
WHEREAS, the parties agree that it is in the best interest of the
Company that certain restrictions be imposed upon the Stockholders in the
disposition of their respective stock holdings in the Company.
NOW THEREFORE, in consideration of the mutual promises contained herein
and of the mutual benefits to be gained by the performance thereof, the
parties hereto do hereby agree as follows:
ARTICLE I
MANAGEMENT
A. During the term of this Agreement and for so long as they shall be
Stockholders of any of the capital stock or options, warrants or other
instruments granting the right to purchase any of the capital stock of the
Company, the Stockholders agree that there shall be at lease four (4) members
of the Board of Directors of the Company. The initial number of
2
<PAGE>
directors shall be four (4) with one (1) of the four (4) being Peter T. Dixon
of New York, New York or his designee, one (1) of the four (4) being West and
the remaining two (2) directors being Levy and/or his designees. If the
number of directors is increased, the additional directors shall be allocated
Pro Rata.
B. The officers of the Company shall, as of the date hereof, be as
follows:
Chairman Peter T. Dixon
Co-President and Co-Chief
Executive Officer Jack C. West
Co-President and Co-Chief
Executive Officer Scott Levy
C. During the term of this Agreement, the Stockholders agree to vote
their shares in accordance with the terms of this Article and to likewise use
their best efforts to cause the Board of Directors to act in accordance with
this Article.
D. During the term of this Agreement, the Stockholders agree that any
action to be taken by the Board of Directors shall require a unanimous vote
of the Directors.
E. The Stockholders represent and warrant that they are not under any
constraints, contractual or otherwise, against entering into this Agreement
or performing or fulfilling the obligations and services contemplated
hereunder.
3
<PAGE>
ARTICLE II
TRANSFER OF STOCKHOLDER'S STOCK DURING LIFE
A. No Stockholder's Stock shall, either voluntarily or involuntarily,
be sold, assigned, transferred, pledged, encumbered or otherwise disposed of,
except in the manner and upon the terms provided in this Agreement, and any
transfer not in compliance with the terms herewith shall be void and shall not
be recognized by this Company or its transfer agent.
B. Subject to any restrictions imposed by the Securities Act of 1933,
as amended, and the regulations promulgated thereunder (hereinafter the
"Act"), the Shares and such shares hereafter acquired by Dixon pursuant to
the Warrant shall be freely transferable in whole or in part.
C. (1) No Stockholder shall sell, assign, transfer, mortgage, alienate
or in any way encumber or dispose of any of the shares of Stock which he or
it now owns or which he or it may hereafter acquire nor attempt to so
transfer or encumber such Stock in any manner whatsoever, without first
giving the other Stockholders thirty (30) days notice in writing of the
proposed transfer (hereinafter the "Transfer Notice"). Such Transfer Notice
shall contain the name of the proposed recipient, the number and class of
shares involved and the proposed purchase price and terms.
(2) The non-selling Stockholder (the "Optionee") shall have an
option to purchase any part or all of the Stock proposed for transfer, which
option shall continue for a period of thirty (30) days after receipt of the
Transfer Notice pursuant to
4
<PAGE>
subsection (1) of this paragraph. The exercise of such option shall be in
writing. The purchase price and terms of such option shall be no less
favorable than those set forth in the Transfer Notice.
(3) If the Optionee has not exercised its own option as set forth
hereinabove, then the transfer as contemplated in subsection (1) may proceed
in whole and not in part, provided that it shall be consummated to the same
proposed purchaser, on the same terms and at the same price stated in the
Transfer Notice, and that prior to the effectiveness of such transfer, the
transferee shall sign an agreement in form acceptable to the attorneys for
the selling Stockholder, the Optionee and the Company, agreeing to be bound
by the terms of this Agreement. If said transfer is not completed within
thirty (30) days of the expiration of the Optionee's option or the
declination by the Optionee to exercise said option, whichever is earlier,
then the Optionee shall have a second option to purchase any or all of the
Stock proposed for transfer, which option shall continue for a period of
thirty (30) days. The exercise, purchase price and transfer of said second
option shall be as set forth in paragraph C (2) hereinabove.
5
<PAGE>
ARTICLE III
TRANSFER IN THE EVENT OF DEATH, PERMANENT DISABILITY
OR CESSATION OF EMPLOYMENT
In the event of the death, dissolution or permanent disability of any
Stockholder, or in the event of the cessation of the employment of West or
Levy by the Company, then the other Stockholders shall have an option to
purchase, pro rata, all of the Stock owned by said Stockholder and the
purchase price shall be as set forth in Article V. Said option shall be
exercised in writing within a period of thirty (30) days after such other
Stockholders receive written notice of such death, permanent disability or
cessation or employment. In the event that either optionee elects not to
purchase any or all of the Stock available pursuant to his or its option, then
the other optionee shall have an option to purchase such Stock upon the same
terms and conditions as in the original option, said option to be exercised
within fifteen (15) days of the expiry of the original option.
ARTICLE IV
INVOLUNTARY TRANSFER
In the event of the voluntary or involuntary bankruptcy or insolvency of
any Stockholder, or the attachment of or execution or levy against any
Stockholder's Stock, or the sale of pledged stock, or in the event that said
Stock is subject to a judicial sale under the laws of any local, state or
federal government, or in the event that the Stock standing in the name of any
6
<PAGE>
Stockholder, or any part thereof, is to be transferred out of the name of
such Stockholder by any legal action brought by such Stockholder's spouse,
then in any such event, the Company shall give written notice to the other
Stockholders (the "Optionees") immediately after the Company is made aware of
such actual, pending or threatened action and, the Optionees shall have an
option to purchase, pro rata, said Stock or the part thereof that is subject
to any such transfer or legal action. Said option shall be exercised in
writing within a period of thirty (30) days after the Optionees have received
written notice of the transfer or legal action. Upon exercise of the option,
the purchase price and terms of payment shall be as set forth in Article V.
In the event that either Optionee elects not to exercise all or any portion
of his or its Option, then the other Optionee shall have an option to
purchase the Stock not purchased by the other Optionee, upon the same terms
and conditions as in the Original Option, said option to be exercised within
fifteen (15) days of the expiry of the previous option.
ARTICLE V
PURCHASE PRICE
For purposes of Articles III an IV hereof, the Optionees shall pay to
the selling stockholder, his personal representatives or transferees a
purchase price determined as follows:
(1) The Optionees or their estate or personal representatives as
the case may be, and the other
7
<PAGE>
Stockholder shall each select an appraiser within 30 days of the date of
death, cessation of employment or involuntary transfer, each of whom
shall be a member or employee of a certified public accounting or
securities brokerage firm of national reputation, in order to determine a
purchase price for the Stock.
(2) If the two appraisers cannot agree upon a purchase price
for the Stock within 90 days, then the two appraisers shall, as soon as
practicable thereafter, select a third appraiser, who shall have the
same qualifications as above stated. The third appraiser shall confer
with the two other appraisers and a decision of two of the three of them
with respect to said purchase price shall be made within a 30 day period
after designation of the third appraiser. The decision shall be final,
binding and non-appealable and shall be enforceable by either party in
any court of competent jurisdiction.
ARTICLE VI
ENDORSEMENT OF STOCK CERTIFICATES
All of the stock certificates owned by the Stockholders and any
additional stock certificates hereafter issued shall be submitted to the
Secretary of the Company to be endorsed substantially in the following form:
"Any sale, assignment, transfer, pledge, encumbrance or other
disposition of the shares of stock represented by this certificate is
restricted by, and subject to, the terms of a Stockholders Agreement
dated January , 1994 and entered into by and among Jack C. West, The
Trust Under Article 16 of the Will of W. Palmer Dixon, for the Benefit
of Palmer Dixon and The Trust Under Article 16 of the Will of W. Palmer
Dixon, for the Benefit of Peter T. Dixon, Scott and Beth Levy and Puro
Corporation of America. A copy of said agreement is on file with the
Secretary of the Company. By acceptance of this certificate, the holder
hereof agrees to be bound by the terms, including those relating to
transferability, of said agreement."
8
<PAGE>
ARTICLE VII
FINANCIAL RECORDS
The Company's books shall be kept at the principal office of the
Company, and the said books shall, during normal business hours, be open to
inspection and copying by any Stockholder a party hereto, or his or its duly
appointed agent.
ARTICLE VIII
PUBLIC OFFERING
Notwithstanding anything contained herein to the contrary, this
Agreement shall be null, void and of no further effect if and when a
registration statement seeking registration of any of the securities of the
Company for an initial public offering thereof pursuant to the Act is filed
with the United States Securities and Exchange Commission and becomes
effective.
ARTICLE IX
AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this agreement shall be valid
unless made in writing and signed by all of the parties hereto.
ARTICLE X
CHOICE OF LAW; JURISDICTION
This agreement shall be governed by the laws of the State of Delaware
without giving effect to principles of conflicts of law.
9
<PAGE>
The Stockholders hereby consent to submit themselves to the jurisdiction
of the United States District Court for the Southern District of New York and
the Courts of the State of New York in connection with any disputes which
may arise hereunder. The Company hereby consents to service of process in the
State of New York by naming the Secretary of State of the State of New York
as agent for service of process. Such submission to jurisdiction and consent
to service of process is nonexclusive of any other jurisdiction or manner of
service in which or by which personal jurisdiction over the Original
Stockholder may be obtained.
ARTICLE XI
BINDING EFFECT
The terms of this agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, administrators,
personal representatives, successors and assigns and the holders from time to
time of any of the Stock.
ARTICLE XII
NOTICES
All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this Agreement shall be in writing
and shall be considered as properly given or made if sent prepaid and
actually received by telecopier, certified mail, overnight delivery service
or courier service addressed to the respective parties as indicated below.
10
<PAGE>
Any party may change its notice instructions by giving notice thereof, in
writing, to the other parties.
To the Company: Puro Corporation of America
56-45 58th Street
Maspeth, NY 11378
Attention: Jack C. West,
President
With a copy to: Epstein, Becker & Green
250 Park Avenue, 14th Floor
New York, NY 10177
Attention: Bernice K. Leber, Esquire
To Jack C. West: Mr. Jack C. West
3207 Victoria Drive
Mt. Kisco, NY 10549
To Dixon: c/o Peter T. Dixon
79 East 79th Street
New York, New York 10021-0202
With a copy to: Bruce L. Lev, Esquire
Lev, Spalter & Berlin, P.C.
105 Rowayton Avenue
Rowayton, CT 06853
To Levy: Scott and Beth Levy
With a copy to: Frederick A. Rossetti, Esquire
Segan, Culhane, Nemerov & Singer
112 Madison Avenue
New York, NY 10018
or the residence of the legal representative of the estate of a deceased
Stockholder.
11
<PAGE>
ARTICLE XIII
PARTIES RIGHTS ARE CUMULATIVE
The rights and remedies granted hereunder to each party are cumulative
and in addition to any rights and remedies granted to said party under any
other agreement to which they are parties.
ARTICLE XIV
WAIVER OF BREACH
No failure on the part of any party hereto to enforce the breach of any
of the obligations, agreements or conditions hereunder shall be construed as
a waiver of such breach or any subsequent performance hereunder unless such
waiver shall be in writing signed by the party to whom such obligation or
compliance is owed.
ARTICLE XV
USAGE
Any term used in the singular or plural, or masculine, feminine or
neuter forms shall be singular or plural, and masculine, feminine or neuter
as proper reading requires.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
WITNESSES:
Attest: PURO CORPORATION OF AMERICA
a Delaware Corporation
By: /s/ Scott Levy & Jack C. West
- ---------------------------------- -----------------------------------
Its Secretary Its Co-Presidents
Hereunto Duly Authorized Hereunto Duly Authorized
/s/ Jack C. West
- ---------------------------------- -----------------------------------
Jack C. West
- ----------------------------------
The Trust Under Article 16 of the
Will of W. Palmer Dixon, for the
Benefit of Palmer Dixon and The Trust
Under Article 16 of the Will of W.
Palmer Dixon, for the Benefit of
Peter T. Dixon
By: /s/ Peter T. Dixon Trustee
- ---------------------------------- -----------------------------------
Peter T. Dixon,
Hereunto Duly Authorized
- ----------------------------------
/s/ Scott Levy
- ---------------------------------- ---------------------------------------
Scott Levy
/s/ Beth Levy
- ---------------------------------- ---------------------------------------
Beth Levy
13
<PAGE>
FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT
FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT dated as of October 16, 1995
and entered into by and among JACK C. WEST of 3207 Victoria Drive, Mt. Kisco,
New York 10549 ("West"), THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER
DIXON, FOR THE BENEFIT OF PALMER DIXON (the "Palmer Trust"), THE TRUST UNDER
ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR THE BENEFIT OF PETER T. DIXON
(the "Peter Trust"), PETER T. DIXON, individually ("Dixon"), of 79 East 79th
Street, New York, New York 10021-0202 and SCOTT and BETH LEVY of Morewood
Oaks, Port Washington, New York 11050 (together "Levy", along with West, the
Palmer Trust, the Peter Trust and Dixon are hereinafter collectively referred
to as the "Stockholders") and THE PURO CORPORATION OF AMERICA, a Delaware
corporation (hereinafter the "Company").
W I T N E S S E T H :
WHEREAS, the Company was incorporated under the laws of the State of
Delaware on January 7, 1994; and
WHEREAS, the total number of authorized shares of capital stock of the
Company consists of two million (2,000,000) shares of common voting stock,
$.01 par value (the "Common Stock" or the "Stock"); and
WHEREAS, the Stockholders and the Company entered into that certain
Stockholders Agreement dated as of January 28, 1994; and
WHEREAS, pursuant to that certain Stock Purchase Agreement between the
Palmer Trust, the Peter Trust, Dixon and the Company of even date, the Palmer
Trust, the Peter Trust and Dixon purchased an aggregate of one hundred twenty
five thousand (125,000) shares of Common Stock as set forth below; and
<PAGE>
WHEREAS, the Stockholders and the Company desire to amend said
Stockholders Agreement pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained herein
and of the mutual benefits to be gained by the performance thereof, the
parties hereto do hereby agree as follows:
1. The Stockholders of the Company and their respective holdings are as
follows:
Shareholders Number of Shares
- ------------ ----------------
Peter T. Dixon Trust 302,500
W. Palmer Dixon Trust 252,500
Peter T. Dixon, Individually 50,000
Scott & Beth Levy 270,000
Jack C. West 250,000
---------
Total Issued Shares 1,125,000
---------
---------
2. Dixon hereby agrees to be bound by and to comply with the terms and
conditions of the Stockholders Agreement as same may be amended from time to
time for so long as he shall own Stock.
2
<PAGE>
3. All other terms set forth in the Stockholders Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
WITNESSES:
Attest: PURO CORPORATION OF AMERICA,
a Delaware Corporation
By:/s/ Jack C. West
- ------------------------ -------------------------
Jack C. West
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
By:/s/ Scott Levy
- ------------------------ -------------------------
Scott Levy
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
/s/ Jack C. West
- ------------------------ ----------------------------
Jack C. West
- ------------------------ The Trust Under Article 16 of
the Will of W. Palmer Dixon,
for the Benefit of Palmer
Dixon and The Trust Under
Article 16 of the Will of W.
Palmer Dixon, for the Benefit
of Peter T. Dixon
By:/s/ Peter T. Dixon
- ------------------------ -------------------------
Peter T. Dixon
Hereunto Duly Authorized
- ------------------------
/s/ Peter T. Dixon
- ------------------------- ----------------------------
Peter T. Dixon
- -------------------------
/s/ Scott Levy
- ------------------------- ----------------------------
Scott Levy
- -------------------------
/s/ Beth Levy
- ------------------------- ----------------------------
Beth Levy
3
<PAGE>
SECOND AMENDMENT TO
STOCKHOLDERS AGREEMENT
----------------------
SECOND AMENDMENT TO STOCKHOLDERS AGREEMENT dated as of December 29, 1995
and entered into by and among JACK C. WEST of 3207 Victoria Drive, Mt. Kisco,
New York 10549 ("West"), THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER
DIXON, FOR THE BENEFIT OF PALMER DIXON (the "Palmer Trust"), THE TRUST UNDER
ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR THE BENEFIT OF PETER T. DIXON
(the "Peter Trust"), PETER T. DIXON, individually ("Dixon"), of 79 East 79th
Street, New York, New York 10021-0202, SCOTT and BETH LEVY of 32 Morewood Oaks,
Port Washington, New York 11050 (together "Levy"), and WILMER THOMAS of
272 Undermountain Road, Salisbury, Connecticut 06068 ("Thomas", along with
West, the Palmer Trust, the Peter Trust, Dixon and Levy are hereinafter
collectively referred to as the "Stockholders") and THE PURO CORPORATION OF
AMERICA, a Delaware corporation (hereinafter the "Company").
WITNESSETH:
WHEREAS, the Company was incorporated under the laws of the State of
Delaware on January 7, 1994; and
WHEREAS, the total number of authorized shares of capital stock of the
Company consists of two million (2,000,000) shares of common voting stock,
$.01 par value (the "Common Stock" or the "Stock"); and
WHEREAS, the Stockholders (other than Thomas and Dixon) and the Company
entered into that certain Stockholders Agreement dated as of January 28,
1994; and
<PAGE>
WHEREAS, the Stockholders (other than Thomas) and the Company entered
into that certain First Amendment to Stockholders Agreement dated as of
October 16, 1995; and
WHEREAS, pursuant to that certain Stock Purchase Agreement between Thomas
and the Company of even date, Thomas purchased an aggregate of one hundred
twenty five thousand (125,000) shares of Common Stock; and
WHEREAS, the Stockholders and the Company desire to amend said
Stockholders Agreement pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual premises contained herein
and of the mutual benefits to be gained by the performance thereof, the
parties hereto do hereby agree as follows:
1. The Stockholders of the Company and their respective holdings are as
follows:
SHAREHOLDERS NUMBER OF SHARES
- ------------ ----------------
Peter T. Dixon Trust 302,500
W. Palmer Dixon Trust 252,500
Peter T. Dixon, Individually 50,000
Scott & Beth Levy 270,000
Jack C. West 250,000
Wilmer Thomas 125,000
-------
Total Issued Shares 1,250,000
=========
2. Thomas hereby agrees to be bound by and to comply with the terms and
conditions of the Stockholders Agreement as same has been and may be amended
from time to time for so long as he shall own stock.
2
<PAGE>
3. In the event that a registration statement filed with the United
States Securities and Exchange Commission seeking registration of any of the
securities of the Company for an initial public offering thereof pursuant to
the Securities Act of 1933, as amended, does not become effective on or
before December 31, 1996, then Paragraph A of Article I of the Stockholders
Agreement shall terminate and be of no further effect.
4. All other terms set forth in the Stockholders Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
WITNESSES:
Attest: PURO CORPORATION OF AMERICA,
a Delaware Corporation
By: /s/ JACK C. WEST
- ------------------------ -------------------------
Jack C. West
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
By: /s/ SCOTT LEVY
- ------------------------ -------------------------
Scott Levy
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
/s/ JACK C. WEST
- ------------------------ -----------------------------
Jack C. West
- ------------------------
The Trust Under Article 16 of
the Will of W. Palmer Dixon,
for the Benefit of Palmer
Dixon and The Trust Under
Article 16 of the Will of W. Palmer
Dixon, for the Benefit
of Peter T. Dixon
By: /s/ PETER T. DIXON
- ------------------------ -------------------------
Peter T. Dixon
Hereunto Duly Authorized
- ------------------------
/s/ PETER T. DIXON
- ------------------------ -----------------------------
Peter T. Dixon
- ------------------------
3
<PAGE>
THIRD AMENDMENT TO
STOCKHOLDERS AGREEMENT
(AMENDMENT RE: EDBERG STOCK PURCHASE)
THIRD AMENDMENT TO STOCKHOLDERS AGREEMENT dated as of May 1, 1996 and
entered into by and among Jack C. West of 3207 Victoria Drive, Mt. Kisco, New
York 10549 ("West"), The Trust Under Article 16 of the Will of W. Palmer
Dixon, for the Benefit of Palmer Dixon (the "Palmer Trust"), The Trust Under
Article 16 of the Will of W. Palmer Dixon, for the Benefit of Peter T. Dixon
(the "Peter Trust"), Peter T. Dixon, individually ("Dixon"), of 79 East 79th
Street, New York, New York 10021-0202 and SCOTT and BETH LEVY of 32 Morewood
Oaks, Port Washington, New York 11050 (together "Levy"), Thomas Limited
Partnership of 272 Undermountain Road, Salisbury, Connecticut 06068
("Thomas") and Edberg Associates Limited Partnership, a Connecticut Limited
Partnership with an address of 356 Woodland Lane, Orange, Connecticut 06477
("Edberg", along with West, the Palmer Trust, the Peter Trust, Dixon, Levy
and Thomas are hereinafter collectively referred to as the "Stockholders"),
and PURO WATER GROUP, INC., formerly known as PURO CORPORATION OF AMERICA, a
Delaware corporation (hereinafter the "Company").
<PAGE>
W I T N E S S E T H:
WHEREAS, the Company was incorporated under the laws of the State of
Delaware on January 7, 1994; and
WHEREAS, the total number of authorized shares of capital stock of the
Company consists of ten million (10,000,000) shares of common voting stock,
$0.01 par value (the "Common Stock" or the "Stock"); and
WHEREAS, the Stockholders other than (Edberg) and the Company entered
into that certain Stockholders Agreement dated as of January 28, 1994, as
amended by that certain First Amendment to Stockholders Agreement dated as of
October 16, 1995 and that certain Second Amendment to Stockholders Agreement
dated as of December 29, 1995 (the "Stockholders Agreement"),
WHEREAS, pursuant to that certain Stock Purchase Agreement between
Edberg and the Company of even date, Edberg purchased an aggregate of Two
Hundred Thousand (200,000) shares of Common Stock as set forth below; and
WHEREAS, the Stockholders and the Company desire to amend said
Stockholders Agreement pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained herein
and of the mutual benefits to be gained by the
2
<PAGE>
performance thereof, the parties hereto do hereby agree as follows:
1. The Stockholders of the Company and their respective holdings are as
follows:
Shareholders Number of Shares
- ------------ ----------------
Peter T. Dixon Trust 968,000
W. Palmer Dixon Trust 808,000
Peter T. Dixon, Individually 160,000
Scott & Beth Levy 864,000
Jack C. West 800,000
Thomas Limited Partnership 400,000
Edberg Associates Limited Partnership 200,000
---------
Total Issued Shares 4,200,000
---------
---------
2. Edberg individually hereby agrees to be bound by and to comply with
the terms and conditions of the Stockholders Agreement as same has been and
may be amended from time to time for so long as it shall own stock.
3. Paragraph I.A. of the Stockholders Agreement is hereby amended by
deleting the last sentence thereof.
3
<PAGE>
4. TAG-ALONG RIGHTS
4.1 TAG-ALONG RIGHTS
(a) If at any time prior to three years after the completion of
a public offering of its shares a Shareholder (or Shareholders), (the
"Selling Shareholder"), receives a bona fide third party offer (including,
without limitation, any such offer from another Shareholder) in writing (a
"Bona Fide Offer") which the Selling Shareholder desires to accept, to
purchase any or all of the Shares owned by the Selling Shareholder (the
"Offered Shares"), then the Selling Shareholder shall give the Company and
the other Shareholders (each other Shareholder, an "Offeree") written notice
(the "Selling Shareholder Notice") of (i) the name and address of the person
who made the Bona Fide Offer (the "Proposed Transferee"), (ii) the number of
shares of Common Stock to be purchased, (iii) the price per share of Common
Stock to be paid, (iv) the terms and conditions of payment
offered by the Proposed Transferee, (v) the date and location of, and
procedures for selling Shares to the Proposed Transferee and (vi) a
representation that the Proposed Transferee has been informed of the
Tag-Along Right provided for in this Section 4.1 and has agreed to purchase
shares of Common Stock in accordance with the terms hereof.
4
<PAGE>
(b) Each Offeree shall have the right (the "Tag-Along Right") to
require the Proposed Transferee to purchase from him up to the number derived
by multiplying (i) the aggregate number of shares of Common Stock the
Proposed Transferee is willing to acquire by (ii) a fraction, the numerator
of which is the aggregate number of shares of Common Stock owned by such
Offeree, and the denominator of which is the aggregate number of shares of
Common Stock owned by the Selling Shareholder plus the aggregate number of
shares of Common Stock owned by all Offerees who validly exercise their
respective Tag-Along Rights. Any shares of Common Stock purchased from an
Offeree pursuant to this Section 4.1 shall be paid for at the same price
per Share and upon the same terms and conditions as are received by the Selling
Shareholder for his Shares. The number of Shares to be Transferred by the
Selling Shareholder to the Proposed Transferee shall be reduced by the number
of Shares to be sold by the Offerees pursuant to this Section 4.1
(c) The Tag-Along Right shall be exercised by delivery of a written
notice to the Selling Shareholder (the "Tag-Along Acceptance Notice") within
15 days following receipt of the Selling Shareholder Notice. The Tag-Along
Acceptance Notice shall state (i) the number of shares of Common Stock that
5
<PAGE>
the Offeree proposed to include in such Transfer to the Proposed Transferee,
which number shall not exceed the maximum number of shares of Common Stock
which such Offeree would be entitled to include if all Offerees elected to
participate in the Transfer to the fullest extent possible, determined as
aforesaid, and (ii) whether the Offeree would prefer to include additional
shares of Common Stock in the Transfer in the event that some Offerees choose
not to so participate and, if so, the aggregate number of such additional
Shares.
(d) Within 45 days of the dispatch of the Selling Shareholder
Notice to the Offerees, the Selling Shareholder shall deliver to each Offeree
who validly exercises his Tag-Along Right a notice setting forth the number
of shares of Common Stock that such Offeree will be entitled to include and
the delivery instructions and procedures required to effectuate the Transfer.
In the event that any Offeree does not choose to participate in the Transfer
to the fullest extent possible, the right to include Shares that such Offeree
would have been entitled to include but chose to exclude shall be apportioned
among the Selling Shareholder and the other participating Offerees ratably on
the basis of (A) in the case of the Selling Shareholder, the amount by which
the total number of Shares to be included in the Transfer exceeds the number
the Selling Shareholder would have
6
<PAGE>
been entitled to include had all Offerees chosen to participate to the
fullest extent possible, and (B) in the case of the participating Offerees,
the amounts designated by them in the Tag-Along Acceptance Notice as
described in clause (ii) of Section 4.1(c) hereof.
(e) If the Proposed Transferee does not purchase shares of Common
Stock from the Offerees who validly exercise their respective Tag-Along
Rights at the same price and on the same terms and conditions as the Proposed
Transferee purchases from the Selling Shareholder, then the Selling
Shareholder shall not be permitted to Transfer any shares of Common Stock to
the Proposed Transferee in the proposed Transfer. The Selling Shareholder and
the Offerees who validly exercise their respective Tag-Along Rights shall
have the right, for a 150 day period following the dispatch of the Selling
Shareholder Notice, to Transfer to the Proposed Transferee the shares of
Common Stock proposed to be transferred on terms and conditions no more
favorable to the Selling Shareholder and such Offerees than those stated in
the Selling Shareholder Notice. Any shares of Common Stock which continue to
be held by the Selling Shareholder or any such Offerees after the earlier of
the consummation of the proposed Transfer or the expiration of such 150-day
period shall again be subject to the provisions of this Section 4.1.
7
<PAGE>
4.2. COSTS.
All reasonable costs and expenses incurred by any seller in
connection with a Transfer under Section 4.1 hereof, including without
limitation all reasonable attorneys' fees, costs and disbursements and any
reasonable finders' fees or brokerage commissions, shall be allocated PRO
RATA among the Shareholders transferring Shares in such Transfer, with each
bearing that portion of such costs and expenses equal to the aggregate of
such costs and expenses multiplied by a fraction, the numerator of which is
the amount of the gross proceeds received by such Shareholder from such
Transfer, and the denominator of which is the total amount of the gross
proceeds received by all Shareholders from such Transfer.
5. PREEMPTIVE RIGHTS.
5.1. GRANT AND EXERCISE OF PREEMPTIVE RIGHT.
(a) The Company will not issue or sell to the Shareholders or
any third party, any shares of Common Stock or any options, warrants or other
rights to purchase or subscribe for such shares of Common Stock or any
securities convertible into or exchangeable for such shares of Common Stock
("Newly Issued Shares") unless prior to the issuance or sale of such Newly
Issued Shares each Shareholder shall have been given the opportunity (such
opportunity being herein referred to as the
8
<PAGE>
"Preemptive Right") to purchase (on the same terms as such Newly Issued
Shares are proposed to be sold) the same proportion of such Newly Issued
Shares being issued or offered for sale by the Company as (x) the number of
Shares of Common Stock (calculated on a fully diluted basis) held by such
Shareholder on the day preceding the date of the Preemptive Notice (as
defined herein), bears to (y) the total number of Shares of Common Stock
(calculated on a fully diluted basis) outstanding on that day.
(b) Prior to the issuance or sale by the Company of any Newly
Issued Shares, the Company shall give written notice thereof (the "Preemptive
Notice") to each Shareholder. The Preemptive Notice shall specify (i) the
name and address of the bona fide investor to whom the Company proposes to
issue or sell Newly Issued Shares, (ii) the total amount of capital to be
raised by the Company pursuant to the issuance or sale of Newly Issued
Shares, (iii) the number of shares of such Newly Issued Shares proposed to be
issued or sold, (iv) the price and other terms of their proposed issuance or
sale, (v) the number of such Newly Issued Shares which such Shareholder is
entitled to purchase (determined as provided in subsection (a) above), and
(vi) the period during which such Shareholder may elect to purchase such
Newly Issued Shares, which period shall extend for at least thirty (30) days
following the receipt by such
9
<PAGE>
Shareholder of the Preemptive Notice (the "Preemptive Acceptance Period").
Each Shareholder who desires to purchase Newly Issued Shares shall notify the
Company within the Preemptive Acceptance Period of the number of Newly Issued
Shares he wishes to purchase, as well as the number, if any, of additional
Newly Issued Shares he would be willing to purchase in the event that all of
the Newly Issued Shares subject to the Preemptive Right are not subscribed
for by the other Shareholders.
(c) In the event a Shareholder declines to subscribe for all or
any part of his pro rata portion of any Newly Issued Shares which are subject
to the Preemptive Right (the "Declining Preemptive Purchaser), then the other
Shareholders shall have the right to subscribe for all (or any declined part)
of the Declining Preemptive Purchaser's pro rata portion of such Newly Issued
Shares (to be divided among the other Shareholders desiring to exercise such
right on a ratable basis).
(d) Any such Newly Issued Shares which none of the Shareholders
elect to purchase in accordance with the provisions of this Article 5 may be
sold by the Company within a period of three (3) months after the expiration
of the Preemptive Acceptance Period to any other person or persons at not
less than
10
<PAGE>
the price and upon other terms and conditions not less favorable to the
Company than those set forth in the Preemptive Notice.
5.2 CERTAIN EXEMPTIONS: TERMINATION
The Preemptive Right shall not apply to the issuance or sale of
any Newly Issued Shares (a) pursuant to stock option or stock purchase plans
or agreements or other similar plans or agreements approved by the Board of
Directors of the Company, (b) pursuant to the acquisition assets other than
cash or marketable securities in consideration of the issuance of shares of
Common Stock by the Company, or (c) pursuant to a public offering.
6. AMENDMENT TO ARTICLE VIII
Article VIII of the Agreement shall be amended to read as follows:
The provisions of Article II, Article III, Article IV, and Article V
shall become null, void, and of no further effect upon the effectiveness of a
registration statement seeking registration of any of the securities of the
Company for an initial public offering. However, the other provisions shall
remain in full, force, and effect.
11
<PAGE>
7. This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. All other terms set forth in the Stockholders Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
WITNESSES
Attest: PURO WATER GROUP, INC.,
a Delaware Corporation
By: /s/ JACK C. WEST
- ------------------------------- -----------------------------
Jack C. West
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
By: /s/ SCOTT LEVY
- ------------------------------- -----------------------------
Scott Levy
Its Secretary Its Co-President
Hereunto Duly Authorized Hereunto Duly Authorized
/s/ JACK C. WEST
- ------------------------------- --------------------------------
Jack C. West
- -------------------------------
12
<PAGE>
The Trust Under Article 16 of
the Will of W. Palmer Dixon,
for the Benefit of Palmer
Dixon and The Trust Under
Article 16 of the Will of W.
Palmer Dixon, for the Benefit
of Peter T. Dixon
By: /s/ PETER T. DIXON
- ------------------------------- -----------------------------
Peter T. Dixon,
Hereunto Duly Authorized
- -------------------------------
/s/ PETER T. DIXON
- ------------------------------- --------------------------------
Peter T. Dixon
- -------------------------------
/s/ SCOTT LEVY
- ------------------------------- --------------------------------
Scott Levy
- -------------------------------
/s/ BETH LEVY
- ------------------------------- --------------------------------
Beth Levy
- -------------------------------
THOMAS LIMITED PARTNERSHIP
By: /s/ WILMER J. THOMAS Jr.
- ------------------------------- -----------------------------
Wilmer Thomas
Hereunto Duly Authorized
- -------------------------------
EDBERG ASSOCIATES LIMITED PARTNERSHIP
By: /S/ Stephen C. Edberg
- ------------------------------- --------------------------------
Stephen C. Edberg
- -------------------------------
13
<PAGE>
FOURTH AMENDMENT TO
STOCKHOLDERS AGREEMENT
(AMENDMENT RE: INITIAL PUBLIC OFFERING)
FOURTH AMENDMENT TO STOCKHOLDERS AGREEMENT dated as of November 11, 1996
and entered into by and among Jack C. West of 3207 Victoria Drive, Mt. Kisco,
New York 10549 ("West"), The Trust Under Article 16 of the Will of W. Palmer
Dixon, for the Benefit of Palmer Dixon (the "Palmer Trust"), The Trust Under
Article 16 of the Will of W. Palmer Dixon, for the Benefit of Peter T. Dixon
(the "Peter Trust"), Peter T. Dixon, individually ("Dixon"), of 79 East 79th
Street, New York, New York 10021-0202 and Scott and Beth Levy of 32 Morewood
Oaks, Port Washington, New York 11050 (together "Levy"), Wilmer Thomas of 272
Undermountain Road, Salisbury, Connecticut 06068 ("Thomas") and Edberg
Associates Limited Partnership, a Connecticut Limited Partnership with an
address of 356 Woodlane Lane, Orange, Connecticut 06477 ("Edberg", along with
West, the Palmer Trust, the Peter Trust, Dixon, Levy and Thomas are
hereinafter collectively referred to as the "Stockholders"), and PURO WATER
GROUP, INC., formerly known as PURO CORPORATION OF AMERICA, a Delaware
corporation (hereinafter the "Company").
W I T N E S S E T H:
WHEREAS, the Company was incorporated under the laws of the State of
Delaware on January 7, 1994; and
WHEREAS, the total number of authorized shares of capital stock of the
Company consists of ten million (10,000,000) shares of common voting stock,
$.003125 par value (the "Common Stock" or the "Stock"); and
<PAGE>
WHEREAS, the Stockholders and the Company entered into that certain
Stockholders Agreement dated as of January 28, 1994, as amended by that
certain First Amendment to Stockholders Agreement dated as of October 16,
1995, that certain Second Amendment to Stockholders Agreement dated as of
December 29, 1995 and that certain Third Amendment to Stockholders Agreement
dated as of May 1, 1996 (the "Stockholders Agreement"); and
WHEREAS, the Company intends to complete a public offering of some of
the Stock; and
WHEREAS, the Stockholders and the Company desire to amend said
Stockholders Agreement pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained herein
and of the mutual benefits to be gained by the performance thereof, the
parties hereto do hereby agree as follows:
1. Upon the effectiveness of a Registration Statement filed by the
Company with the Securities and Exchange Commission registering shares of the
Company's Stock, this Agreement shall terminate and shall be of no further
force and effect.
2. This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
PURO WATER GROUP, INC.,
a Delaware Corporation Thomas Limited Partnership
By: /s/ Jack C. West By: /s/ Wilmer Thomas
--------------------------- ---------------------------
Jack C. West Wilmer Thomas
Its President Hereunto Duly Authorized
Hereunto Duly Authorized
By: /s/ Scott Levy /s/ Jack C. West
--------------------------- -------------------------------
Scott Levy Jack C. West
Its Chief Executive Officer
Hereunto Duly Authorized
The Trust Under Article 16 of /s/ Scott Levy
the Will of W. Palmer Dixon, -------------------------------
for the Benefit of Palmer Scott Levy
Dixon and The Trust Under
Article 16 of the Will of W.
Palmer Dixon, for the Benefit /s/ Beth Levy
of Peter T. Dixon -------------------------------
Beth Levy
By: /s/ Peter T. Dixon
---------------------------
Peter T. Dixon
Hereunto Duly Authorized
/s/ Peter T. Dixon
- -------------------------------
Peter T. Dixon
Edberg Associates Limited Partnership
By: /s/ Stephen C. Edberg
--------------------------
Stephen C. Edberg
3
<PAGE>
EX-10.1
PURCHASE AGREEMENT
AGREEMENT (the "Agreement") dated the 26th day of August 1994 by and
among the Downmorr Water Corporation, a corporation existing under the laws
of the State of New York, (hereinafter referred to as "Downmorr"), Glenn
Downing and Gary Downing, (collectively referred to as "Downing" and/or
"Sellers"), and the Puro Corporation of America, a New York Corporation,
(referred to as "Puro" and/or "Purchaser").
WITNESSETH
WHEREAS, the Downings are the original and controlling Shareholders of
Downmorr and hold a total of one hundred (100) shares of Common Stock,
representing one hundred (100%) percent of all such voting and non voting,
shares issue and outstanding, are desirous to sell selected assets of
Downmorr to Puro and Puro is desirous to purchase said selected assets owned
by Downmorr and assume selected liabilities of Downmorr.
1. PURCHASE PRICE:
The purchase price to be paid the Sellers by the Purchasers for selected
assets of Downmorr shall be determined and calculated as follows:
(a) The Sellers shall be paid the average price per bottle of water
received by Downmorr for each bottle of water sold Aug. 1, 93 thru July 31,
94 less one dollar and fifty cents
-1-
<PAGE>
($1.50), per bottle (the cost to PURO) approximately 37,000 bottles. The
average price shall be determined using the July 1994 actual invoices from
Downmorr. Revenues from the Town of Babylon contract (rentals) shall be
excluded for purposes of this section (A & B).
(b) The Sellers shall be paid additionally the sum of $63,364.80
representing the annual water cooler rentals on the corporate books of
Downmorr, subject to verification as of 9/1/94. A listing of said cooler
rentals is attached hereto as Exhibit 1. Plus the additional sum of $16,162.
(c) The Seller shall convey all operating assets of Downmorr, including
customer lists, rental and supply agreements, files, records, telephone
numbers, advertising and non compete agreements.
(d) The Sellers may be paid an additional sum for certain other assets
owned by Downmorr, such as trucks, forklifts, warehouse inventory and water
coolers (excluding racks and Triple Springs' bottles in warehouse). The
Sellers shall attach hereto, as Exhibit 2, a schedule of said items being
turned over to Puro with a valuation for each item.
Against the figures itemized on Exhibit 1 and 2, and the values
calculated under sub paragraphs "a" "b" and "c" above, the Purchaser shall
receive a credit of $45,209.16 representing the long term payables owed by
Downmorr to Dependable Acceptance Co. ($16,013.33), to Charles Morrell Jr.
($15,762.20) and to the Bank of Smithtown ($13,433.63). Purchaser shall defend
and indemnify sellers from any claims made and referrable to the payables
noted herein.
-2-
<PAGE>
It is estimated by and between the parties to this agreement, that the
total purchase price for the assets as determined by paragraphs 1(a), (b),
and (c) will be approximately One Hundred Sixty-five Thousand ($165,000)
Dollars.
2. PAYMENT FOR ASSETS
(a) The purchase money that may be due and owing for the purchase of
the assets of Downmorr, as determined pursuant to paragraph 1, shall be paid
to Downmorr Water Corporation, over forty eight (48) months in equal monthly
payments, with interest payable at the prime rate at the time. There shall be
no penalty for any prepayment on the part of the Purchaser. Said payments
shall begin thirty (30) days after Glenn Downing terminates his Employment
Agreement (which is being executed simultaneously with this Purchase
Agreement). However if Puro terminates the Employment Agreement with Glenn
Downing, then the balance of the payments for the purchase of the assets
shall begin one year after date of termination unless Mr. Downing requests
payment earlier. Said request must be in writing and made thirty (30) days
before payment is to commence.
(b) If Puro Corporation of America shall be in the process of
preparing a Public Stock Offering and no money has been paid under this
paragraph, the Seller shall have the option to convert such money in a
purchase of said stock in the Public Offering, at the offering price less any
underwriters commissions.
-3-
<PAGE>
3. REPRESENTATIONS OF THE PURCHASER:
(a) The Purchaser shall assume the obligation for the monthly rent,
for the balance of the lease, on the property wherein Downmorr has its
facilities (Knickerbocker Ave., Bohemia New York). Said lease has a
termination dated of 10/31/94 with a rental of $810 per month. Glenn Downing
shall personally assume all responsibility for any pre-closing damage to the
lease property. If the Purchaser shall be responsible to pay any pre-closing
damage claim of the landlord, said monies so paid to the landlord shall be
deducted from any money due and owing Glenn Downing pursuant to Paragraph 1
of the Agreement. Any security deposit returned by the landlord shall be paid
to Glenn Downing.
(b) Purchaser will assume and pay, from the execution of the
Agreement, all monthly payments due and owing the Yellow Book and Pages for
the advertisements of the Corporation (estimated to be $1,100 per month).
(c) Purchaser shall attempt to return approximately Ten Thousand
(10,000) water bottles held by Downmorr and Triple Springs, for the operation
of its business. Any deposits received by the Purchaser, whether received in
cash or credit shall apply one third (1/3) to Downmorr and two thirds (2/3)
to the Purchaser.
-4-
<PAGE>
4. REPRESENTATIONS OF THE SELLERS:
(a) The Sellers represent that all taxes, Federal, State and Local
have been duly filed and paid. If for any reason a Tax audit is made of
the Corporation, and a claim for past taxes is made to the Purchaser, any
money paid pursuant to these claims shall be deducted from the money due and
owing Downmorr in accordance with paragraph 1 of this agreement. The purchase
price for this agreement shall be shown and indicated in Exhibit 3 attached
hereto.
(b) Sellers represent that there has been no broker or finder involved
in or retained with respect to the transactions described herein.
(c) The Sellers represent that there are no actions, suits or other
proceedings pending before any court, tribunal, commission, agency or bureau
against Downmorr, except as noted in Exhibit 4 attached hereto. Downmorr is
not in default with respect to any order, injunction, writ or decree of any
court, tribunal, commission, agency, office or bureau.
(d) Seller further represents that it shall fully cooperate with the
Purchaser to comply with the New York State Bulk Asset Sales Law. Any failure
to cooperate by the Seller which results in a claim against the Purchaser,
shall be offset against any money due and owing under this agreement.
-5-
<PAGE>
5. RESTRICTIVE COVENANT:
This Agreement shall contain a covenant by the Sellers and all other
persons heretofore active in the said Corporation or in any way interested
therein with the Sellers, not to reestablish, reopen, be engaged in, nor in
any manner whatsoever become interested, directly or indirectly, either as a
employee, as an owner, as a partner, as a agent, or as stockholder, director
or officer of a corporation, or otherwise, in any business, trade or
occupation similar to the one operated by the corporation Downmorr, within
the Counties of Suffolk and Nassau New York for a period of Five (5) years
from the date of this agreement or the termination of the Consulting
Agreement of Glenn Downing, which ever date is later. Glenn Downing upon
becoming a employee of Puro, by executing his employment agreement, shall
also execute a employee restrictive covenant agreement as attached hereto as
Exhibit 5.
6. GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principles of Conflict of Law.
-6-
<PAGE>
7. ARBITRATION:
Any Dispute relating to the interpretation or performance of this
Agreement shall be resolved at the request of either party through binding
arbitration in accordance with the rules of the American Arbitration
Association. Judgment of any award determined by the arbitrators may be
entered in any appropriate court having jurisdiction. In event that
litigation is commenced to enforce any of the terms of this Agreement, the
prevailing party in the litigation (whether by court or arbitration) shall be
entitled to the costs thereof, including reasonable attorney's fees.
8. CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Agreement
nor the intent of any provisions thereof.
This Agreement may not be changed orally. The terms, warranties and
agreements herein contained shall bind and inure to the benefit of the
respective parties hereto, and their respective legal representatives,
successors and assigns and shall survive after delivery of the bill of sale.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be made and
executed the day and year first written above.
Downmorr Water Corporation
by /s/ Glenn Downing Pres.
--------------------------------
/s/ Glenn Downing
----------------------------------
Glenn Downing
/s/ Gary Downing
----------------------------------
Gary Downing
Puro Corporation of America
by /s/ Scott Levy Pres.
--------------------------------
-8-
<PAGE>
EXHIBIT "1"
-----------
DOWNMORR WATER CORPORATION
--------------------------
COOLER RENTALS
--------------
<PAGE>
EXHIBIT "2"
-----------
DOWNMORR WATER CORPORATION
--------------------------
EQUIPMENT TRANSFERRED TO
------------------------
PURO CORPORATION OF AMERICA
---------------------------
<PAGE>
EXHIBIT # 2
1. 1987 International Delivery Truck (Diesel) $ 7,000.00
ID# 1HTLDTVN4HH471365
2. Clark Forklift # 030B- 625-741-266 2,000.00
3. Coolers
A. 3 Cold 225.00
B. 1 Cook & Cold 85.00
C. 3 Hot & Cold 300.00
D. 1 Room Temp Dispenser 45.00
E. 5 Cordley Refreshment Ctrs 900.00
F. 1 Table Top Cook & Cold 95.00
G. 1 Refrigerator 150.00
H. 2 Springwell Dispensers 47.90
I. 2 Springwell Oak Stands 49.90
4. Cup Dispensers
A. 19 ADJ15 4 oz Cone Disp 77.52
B. 3 ADJ20 7oz Disp 16.11
C. 20 5 oz Disp 71.40
5. Water Guards
A. 22 EBCO Water Guards 237.60
B. 1 Cordley WG 11.97
6. Cups
A. 6 Cases 42 RCP Cone 196.92
7. 4 Propane Gas Tanks @ $75 each 300.00
8. Cooler Parts
A. Cooler Tops
1. 7 Oasis 33.30
2. 4 Cordley 26.68
B. Side Panels
1. 64 Oasis 221.56
2. 44 Cordley 130.68
C. Receptors
1. 5 Oasis 9.15
2. 3 Cordley 9.63
D. Anti-Splash Trays
1. 6 Oasis 5.68
2. 6 Cordley 6.98
E. Baffles
1. 12 Oasis H&C 11.73
2. 1 Oasis Cold 0.91
3. 5 Cordley H&C 8.37
4. 4 Cordley Cold 3.57
F. Faucets
1. 27 Oasis 62.04
2. 1 Oasis Safety 3.51
3. 12 Cordley 28.58
G. Faucet Recess Panel
1. 1 Oasis Almond 5.48
Total $12,367.17
<PAGE>
EXHIBIT "3"
-----------
AGREED PURCHASE PRICE
----------------------
Approximately $215,000.00
-------------------------
<PAGE>
EXHIBIT "4"
-----------
LAW SUITS AND ACTIONS
---------------------
PENDING AGAINST
---------------
DOWNMORR WATER CORPORATION
--------------------------
<PAGE>
SUPREME COURT OF THE STATE OF NEW YORK FILE COPY
COUNTY OF SUFFOLK
- -------------------------------------------------x
PHILIP MONTANA and ANITA MONTANA,
Index No.:
Plaintiffs, 10763/92
-against-
THIRD-PARTY
TRUX, INC., SUMMONS
-----------
Defendant.
- --------------------------------------------------x
TRUX, INC.,
Third-Party Plaintiff,
-against-
DOWNMORR WATER CORPORATION,
Third-Party Defendant.
- --------------------------------------------------
TO: THE ABOVE NAMED THIRD-PARTY DEFENDANT:
YOU ARE HEREBY SUMMONED, to serve an Answer to this third-party Summons
and Complaint upon the attorneys for the defendant/third-party plaintiff,
QUIRK & BAKALOR, P.C., as well as upon the office of SIBEN & FERBER, P.C.,
attorneys for the plaintiffs, located at 1455 Veterans Memorial Highway,
Hauppauge, New York 11788, within twenty (20) days after service thereof,
exclusive of the date of service or within thirty (30) days after completion
of service if service is made upon you by any method other than by personal
delivery to you in the State of New York.
In case of your failure to Answer the Complaint of the third-party
plaintiff, judgment will be taken against you by default for the relief demanded
in this third-party Complaint.
<PAGE>
[Letterhead]
January 31, 1994
State Insurance Fund
199 Church Street
13th Floor
New York, New York 10007
Attention: James Fiedler, Esq.
Re: Your Insured: Downmorr Water Corp.
Date of Loss: October 12, 1990
Dear Mr. Fiedler:
Enclosed please find copies of the Montana Summons and Complaint and Trux,
Inc. Third-Party Summons and Complaint. Kindly provide Downmorr Water Corp.
with a defense according to the terms of their policy at the time of the loss.
I trust you will attend to this matter with all due haste.
Should you require anything further, you may contact the undersigned.
Very truly yours,
/s/ Jerry Garguilo
JERRY GARGUILO
JG/clb
Enclosures
cc: Downmorr Water Corp.
Quirk & Bakalor, P.C.
<PAGE>
EXHIBIT "5"
-----------
PURO CORPORATION OF AMERICA
---------------------------
EMPLOYEES RESTRICTIVE COVENANT
------------------------------
<PAGE>
TO: LSL HYDRO SYSTEMS, INC. and/or PURO CORPORATION OF
AMERICA ("Puro/Hydro")
I hereby acknowledge that in connection with my employment with Puro/Hydro I
will from time to time have access to trade secrets vital to Puro/Hydro's
business, including customer bills, letters, contract bids, prices, processes,
techniques and other confidential information not generally known to the public
or to Puro/Hydro's competitors, and I agree to protect and hold such information
confidential during and after my employment with Puro/Hydro. In the event I
leave Puro/Hydro, I shall immediately return to Puro/Hydro all records and
documents relating to its business.
During the term of my employment I shall not directly or indirectly take any
action inconsistent with my obligation of loyalty to Puro/Hydro as my employer.
For a period of one (1) year from the termination of my employment, I shall not
directly or indirectly approach or otherwise deal with any of Puro/Hydro's
customers or suppliers or in any way encourage them to do business with any
competing service or company in the area served by Puro/Hydro. During this
period, I shall not approach any of Puro/Hydro's employees to encourage them to
leave Puro/Hydro or take any action inconsistent with Puro/Hydro's interests.
I recognize that the amount of damages to Puro/Hydro were I to violate this
agreement would be difficult if not impossible to ascertain, and I agree that
Puro/Hydro, in addition to its other rights, shall have the right to an
injunction against such violation. I understand that my agreement hereto is in
consideration of my continued employment by Puro/Hydro.
Signed:_____________________________Printed:_______________________
Witnessed:__________________________
Dated:______________________________
<PAGE>
EX-10.2
DOWNMORR WATER CORPORATION
November 14, 1996
Mr. Scott Levy
Puro Water Group, Inc., President
56-45 58th Street
Maspeth, New York 11378-0010
Re: Purchase Agreement dated 8/26/94; Downmorr to Puro
Dear Mr. Levy:
This will confirm that Downmorr Water Corporation, Inc. (the "Company"),
hereby waivers any rights to convert debt into the right to receive common
stock ("Common Stock") of Puro Water Group, Inc., formerly known as Puro
Corporation of America ("Puro") to be issued in connection with the initial
public stock offering referred to in that certain agreement dated the 26th
day of August, 1994 by and among the Company, Glenn Downing, Gary Downing and
Puro (the "Agreement"). All other items of the Agreement shall remain in
force and effect.
In consideration of the foregoing, the Company hereby agrees to issue to
Glenn Downing in payment and full satisfaction of such debt, 30,667 shares of
Common Stock of the Company's 1996 Stock Option Plan, said shares to be
valued at the value calculated pursuant to the terms of the Plan. In
addition, the Company further hereby agrees to issue to Glenn Downing an
option under the 1996 Stock Option Plan for a number of shares equal to 1% of
the total outstanding stock, or 22,500 shares thereby satisfying the
Company's stock option obligations under the employment agreement by and
between Glen Downing and Puro, dated August 26, 1994 and amended December 31,
1994.
In the event that the Options covering the 30,667 shares and the 22,500
shares are not issued to Glenn Downing by within ninety (90) days of the
conclusion of the initial public offering, the entire amount (agreed to be
$184,000) of the original debt owed pursuant to the Purchase Agreement dated
August 26, 1994 shall become immediately due and payable in 36 monthly
installments and shall bear interest at the rate of prime per annum.
In the event the initial public offering is not concluded, this
Agreement shall be null and void and the terms of the August 26, 1994
Agreement shall remain in effect.
AGREED TO: /s/ Glenn Downing
PURO WATER GROUP, INC. -------------------------
Glenn Downing, individually and as
President of Downmorr Water
Corporation, Inc.
BY: /s/ Jack West
--------------------- /s/ Gary Downing
Jack West -------------------------
Gary Downing
<PAGE>
EX-10.3
PURCHASE AGREEMENT
AGREEMENT (the "Agreement") dated the 30th day of January 1995 by and
among the Bark Water Co. Ltd., a corporation existing under the laws of the
State of New York, maintaining offices at 28 Garfield Avenue, Bayshore
New York, (hereinafter referred to as "Bark Water" or Seller), and
Kenneth Gelber, residing at 67-66 108th Street, Forest Hills New York 11325,
(hereinafter referred to as "Gelber"), and the Puro Corporation of America, a
New York Corporation, maintaining offices at 56-45 58th Street, Maspeth
New York (referred to as "Puro" and/or "Purchaser").
WITNESSETH
WHEREAS, Gelber is the original and sole Shareholder of Bark Water Co.
Ltd. and holds a total of one hundred (100) shares of Common Stock,
representing one hundred (100%) percent of all such voting and non voting,
shares issue and outstanding, and
WHEREAS, Bark Water desires to sell to Purchaser and Purchaser desires
to purchase selected assets owned by Bark Water and assume selected
liabilities of Bark Water.
1. PURCHASE PRICE:
The purchase price to be paid the Seller by the
-1
<PAGE>
Purchasers for selected assets of Bark Water shall be Four Hundred Fifty
Thousand Dollars ($450,000) which is derived and calculated upon the
following representations of the Sellers:
(a) The Sellers have represented that the most recent twelve month
revenues of Bark Water for the calendar year 1994, to be approximately Two
Hundred Eighty Six Thousand Dollars ($286,000). Attached hereto as Exhibit 1.
(b) The most recent annual water cooler rentals for the calendar year
1994, estimated to be approximately Seventy Thousand Dollars ($70,000) for
six hundred units. Attached hereto as Exhibit 2.
(c) The Sellers shall convey all operating assets of Bark Water,
including customer lists, rental and supply agreements, files, records,
telephone numbers, advertising and non compete agreements.
2. PAYMENT FOR ASSETS
The purchase money that may be due and owing for the purchase of the
assets of Bark Water, as determined pursuant to paragraph 1, shall be paid to
Bark Water Co. Ltd. as follows:
(a) At the date of closing, by certified check, payable to Bark Water or
whomever else the Sellers designate in writing on or before the date of
closing, the sum of One Hundred Fifty Thousand Dollars ($150,000), less any
amount or sums of money due and owing Puro on said date. The Sellers agree to
pay from
-2-
<PAGE>
the cash received at the closing his and/or its obligation due and owing
under an original Sellers note, a copy of which is annexed as exhibit 3, that
places a lien on Bark Water's assets and stock, so that Bark Water is able to
convey the assets covered by this Agreement free and clear of any and all
obligations, claims and liens held by said James Wolf, Edward Walsh and any
other third person or entity.
(b) The giving of a note by the Purchaser and personally guaranteed by
Jack West and Scott Levy, Co-Chief Executive Officers of Puro, in the face
amount of One Hundred Twenty Thousand Dollars ($120,000), payable monthly
over seven years from the date of closing, with interest at the rate of nine
(9%) percent per annum. A copy of the note and guaranty is annexed hereto as
Exhibit 4.
(c) The giving of a convertible note by Puro in the face Amount of One
Hundred Eighty Thousand Dollars ($180,000), personally guaranteed by Jack
West and Scott Levy, Co-Chief Executive officers of Puro, payable over six
years (6) with interest at the rate of nine percent (9%) per year. Interest
only will be due and payable monthly for years one and two. For the years
three through six principal and interest shall be paid monthly at the rate of
$4479.32 per month. The amount due the Seller on the note under this
sub-paragraph "c", shall be
-3-
<PAGE>
adjusted in accordance with the percentage of increase or decrease in the
Purchaser's Long Island Division's and New York City Bark accounts yearly
gross sales, over the gross sales of the Long Island Division plus "Bark
Water" for the year ending December 31, 1994. Said amount shall be paid or
deducted if required during the year one, if Puro's public offering occurs
before December 31, 1995 otherwise the adjustment shall occur in year two.
However the face amount of the note herein shall not exceed, in total, the
sum of Four Hundred Thousand ($400,000.00) Dollars. If Bark Water customers
cease to continue to do business with Puro, anytime after November 18, 1994
as a result of inadequate revenue from Puro, the gross sales figures for
calendar 1994 or the applicable part thereof shall be added to the 1995 gross
sales figures for the purpose of the adjustment contained herein above.
(d) If Puro Corporation of America shall be in the process of preparing
a Public Stock Offering, the Sellers and the Sellers only have the option to
convert the balance of the principal due and owing on the notes contained in
subdivisions (b) and (c) above for the purchase of said stock in the Public
Offering, at the offering price less any underwriters commissions. The right
of conversion shall belong only to the Sellers herein and may not be
transferred, assigned or given to any other person or entity. If the initial
public offering occurs before December 31, 1995, the adjustment up or down
mentioned in paragraph "c" above, will be determined by year to date change
prorated to the twelve month period.
3. REPRESENTATIONS OF THE PURCHASER:
(a) Purchaser will assume and pay, from the execution of
-4-
<PAGE>
the Agreement, all monthly payments due and owing the Yellow Book and Pages
for the advertisements of the Corporation, Bark Water Co. Ltd. (estimated to
be $350.00 per month).
(b) Purchaser will assume and be liable to Bark Water customers for all of
Bark Water's customer bottle deposits as of the date of closing.
(c) Purchaser will assume all cooler contracts between Bark Water and
its customers. A list of cooler contracts being assumed is annexed as Exhibit
2.
(d) Purchaser shall fully comply with its obligations under the New York
State Bulk Assets Sales Law.
(e) Purchaser represents that it has full power and legal right to
execute, deliver and perform this agreement. The execution, delivery and
performance of this agreement will not contravene any provision of the
certificate of incorporation or by-laws of Purchaser. The above
representation shall survive closing.
4. REPRESENTATIONS OF THE SELLERS:
(a) The Seller and Gelber represent that Bark Water's Federal, State and
Local taxes have been or will be filed and paid. If for any reason a Tax
audit is made of Bark Water, and a claim for past taxes is made to the
Purchaser, any money paid pursuant to these claims shall be deducted from the
money due and owing Sellers in accordance with paragraph 1 of this
-5-
<PAGE>
agreement. In the event of a tax audit, Puro must notify Sellers pursuant to
paragraph 10 herein.
(b) The Seller and Gelber represent that there are no actions, suits or
other proceedings pending before any court, tribunal, commission, agency or
bureau against Bark Water, except as noted in Exhibit 3 attached hereto.
Sellers are not in default with respect to any order, injunction, writ or
decree of any court, tribunal, commission, agency, office or bureau.
(c) Seller and Gelber represent that they shall fully cooperate with
the Purchaser to comply with the New York State Bulk Asset Sales Law. Any
failure to cooperate by the Seller which results in a claim against the
Purchaser, shall be offset against any money due and owing under this
agreement.
5. ACCOUNTS RECEIVABLE:
Purchaser shall be under no obligation to assist in collection of any
accounts receivable due from Bark Water customers. In the event Purchaser
does receive any payments which are denominated payments of Bark Water's
accounts receivables, Purchaser shall forward said payments to Sellers,
without undue delay and without reduction. A schedule of accounts receivable
is set forth in Schedule 5 annexed hereto.
-6-
<PAGE>
6. RESTRICTIVE COVENANT:
Sellers covenant that they will not reestablish, reopen, be engaged in,
nor in any manner whatsoever become interested, directly or indirectly,
either as a employee, as an owner, as a partner, as a agent, or as private
stockholder, director or officer of a corporation, or otherwise, in any
business, trade or occupation similar to the one operated by the corporation
Bark Water Co. Ltd., within the Counties of Suffolk, Nassau and the City of
New York for a period of Seven (7) years from the date of this agreement.
Upon the termination for economic reasons of the Employment Agreement of
Kenneth Gelber the period shall be two years from the date of termination.
Not withstanding the foregoing, Kenneth Gelber shall be bound by the seven
years period with respect to the existing PURO/BARK customers as of the date
of termination. Kenneth Gelber upon becoming a employee of Puro, by executing
his employment agreement, shall also execute a employee restrictive covenant
agreement as attached hereto as Exhibit 6. This restrictive covenant and the
restrictive covenant attached hereto as Exhibit 6 shall be rendered null and
void in the event of a default by purchase on the notes executed
simultaneously herewith.
7. GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principles of Conflict of Law.
-7-
<PAGE>
8. ARBITRATION:
Any Dispute relating to the interpretation or performance of this
Agreement shall be resolved at the request of either party through binding
arbitration in accordance with the rules of the American Arbitration
Association. Judgment of any award determined by the arbitrators may be
entered in any appropriate court having jurisdiction In event that
arbitration is commenced to enforce any of the terms of this Agreement, the
prevailing party in the arbitration shall be entitled to the costs thereof,
including reasonable attorney's fees.
9. CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Agreement
nor the intent of any provisions thereof.
10. NOTICE
All notices, requests or other communications required hereunder shall be
in writing and shall be deemed to have been duly given or made, if personally
delivered, or if mailed by United States certified mail, return receipt
requested, to the parties at the respective addresses first above written, or
at such other address as shall be specified in writing by either
-8-
<PAGE>
of the parties to the other in accordance with the terms and conditions of
this paragraph.
11. BROKERAGE:
Each party represents to each other party that it has dealt with no
finder or broker in connection with any of the transactions contemplated by
this agreement or the negotiations looking forward to the consummation of
this agreement and that no broker or other person is entitled to any
commission or finder's fee in connection with any such transactions or
negotiations, and each party hereby indemnifies each other party against and
agrees to hold such other party harmless from any liability or expense which
may be imposed by or incurred by such other party in connection with any
claim by any such finder or broker based upon any alleged arrangement or
communication with the indemnifying party.
12. EXPENSES:
Whether or not the transactions contemplated by this agreement shall be
consummated, all expenses incurred by the Sellers or the Purchaser in
connection with the transactions contemplated hereby shall be the
responsibility of and for the account of the party who ordered the particular
service or incurred the particular expense.
This Agreement may not be changed orally. The terms,
-9-
<PAGE>
warranties and agreements herein contained shall bind and inure to the
benefit of the respective parties hereto, and their respective legal
representatives, successors, and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made and
executed the day and year first written above.
Bark Water Co. Ltd.
by /s/ Kenneth Gelber Pres.
--------------------------
/s/ Kenneth Gelber
----------------------------
Kenneth Gelber
Puro Corporation of America
by /s/ Jack West Pres
--------------------------
-10-
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENT, that Bark Water Co. Ltd. of 28 Garfield
Avenue, Bayshore New York, in consideration of the sum of Four Hundred Fifty
Thousand ($450,000) Dollars, lawful money of the United States, paid to me in
hand by the Puro Corporation of America, 56-45 58th Street, Maspeth New York,
receipt of which is hereby acknowledged has bargained and sold, and by these
present does grant and convey unto Puro Corporation of America, its
successors and assigns, the
a. Accounts, Inventory and Coolers valued at $145,000
b. Furniture, Fixtures and Equipment valued at $5,000
c. Goodwill valued at $300,000
and attached hereto Exhibit A and Exhibit B respectively.
To Have And Hold the same by Puro Corporation of America, its successors
and assigns forever;
And Bark Water Co. Ltd. warrants and represents to Puro Corporation of
America that the title conveyed is good, its transfer is appropriate and
rightful, and the accounts, containers and water coolers described in Exhibit
A and B are and have been delivered free of any security interest, lien and
encumbrance thereon.
EXECUTED this 30th day of January 1995 at 56-45 58th Street, Maspeth New
York.
Bark Water Co. Ltd.
by /s/ Kenneth Gelber Pres.
---------------------------
Kenneth Gelber
<PAGE>
State of New York)
County of Queens )
On January 30th, 1995, before me, a notary public for the State of New
York, personally appeared Kenneth Gelber, known to me or proved to me to be
the President of Bark Water Co. Ltd., the person whose name is subscribed to
the within Bill of Sale and acknowledged to me that he executed same.
[seal] /s/ Frederick A. Rossetti
------------------------------------
Notary
Kenneth Gelber being duly sworn depose and say:
That he has read the foregoing document, warrant and guarantee and that the
statements made by Bark Water Co. Ltd., BY its president, Kenneth Gelber are
true, full well realizing that Puro Corporation of America is relying upon
its representation.
/s/ Kenneth Gelber
-------------------------------------
Kenneth Gelber
State of New York)
County of Queens )
On January 30th, 1995, before me, a notary public for the State of New
York, personally appeared Kenneth Gelber, known to me or proved to me to be,
the person whose name is subscribed to the within Bill of Sale and acknowledged
to me that he executed same.
[seal] /s/ Frederick A. Rossetti
------------------------------------
Notary
<PAGE>
VARIABLE PROMISSORY NOTE
$120,000.00 JANUARY 30, 1995
For value received, Puro Corporation of America maintaining offices at
56-45 58th Street, Maspeth New York 11378 promises to pay to the order of
Bark Water Co. Ltd. ("Bark Water") maintaining offices at 28 Garfield Avenue,
Bayshore New York, One Hundred Twenty Thousand ($120,000.00) Dollars in the
following manner: $1930.70 on March 1, 1995 an $1930.70 on the 1st day of
each month thereafter until February 1, 2002 when the entire amount is fully
paid, with interest from the date hereof, at the rate of nine (9%) percent
per annum, included in each installment. Payments shall be made at such
locations as Bark Water may from time to time designate in writing. All
installments if not paid within 15 days of the due date shall become due and
payable forthwith, at the option of holder. This note shall be governed by
the laws of the State of New York, without giving effect to the principles of
conflict of laws. Bark Water may at any time negotiate and assign this note,
but said note is subject to the terms and
<PAGE>
contained in the Purchase Agreement executed simultaneous hereto between Puro
Corporation of America, Bark Water and Kenneth Gelber. Protest waived.
Attest: Puro Corporation of America
/s/ Scott Levy By /s/ Jack West
- -------------------------- ------------------------------
Scott Levy Jack West - President
Payment of the within promissory note is herewith personally guaranteed
jointly and severable by the following individuals, Scott Levy, residing at
32 Morewood Oaks, Port Washington, NY 11050 and Jack West, residing at 3207
Victoria Drive, Mt. Kisco, New York, 10549. The payee of the written note may
only assign this note to Kenneth Gelber, which may be done at any time. The
Guarantors herein shall have the same rights and defenses against the payment
of the note which the maker (Puro) shall have the Guarantors herewith
guarantee the payment of the within note. The Guaranty shall continue until
all sums due under the promissory note executed simultaneously herewith are
paid in full and shall be governed by New York State Law.
/s/ Scott Levy /s/ Jack West
- ------------------------ -------------------------------
Scott Levy Jack West
<PAGE>
VARIABLE PROMISSORY NOTE
$180,000.00 JANUARY 30, 1995
For value received, Puro Corporation of America maintaining offices at
56-45 58th Street, Maspeth New York 11378 promises to pay to the order of
Bark Water Co. Ltd. ("Bark Water") maintaining offices at 28 Garfield Avenue,
Bayshore New York, One Hundred eighty Thousand ($180,000.00) Dollars, with
interest at nine (9%) percent per annum in the following manner: Interest
payment of $1350.00 on March 1, 1995 and #1350.00 on the 1st day of each
month thereafter until February 1, 1997. Principal and interest payments in
the amount of $4479.32 payable on March 1, 1997 and monthly thereafter until
February 1, 2001, when the entire amount is fully paid, with interest from
the date hereof. Payments shall be made at such locations as Bark Water may
from time to time designate in writing. All installments if not paid within
15 days of the due date shall become due and payable forthwith, at the option
of holder. This note shall be governed by the laws of the State of New York,
without giving effect to the principles of conflict of laws. Bark Water may
at any time negotiate and assign this note, but said note is subject to the
terms and conditions
<PAGE>
contained in the Purchase Agreement executed simultaneous hereto between Puro
Corporation of America, Bark Water and Kenneth Gelber. Protest waived.
Attest: Puro Corporation of America
/s/ Scott Levy By /s/ Jack West
- -------------------------- ------------------------------
Scott Levy Jack West - President
Payment of the within promissory note is herewith personally guaranteed
jointly and severable by the following individuals, Scott Levy, residing at
32 Morewood Oaks, Port Washington, NY 11050 and Jack West, residing at 3207
Victoria Drive, Mt. Kisco, New York, 10549. The payee of the written note may
only assign this note to Kenneth Gelber, which may be done at any time. The
Guarantors herein shall have the same rights and defenses against the payment
of the note which the maker (Puro) shall have the Guarantors herewith
guarantee the payment of the within note. The Guaranty shall continue until
all sums due under the promissory note executed simultaneously herewith are
paid in full and shall be governed by New York State Law.
/s/ Scott Levy /s/ Jack West
- ------------------------ -------------------------------
Scott Levy Jack West
<PAGE>
DOCUMENTS
SALE OF
BARK WATER CO. LTD.
TO
PURO CORPORATION OF AMERICA
JANUARY 30, 1995
Frederick A. Rossetti Esq.
112 Madison Avenue
New York, New York 10016
(212) 696-9100
<PAGE>
[LETTERHEAD]
January 30, 1995
Kenneth Gelber
67-66 108th Street
Forest Hills, New York 11325
Re: Employment Agreement
Puro Corporation of America with Kenneth Gelber
Dear Mr. Gelber:
This will confirm the arrangements, terms and conditions whereby Kenneth
Gelber (hereinafter referred as the "Employee") will be employed by Puro
Corporation of America (hereinafter referred as "Company").
You will be retained as a Employee handling the Nassau and Suffolk
Counties Bark Water Co. Ltd., d/b/a Nature's Way, divisions of the Company,
which are located at Garfield Avenue, Bayshore New York. As Manager you will
be required to devote a minimum of eight hours a day to your duties
supervising and coordinating the smooth transition of Nature's Way accounts
into Puro and opening, directing and managing a direct store-door small
package business. As compensation for the hours devoted to these duties, you
will be paid the sum of fifteen hundred ($1,500) per week, which includes
salary, special benefits and expenses, less appropriate deductions required
by law. You guarantee to preform these services up to and including December
31, 1996. However either party, either yourself or the Company may cancel
this agreement upon ninty days written notice to the other party.
This agreement shall not be assignable by either party, nor may it be
changed orally.
Very truly yours,
by /s/ Jack West Pres.
-----------------------------
Puro Corporation of America
Dated: January 30, 1995
Agreed and Accepted by
/s/ Kenneth Gelber
- ----------------------
Kenneth Gelber
<PAGE>
EX-10.4
AMENDMENT TO PURCHASE AGREEMENT
AGREEMENT made this 12th day of November, 1996 by and among the Bark Water Co.
Ltd., a corporation existing under the laws of the State of New York,
maintaining offices at 28 Garfield Avenue, Bayshore, New York, (hereinafter
referred to as "Bark Water" and/or "Seller"), and Kenneth Gelber, residing at
67-66 108th Street, Forest Hills, New York 11325, (hereinafter referred to as
("Gelber"), and Puro Water Group, Inc., formerly known as Puro Corporation of
America, a Delaware Corporation, maintaining offices at 56-45 58th Street,
Maspeth, New York (referred to as "Puro" and/or "Purchaser").
WITNESSETH
WHEREAS, the parties have executed that certain Purchase Agreement ("the
"Agreement") dated January 30, 1995;
WHEREAS, the parties wish to amend a provision of the Agreement
NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the parties hereto do hereby agree as follows:
1) Paragraph 2(d) is hereby amended and restated as follows:
If Puro shall be in the process of preparing a Public Stock Offering,
the Sellers and the Sellers only shall have the option to convert the
balance of the principal due and owing on the notes contained in
subdivisions (b) and (c) above for the purchase from the company of
common stock at a purchase price equal to the offering price less any
underwriters' commissions. The right of conversion shall belong only
to the Sellers herein and may not be transferred, assigned or given to
any other person or entity. If the initial public offering occurs
before December 31, 1995, the adjustment up or down mentioned in
paragraph "c" above will be determined by year to date change prorated
to the twelve-month period.
<PAGE>
2) All other terms and provisions of the Agreement shall remain unchanged
and in full force and effect.
Bark Water Co. Ltd.
by /s/ Kenneth Gelber, Pres.
/s/ Kenneth Gelber
--------------------------------
Kenneth Gelber
Puro Corporation of America
by /s/ Scott Levy, Pres.
<PAGE>
EX-10.5
PURCHASE AGREEMENT
AGREEMENT (The "Agreement") dated the 28th day of April 1995 by and among
the National Ozone Water Corp. a corporation existing under the laws of the
State of New York, maintaining offices at 430 W. Merrick Road, Valley Stream
New York 11762, (hereinafter referred to as "National Ozone"), Edward
Worfler, residing at 252 Harbor Lane, Massapequa Park New York 11762.
(hereinafter referred to as "Worfler", and Rita Worfler, residing at 252
Harbor Lane, Massapequa Park New York (hereinafter referred to as "Worfler")
and/or collectively as the "Sellers"), and the Puro Corporation of America, a
New York Corporation, maintaining offices at 56-45 58th Street, Maspeth New
York (referred to as "Puro" and/or "Purchaser").
WITNESSETH
WHEREAS, Edward and Rita Worfler are the original and sole Shareholder of
National Ozone Water Corp. and hold a total of one hundred (100) shares of
Common Stock, representing one hundred (100%) percent of all such voting and non
voting, shares issue and outstanding, and
WHEREAS, National Ozone desires to sell to Purchaser and Purchaser desires
to purchase selected assets owned by National Ozone Water Corp. and assume
selected liabilities of National Ozone Water Corp.
-1-
<PAGE>
1. PURCHASE PRICE:
The purchase price to be paid the Seller by the Purchasers for selected
assets of National Ozone shall be approximately Five Hundred Twenty Four
Thousand Dollars ($524,000) which is derived and calculated upon the following
representations, attached hereto as Exhibit 1, of the Sellers:
(a) The Sellers have represented that the most recent twelve month annual
net water revenues of National Ozone exclusive of the Long Island RR, to be
approximately Three Hundred Fifty Thousand Dollars ($350,000). Attached hereto
as Exhibit 1. The Purchaser Agrees to pay one hundred percent (100%) of such
annual water sales.
(b) The most recent annual net water cooler rentals, estimated to be
approximately One Hundred Thousand Dollars ($100,000). Attached hereto as
Exhibit 2. The Purchaser agrees to pay one hundred fifty percent (150%) of the
annual water cooler rentals.
(c) The Sellers further represent that the annual net water sales to the
Long Island Rail Road to be Sixty One Thousand ($61,000.00) Dollars. The
Purchaser agrees to pay forty percent (40%) for said water sales to the LIRR.
(d) The Sellers shall convey all operating assets of National Ozone,
including customer lists, trucks, rental and supply agreements, production
equipment files, records, telephone numbers, advertising and non compete
agreements, use
-2-
<PAGE>
of trade name, if any, inventory, bottles, coolers, containers, racks, crates
(wood or plastic) and furniture and fixtures.
2. PAYMENT FOR ASSETS
The purchase money that may be due and owing for the purchase of the assets
of National Ozone, as determined pursuant to paragraph 1, shall be paid to
National Ozone Water Corp. as follows:
(a) At the date of closing, by certified check, payable to National Ozone
Water Corp. or whomever else the Sellers designate in writing on or before the
date of closing, the sum of One Hundred Seventy Four Thousand Eight Hundred
Dollars ($174,800), less any amount or sums of money due and owing Puro on said
date.
(b) The giving of a variable note by Puro in the face amount of Three
Hundred Forty Nine Thousand Six Hundred Dollars ($349,600), payable over four
years (4) with interest at eight percent (8%) per annum. Interest only will be
paid monthly for the first six months. Thereafter payments to be made monthly
beginning seven months from the date of closing and continuing monthly
thereafter at the rate of $9,571.01 per month for forty two (42) months.. The
amount due the Seller on the note under this sub-paragraph "b", shall be
adjusted in accordance with the percentage of increase or decrease in the
Purchaser's Ozone's accounts yearly gross sales ending 3/31/96, over the gross
sales of National Ozone Water Corp. for the year ending March 31, 1996. Said
-3-
<PAGE>
amount shall also be paid or deducted if required to reflect any changes in the
actual representations made in Section 1.
(c) The Purchaser agrees not to increase the prices of Ozone customers
during the initial first year adjustment period. If however any National Ozone
customer who discontinues or shall be in payment arrears of 120 days or more,
said customer revenues shall be deducted from the purchase price from the date
of discontinuance to the end of the adjustment period as outlined in paragraph 1
of this Agreement.
3.REPRESENTATIONS OF THE PURCHASER:
(a) Purchaser will assume and pay, from the execution of the Agreement,
all monthly payments due and owing the Yellow Book and Pages for the
advertisements of the Corporation, National Ozone Water Corp. (estimated to be
$000.00 per month).
(b) Purchaser will assume and be liable to National Ozone customers for
all of National Ozone Customer bottle deposits as of the date of closing.
(c) Purchaser will assume all cooler contracts between National Ozone and
its customers. A list of cooler contracts being assumed is annexed as Exhibit
2.
(d) Purchaser shall fully comply with its obligations under the New York
State Bulk Assets Sales Law.
(e) Purchaser represents that it has full power and legal right to
execute, deliver and perform this agreement. The execution, delivery and
performance of this agreement will not
-4-
<PAGE>
contravene any provision of the certificate of incorporation or by-laws of
Purchaser.
4. REPRESENTATIONS OF THE SELLERS:
(a) The Sellers represent that National Ozone Water Corp. Federal, State
and Local taxes have been or will be filed and paid. If for any reason a Tax
audit is made of National Ozone and a claim for past taxes is made to the
Purchaser, any money paid by the Purchaser pursuant to these claims shall be
deducted from the money due and owing Sellers in accordance with paragraph 1 of
this agreement. In the event of a tax audit, Puro must notify Sellers and the
Sellers accountant, Nat Migden, who will conduct these audits at no expense to
the Buyer pursuant to paragraph 10 herein.
(b) The Sellers represent that there are no actions, suits or other
proceedings pending before any court, tribunal, commission, agency or bureau
against National Ozone, except as noted in Exhibit 3 attached hereto.
Sellers are not in default with respect to any order, injunction, writ or
decree of any court, tribunal, commission, agency, office or bureau.
(c) Sellers further represent that they shall fully cooperate with the
Purchaser to comply with the New York State Bulk Asset Sales Law. Any failure
to cooperate by the Seller which results in a claim against the Purchaser, shall
be offset against any money due and owing under this agreement.
-5-
<PAGE>
6.RESTRICTIVE COVENANT:
Sellers covenant that they will not reestablish, reopen, be engaged in, nor
in any manner whatsoever become interested, directly or indirectly, either as a
employee, as an owner, as a partner, as a agent, or as stockholder, director or
officer of a corporation, or otherwise, in any business, trade or occupation
similar to the one operated by the corporation National Ozone Water Corp.,
within the Counties of Suffolk, Nassau and the City of New York for a period of
Seven (7) years from the date of this agreement.
7.GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principles of Conflict of Law.
-6-
<PAGE>
8. ARBITRATION:
Any Dispute relating to the interpretation or performance of this Agreement
shall be resolved at the request of either party through binding arbitration in
accordance with the rules of the American Arbitration Association. Judgment of
any award determined by the arbitrators may be entered in any appropriate court
having jurisdiction In event that arbitration is commenced to enforce any of
the terms of this Agreement, the prevailing party in the arbitration shall be
entitled to the costs thereof, including reasonable attorney's fees.
9. CAPTIONS
The captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this Agreement nor the
intent of any provisions thereof.
10. NOTICE
All notices, requests or other communications required hereunder shall be
in writing and shall be deemed to have been duly given or made, if personally
delivered, or if mailed by United States certified mail, return receipt
requested, to the parties at the respective addresses first above written, or at
such other address as shall be specified in writing by either
-7-
<PAGE>
of the parties to the other in accordance with the terms and conditions of this
paragraph,
11. BROKERAGE:
Each party represents to each other party that it has dealt with no
finder or broker in connection with any of the transactions contemplated by
this agreement or the negotiations looking forward to the consummation of
this agreement and that no broker or other person is entitled to any
commission or finder's fee in connection with any such transactions or
negotiations, and each party hereby indemnifies each other party against and
agrees to hold such other party harmless from any liability or expense which
may be imposed by or incurred by such other party in connection with any
claim by any such finder or broker based upon any alleged arrangement or
communication with the indemnifying party,
12.EXPENSES:
Whether or not the transactions contemplated by this agreement shall be
consummated, all expenses incurred by the Sellers or the Purchaser in connection
with the transactions contemplated hereby shall be the responsibility of and for
the account of the party who ordered the particular service or incurred the
particular expense.
This Agreement may not be changed orally. The terms,
-8-
<PAGE>
warranties and agreements herein contained shall bind and inure to the benefit
of the respective parties hereto, and their respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made
and executed the day and year first written above.
National Ozone Water Corp.
by Edward A. Worfler Pres
----------------------------
Edward A.Worfler
----------------------------
Edward A.Worfler
Rita Worfler
----------------------------
Rita Worfler
Puro Corporation of America
by Scott Levy Pres
----------------------------
-9-
<PAGE>
EX-10.6
PURCHASE AGREEMENT
AGREEMENT (the "Agreement") dated the 28th day of April 1995 by and among
the Nature's Best Water Company, Inc. a corporation existing under the laws of
the State of New York, maintaining offices at 585-12 Bicycle Path, Port
Jefferson Station New York, (hereinafter referred to as "Nature's Best"), Peter
Nicholas, residing at 12 Summercress Lane, Coram New York 11727 (hereinafter
referred to as "Nicholas", and Anthony Bonventre, residing at 3698A Horseblock
Road, Medford New York 11763 (hereinafter referred to as "Bonventre") and/or
collectively as the "Sellers"), and the Puro Corporation of America, a New York
Corporation, maintaining offices at 56-45 58th Street, Maspeth New York
(referred to as "Puro" and/or "Purchaser").
WITNESSETH
WHEREAS, Nicholas and Bonventre are the original and sole Shareholder of
Nature's Best Water Company, Inc. and hold a total of one hundred (100) shares
of Common Stock, representing one hundred (100%) percent of all such voting and
non voting, shares issue and outstanding, and
WHEREAS, Nature's Best desires to sell to Purchaser and Purchaser desires
to purchase selected assets owned by Nature's
-1-
<PAGE>
Best and assume selected liabilities of Nature's Best.
1. PURCHASE PRICE:
The purchase price to be paid the Seller by the Purchasers for selected
assets of Nature's Best shall be Two Hundred Thousand Dollars ($200,000) which
is derived and calculated upon the following representations of the Sellers:
(a) The Sellers have represented that the most recent twelve month
revenues of Nature's Best, to be approximately Two Hundred Eighty Thousand
Dollars ($280,000). Attached hereto as Exhibit 1.
(b) The most recent annual water cooler rentals, estimated to be
approximately Ten Thousand Dollars ($10,000) for Eighty (80) units. Attached
hereto as Exhibit 2.
(c) The Sellers shall convey all operating assets of Nature's Best,
including customer lists, rental and supply agreements, files, records,
telephone numbers, advertising and non compete agreements, use of trade name
"Nature's Best" inventory, bottles, coolers, containers, racks, crates (wood or
plastic) and furniture and fixtures.
2. PAYMENT FOR ASSETS
The purchase money that may be due and owing for the purchase of the assets
of Nature's Best, as determined pursuant to paragraph 1, shall be paid to
Nature's Best Water Company, Inc. as follows:
-2-
<PAGE>
(a) At the date of closing, by certified check, payable to Nature's Best
or whomever else the Sellers designate in writing on or before the date of
closing, the sum of Fifty Thousand Dollars ($50,000), less any amount or sums
of money due and owing Puro on said date.
(b) The giving of a convertible note by Puro in the face Amount of One
Hundred Fifty Thousand Dollars ($150,000), payable over three years (3) without
interest. Payment to be made pursuant to the terms in the note. The amount due
the Seller on the note under this sub-paragraph "b", shall be adjusted in
accordance with the percentage of increase or decrease in the Purchaser's
Nature's Best Division's accounts yearly gross sales, over the gross sales of
Nature's Best Water Company, Inc. for the year ending April 30, 1995. Said
amount shall be paid or deducted if required during the year one, if Puro's
public offering occurs
-3-
<PAGE>
December 31, 1995 otherwise the adjustment shall occur in year two. However the
face amount of the note herein shall not exceed, in total, the sum of One
Hundred Fifty Thousand ($150,000.00) Dollars.
(c) If Puro Corporation of America shall be in the process of preparing a
Public Stock Offering, the Sellers and the Sellers only shall have the option to
convert the balance of the principal due and owing on the notes contained in
subdivision (b) above for the purchase of said stock in the Public Offering, at
the offering price less any underwriters commissions. The right of conversion
shall belong only to the Sellers herein and may not be transferred, assigned or
given to any other person or entity. If the initial public offering occurs
before December 31, 1995, the adjustment up or down mentioned in paragraph "c"
above, will be determined by year to date change prorated to the twelve month
period.
3.REPRESENTATIONS OF THE PURCHASER:
(a) Purchaser will assume and pay, from the execution of
-4-
<PAGE>
the Agreement, all monthly payments due and owing the Yellow Book and Pages for
the advertisements of the Corporation, Nature's Best Water Company, Inc.
(estimated to be $000.00 per month).
(b) Purchaser will assume and be liable to Nature's Best customers for all
of Nature's Best customer bottle deposits as of the date of closing.
(c) Purchaser will assume all cooler contracts between Nature's Best and
its customers. A list of cooler contracts being assumed is annexed as
Exhibit 2.
(d) Purchaser shall fully comply with its obligations under the New York
State Bulk Assets Sales Law.
(e) Purchaser represents that it has full power and legal right to
execute, deliver and perform this agreement. The execution, delivery and
performance of this agreement will not contravene any provision of the
certificate of incorporation or by-laws of Purchaser.
4. REPRESENTATIONS OF THE SELLERS:
(a) The Sellers represent that Nature's Best Water Company, Inc. Federal,
State and Local taxes have been or will be filed and paid. If for any reason a
Tax audit is made of Nature's Best and a claim for past taxes is made to the
Purchaser, any money paid by the Purchaser pursuant to these claims shall be
deducted from the money due and owing Sellers in accordance with paragraph 1 of
this
-5-
<PAGE>
agreement. In the event of a tax audit, Puro must notify Sellers pursuant to
paragraph 10 herein.
(b) The Sellers represent that there are no actions, suits or other
proceedings pending before any court, tribunal, commission, agency or bureau
against Nature's Best, except as noted in Exhibit 3 attached hereto. Sellers
are not in default with respect to any order, injunction, writ or decree of any
court, tribunal, commission, agency, office or bureau.
(c) Sellers further represent that they shall fully cooperate with the
Purchaser to comply with the New York State Bulk Asset Sales Law. Any failure
to cooperate by the Seller which results in a claim against the Purchaser, shall
be offset against any money due and owing under this agreement.
5. ACCOUNTS RECEIVABLE:
Purchaser shall be under no obligation to assist in collection of any
accounts receivable due from Nature's Best customers. In the event Purchaser
does receive any payments which are denominated payments of Nature's Best's
accounts receivables, Purchaser shall forward said payments to Sellers, without
undue delay. A schedule of accounts receivable is set forth on Schedule 4
annexed hereto.
-6-
<PAGE>
6.RESTRICTIVE COVENANT:
Sellers covenant that they will not reestablish, reopen, be engaged in, nor
in any manner whatsoever become interested, directly or indirectly, either as a
employee, as an owner, as a partner, as a agent, or as stockholder, director or
officer of a corporation, or otherwise, in any business, trade or occupation
similar to the one operated by the corporation Nature's Best Water Company Inc.,
within the Counties of Suffolk, Nassau and the City of New York for a period of
Seven (7) years from the date of this agreement. Upon the termination for
economic reasons of the Employment Agreement of Peter Nicholas the period shall
be three years from the date of termination. Not withstanding the foregoing,
Peter Nicholas and and Anthony Bonventre shall be bound by the seven years
period with respect to the existing PURO/NATURE'S BEST customers as of the date
of termination. Peter Nicholas upon becoming a employee of Puro, by executing
his employment agreement, shall also execute a employee restrictive covenant
agreement as attached hereto as Exhibit 5.
7. GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principles of Conflict of Law.
-7-
<PAGE>
8. ARBITRATION:
Any Dispute relating to the interpretation or performance of this Agreement
shall be resolved at the request of either party through binding arbitration in
accordance with the rules of the American Arbitration Association. Judgment of
any award determined by the arbitrators may be entered in any appropriate court
having jurisdiction In event that arbitration is commended to enforce any of
the terms of this Agreement, the prevailing party in the arbitration shall be
entitled to the costs thereof, including reasonable attorney's fees.
9. CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Agreement
nor the intent of any provisions thereof.
10. NOTICE
All notices, requests or other communications required hereunder shall be
in writing and shall be deemed to have been duly given or made, if personally
delivered, or if mailed by United States certified mail, return receipt
requested, to the parties at the respective addresses first above written, or at
such other address as shall be specified in writing by either
-8-
<PAGE>
of the parties to the other in accordance with the terms and conditions of this
paragraph.
11. BROKERAGE:
Each party represents to each other party that it has dealt with no finder
or broker in connection with any of the transactions contemplated by this
agreement or the negotiations looking forward to the consummation of this
agreement and that no broker or other person is entitled to any commission or
finder's fee in connection with any such transactions or negotiations, and each
party hereby indemnifies each other party against and agrees to hold such other
party harmless from any liability or expense which may be imposed by or incurred
by such other party in connection with any claim by any such finder or broker
based upon any alleged arrangement or communication with the indemnifying party.
12. EXPENSES
Whether or not the transactions contemplated by this agreement shall be
consummated, all expenses incurred by the Sellers or the Purchaser in connection
with the transactions contemplated hereby shall be the responsibility of and for
the account of the party who ordered the particular service or incurred the
particular expense.
This Agreement may not be changed orally. The terms,
-9-
<PAGE>
warranties and agreements herein contained shall bind and inure to the benefit
of the respective parties hereto, and their respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made and
executed the day and year first written above.
Nature's Best Water Company, Inc.
by /s/ Peter M. Nichols Pres.
--------------------------
Peter M. Nichols
/s/ Anthony Bonventre
--------------------------------
Anthony Bonventre
Puro Corporation of America
by /s/ Scott Levy Pres.
----------------------------
-10-
<PAGE>
EX-10.7
NATURE'S BEST
BOTTLED WATER COMPANY, INC
November 8, 1996
Mr. Scott Levy, President
Puro Water Group, Inc.
56-45 58th St
Maspeth, NY 1 1378-0010
Re: Purchase Agreement dated 4/28/95; Nature's Best to Puro
Dear Mr. Levy:
This will confirm that Nature's Best Bottled Water Company, Inc. (the
"Company"), hereby waives any rights to convert debt into the right to receive
common stock of Puro Water Group, Inc., formerly known as Puro Corporation of
America ("Puro") referred to in that certain agreement dated the 28th day of
April, 1995 by and among the Company, Peter Nicholas, Anthony Bon Ventre and
Puro (the "Agreement"), or the convertible promissory note dated April 28, 1995
executed by Puro in favor of the Company (the "Note"). All other terms of the
Agreement and the Note are to remain in full force and effect.
Yours truly,
/s/ Peter M. Nicholas
Peter M. Nicholas
President
/s/ Peter M. Nicholas
- --------------------------
Peter Nicholas
/s/ Anthony Bonventre
- --------------------------
Anthony Bonventre
585-12 BICYCLE PATH PORT JEFFERSON STATION NEW YORK 11776
(516) 474-1548 fax: (516) 474-1871
<PAGE>
EX-10.8
PURCHASE AGREEMENT
------------------
AGREEMENT (the "Agreement") dated the 31st day of October 1995 by and among
Waters Filter & Cooler Inc., a corporation existing under the laws of the State
of New York, (hereinafter referred to as "WFC") referred as the Seller, and the
Puro Corporation of America, a New York Corporation (referred to as "Puro"), the
Purchaser.
WITNESSETH
----------
WHEREAS, Alan Waters is the original and controlling shareholder of WFC and
holds a total of one hundred (100) shares of the Common Stock, representing one
hundred percent of all such voting and non voting shares issued and outstanding,
is desirous to sell selected assets owned by WFC with Puro assuming selective
liabilities of WFC.
1. PURCHASE PRICE:
The purchase price to be paid to the Sellers by the Purchaser for selected
assets of WFC shall be SEVEN HUNDRED THOUSAND DOLLARS ($700,000) which is
derived, based and calculated upon the following representations:
(a) The sellers have represented that the most recent twelve month
revenues from cooler rentals (600 units) by WFC to be approximately One Hundred
Twenty Eight Thousand Dollars ($128,000). Attached hereto as Exhibit 1.
(b) The revenue received during the same twelve month period from water
sales and equipment sales, service and warranty repairs to be approximately Four
Hundred Sixty two Thousand Dollars ($462,000). Attached hereto as Exhibit 2.
(c) The Sellers shall also convey to the Purchaser all operating assets of
WFC, including, but not necessarily limited to customer lists, rental
agreements, supply agreements, files, records, telephone numbers, advertising
and non compete agreements, furniture and fixtures, coolers, bottles, crates,
racks, contracts, computer programs, trade and assumed names, inventory,
leasehold to premises known as 124 W. 30th Street, New York City and two Ford
Vans being presently leased from M.T.P. Leasing Company Services Inc.
Any and all security returned on the cancellation of the said lease shall
be the sole property of the Seller.
The Purchaser shall assume the lease on the two Ford Vans which has an
approximate, consolidated payment of One Thousand Dollars ($1,000) per month.
2. PAYMENT OF ASSETS:
The purchase money that may be due and owing for the purchase of the assets
of
<PAGE>
WFC, as determined pursuant to paragraph 1, shall be paid to WFC as follows:
(a) At the date of closing, by certified check, payable to WFC or whomever
else the Seller designates in writing on or before the date of closing, the sum
of Three Hundred Thousand Dollars ($300,000).
(b) The giving of a variable note, a copy of which is attached, by the
Purchaser in the face amount of Four Hundred Thousand Dollars ($400,000),
payable over fifty two months as follows: Interest only at the rate of nine
percent (9%), payable monthly, for fourth months. Then equal monthly
installments of interest (9%) and principal, in the amount of Nine Thousand
Nine Hundred Fifty Four Dollars and four Cents ($9,954.04) over the next
forty eight (48) months when said note shall be paid in full. The amount due
the Seller on the note under this sub-paragraph "b", shall be adjusted dollar
for dollar in accordance with the yearly gross increase or decrease* in the
Purchasers gross revenues received from the items listed under paragraph 1.,
sub-division "a and b" of this agreement, for the year ending October 31,
1996. Said amount to be deducted or added to the balance, two years from the
date of this agreement. *Guarantee $590,000.00 less $27,000.00 for
advertising allowance.
3. REPRESENTATIONS OF THE PURCHASER:
(a) Purchaser will assume and pay from the execution of this agreement all
monthly payments due for the leasing of the two Ford Vans from M.T.P. Auto
Leasing and Service Inc., and all payments due and owing the yellow pages for
advertisements of the corporations and agree to retain said yellow page adds at
a minimal presence for a period of one year, if there is a minimal presence with
regard to the advertising.
(b) Assume all accounts receivables up to sixty days old and all
accounts payable, a list of which shall be attached hereto. Accounts Payable
shall be first deducted from the accounts receivable and if there is a
positive accounts receivable balance, said money shall be paid over to the
Seller within ten days of receipt of the money. If there should be a
negative balance deducting the accounts payables from the account
receivables, said minus monies shall be deducted from current payments.
(c) Purchaser shall assume all equipment and service contracts between WFC
and its customers. A list of cooler contracts being assumed is attached hereto.
(d) Purchaser shall fully comply with its obligations under the New York
State Bulk Assets Sales Law.
(e) Purchaser represents that it has full power and legal right to
execute, deliver and perform this agreement. The execution, delivery and
performance of this agreement will not contravene any provision of the
certificate of incorporation or by-laws of the Purchaser.
4. REPRESENTATIONS OF THE SELLERS:
(a) The Sellers represent that WFC's Federal, State and Local taxes have
been or will be filed and paid. If for any reason a tax audit is made of WFC,
and a claim for past taxes is made to the Purchaser, any money paid pursuant to
these claims shall be deducted from the money due and owing Sellers in
accordance with paragraph 1 of this agreement. In the event of
<PAGE>
a tax audit, Puro must notify the Sellers in accordance with paragraph 10
herein.
(b) Seller further represent that it in lieu of fully comply with New
York State's Bulk Sales Law* and cooperate with the Purchasers in the
compliance of Bulk Sales Law. Any failure to comply or cooperate by the
Sellers which results in a claim against the Purchaser, shall be offset
against any money due and owing under this agreement. An affidavit as to all
accounts payable of the Corporation and it any left out, said amount is to be
deducted from the note if there is not enough accounts receivable to cover
the discrepancy. *By executing annexed affidavit.
(c) Sellers agree to present the following lists which shall be attached
to this agreement and be considered a part thereof. Contract Cooler Rental
Customers, Accounts Receivable of less than sixty days, Accounts Payable, Assets
being transferred to Purchaser, Office Equipment, Telephone Numbers used by the
Sellers.
(d) Sellers advises the Purchasers that it has an oral agreement with the
company The Great Waters of America Inc., which is made up of Deer Park, Poland
Springs, Great Bear and Perrier Group, to deliver water to its customers. The
Sellers agree to notify the Great Water Company that its services are no longer
need as of November 1, 1995 and that the Puro Corporation of America will begin
servicing the accounts as of that date. It shall also advise The Great Water
Company of America that its empty water bottles will be retrieved by Puro will
be returned to them for a Ten Dollar credit per bottle against WFC's accounts
payable. Sellers warrant that if any of the customers so serviced are lost to
any of the companies here above mentioned within one year from the execution of
this agreement, Puro shall have the right to deduct, dollar for dollar any such
lost from the end of the note referred to, in paragraph 3 of this agreement.
There shall be no offset for any account that is lost strickly because of the
lack of performance by Puro.
(e) If an existing WFC customer being presently served by Deer Park
refuses water from Puro, Puro will continue to maintain the account through
Deer Park, but an adjustment will be made on WFC's back end, guaranteed as
follows: Puro's cost of water at $1.50 per bottle subtracted from Deer Park's
cost to WFC ($4.70 per bottle). Fifty percent of said difference will result
in a deduction of WFC's represented revenues.
5. ACCOUNTS RECEIVABLE:
Purchaser agrees to assume the Sellers accounts receivables and use same as
a set off against the accounts payable of the Sellers which are also being
assumed under this agreement. In the event there is a credit balance for the
accounts receivable, the Purchaser agrees to pay over said excess money to the
Sellers within ten days of receipt of same. If there be a minus balance however
between the accounts receivable and accounts payable, this money shall be
deducted current payments, on the note.
6. RESTRICTIVE COVENANT:
Seller Corporation covenant that it will not reestablish, reopen, be
engaged in, nor in any manner whatsoever become interested, directly or
indirectly, as an owner, as a partner, as an agent, or as a private
stockholder, director or officer of a
<PAGE>
corporation, or otherwise, in any business, trade or occupation similar to the
one operated by the corporation WFC, within the counties of Suffolk, Nassau,
Westchester and the City of New York for a period of fifty seven (57) months
from the date of this agreement.
7. GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principle of Conflict of Law.
8. ARBITRATION:
Any dispute relating to the interpretation or performance of this Agreement
shall be resolved at the request of either party through binding arbitration in
accordance with the rules of the American Arbitration Association. Judgment of
any award determined by the arbitrators may be entered in any appropriate court
having jurisdiction. In the event arbitration is commenced to enforce any of
the terms of this agreement, the prevailing party in the arbitration shall be
entitled to the costs thereof, including reasonable attorneys fees.
9. CAPTIONS:
The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Agreement
nor the intent of any provision thereof.
10. NOTICE:
All notices, request or other communications required hereunder shall be in
writing and shall be deemed to have been duly given or made, if personally
delivered, or if mailed by United States certified mail, return receipt
requested, to the parties:
The Sellers: 460 Linda Drive
East Meadow, New York 11554
The Purchaser: 56-45 58th Street
Maspeth, New York 11378
or at such other address as shall be specified in writing by either of the
parties to the other in accordance with the terms and conditions of this
paragraph.
11. BROKERAGE:
Each party represents to the other party that it has dealt with no finder
or broker in connection with any of the transactions contemplated by this
agreement or the negotiations looking forward to the consummation of this
agreement and that no broker or other person is entitled to any compensation,
commission or finder's fee in connection with any such transactions or
negotiations, and each party hereby indemnifies each other party against and
agrees to hold such other party harmless from any liability or expense which may
be imposed by or incurred by such other party in connection with any claim by
any such finder or broker
<PAGE>
based upon any alleged arrangement or communication with the indemnifying party.
12. EXPENSES:
Whether or not the transaction contemplated by this agreement shall be
consummated, all expenses incurred by the Sellers or the Purchaser, in
connection with the transactions contemplated hereby shall be the responsibility
of and for the account of the party who ordered the particular service or
incurred the particular expense.
This Agreement may not be changed orally. The terms, warranties and
agreements herein contained shall bind and inure to the benefit of the
respective parties hereto, and their respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made and
Executed the day and year first above written.
Water Filter and Cooler Inc.
by /s/ Alan Waters Pres.
------------------------------
--------------------------------
Puro Corporation of America
by /s/ Scott Levy Pres.
-----------------------------
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENT, that Waters Filter and Cooler Inc. of 124 W. 31st
Street, New York New York 10001, in consideration of the sum of Seven Hundred
Thousand Dollars ($700,000), lawful money of the United States, paid to me in
hand by the Puro Corporation of America, 56-45 58th Street, Maspeth New York,
receipt of which is hereby acknowledged, has bargained and sold, and by these
present does grant and convey unto Puro Corporation of America, its successors
and assigns, the
a. Inventory and Coolers valued at $200,000.00
b. Furniture, Fixtures and Equipment valued at $1,000.00
c. Goodwill value at $489,000.00
d. Restrictive Covenant, Not To Compete valued at $10,000.00
lists of which are attached hereto as exhibits A and B respectively.
To Have and Hold the same by Puro Corporation of America, its successors
and assigns forever;
And Waters Filter and Cooler Inc. warrants and represents to Puro
Corporation of America that the title conveyed is good, its transfer is
appropriate and rightful, and the accounts, containers and water coolers
described in Exhibit A and B are and have been delivered free of any security
interest, lien and encumbrance thereon.
EXECUTED this 31st day of October 1995 at 56-45 58th Street, Maspeth New
York.
Waters Filter and Cooler Inc.
by /s/ Alan Waters Pres.
-----------------------------
------------------------------
State of New York)
County of ,)
On October 31st, 1995 before me a notary public for the State of New York,
personally appeared Alan Waters, known to me or proved to me to be the President
of Waters Filter and Cooler Inc., the person whose name is subscribed to the
within Bill of Sale and acknowledged to me that he executed same.
--------------------
<PAGE>
VARIABLE PROMISSORY NOTE
$400,000.00 OCTOBER 31, 1995
For value received, Puro Corporation of America, maintaining offices at
56-45 58th Street, Maspeth New York 11378 promises to pay to the order of Waters
Filter and Cooler Inc. (WFC) maintaining offices at 124 W. 30th Street, New York
New York 10001, Four Hundred Thousand Dollars ($400,000.00), with interest at
nine percent (9%) per annum in the following manner: Interest only payment of
Three Thousand Dollars ($3,000) on December 1, 1995 and on the first day of each
month thereafter through March 1, 1996. Principal and interest payments in the
amount of Nine Thousand Nine Hundred Fifty Four Dollars and Four Cents
($9,954.04) payable on April 1, 1996 and monthly thereafter until March 1, 2000,
when the entire amount is fully paid with interest from the date hereof.
Payments shall be made at such locations as WFC may from time to time
designate in writing.
Maker waives trial by jury in the event any action is commenced under this
Note.
Maker will pay all reasonable costs and expenses of collection of this
Promissory Note incurred by Payee or holder of this Note, including court costs
and reasonable attorney's fees if collected by or through an attorney at law.
If any of the following events shall occur, such event shall be deemed an
"Event of Default" hereunder:
a. If Maker shall fail to make any payment of principal or interest which
shall become due and payable pursuant to the terms of this Note within ten (10)
days after such due date (the "Grace Period"); or
b. If (i) a receiver, liquidator, custodian or trustee (or similar
official) is appointed by court order for Maker or for any property of Maker and
such appointment is not discharged within thirty (30) days following the date of
such appointment; (ii) Maker default in the payment of any principal or interest
due on any material obligation for money borrowed by Maker, or do not generally
pay its debts as such become due, the result of which is that the holder of such
obligations for money borrowed or the payee of such debts accelerates the date
upon which such obligations or debts would otherwise be due and payable; (iii)
execution is levied against any material asset of Maker and not paid or
satisfied prior to any execution sale; (iv) a petition, complaint or other
pleading is filed against Maker under any bankruptcy, reorganization,
arrangement, composition, insolvency, readjustment of debt, dissolution, or
liquidation law of the United States or the State of New York, whether now or
hereafter in effect, which petition is not dismissed within sixty (60) days
after such filing; (v) Maker files a petition, complaint, or other pleading
under the Bankruptcy Code or otherwise seeks, or takes
<PAGE>
any action in anticipation of seeking relief under any provision of any
bankruptcy, reorganization, arrangement, composition, insolvency, readjustment
of debt, dissolution or liquidation law of the United States or the State of New
York, whether now or hereafter in effect, or consent to the filing of any such
petition, complaint or other pleading against it under any such law, or (vi)
Maker makes a general assignment for the benefit of his or its respective
creditors or consents to the appointment of a receiver, trustee, custodian, or
liquidator (or other similar official) of Maker of their respective property.
The remedies of Payee or other holder of this note are cumulative and not
exclusive of any remedies provided by law. No failure on the part of the Payee
or other holder of this Note to exercise, no delay by Payee or other holder of
this note in exercising, and no course of dealing with respect to any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by Payee or other holder of this Note or any right hereunder preclude
any other further exercise thereof or the exercise of any other right. A waiver
by Payee or other holder of this Note of any breach of any provision of this
Note shall not operate or be construed as a waiver of similar or dissimilar
provisions at the same time or at any prior or subsequent time.
Maker hereby waives any exemption right against the indebtedness evidenced
by this Note, and diligence, presentment, protest and demand, as well as all
notices of any kind with respect to this note, including, without limitation,
notice or extension, dishonor, protest, demand and nonpayment of this Note.
This Note shall be deemed a New York contract and shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of laws.
This Note is subject to the terms and conditions contained in the Purchase
Agreement executed simultaneous hereto between Puro Corporation of America,
Waters Filter and Cooler Inc.
Attest: Puro Corporation of America
by /s/ Scott Levy Pres
- ---------------------------- ---------------------------------
<PAGE>
ALAN WATERS, as President of Waters Filter & Cooler Inc. (hereinafter
referred to as "Waters"), being duly sworn, deposes and says:
1. I am the President of Waters and I am making this affidavit to
induce Puro Corporation of America (hereinafter referred to as "Puro") to
purchase selective assets of Waters. The annexed computer run represents all
accounts payable available to him as of the date hereof, and that he
acknowledges that there will be additional accounts payable coming. I hereby
agree that I am to be charged with all accounts payable due and payable up to
and including October 31, 1995.
2. That this affidavit is given in lieu of compliance with the New
York State Bulk Sales Act.
/s/ Alan Waters
----------------------------
ALAN WATERS
Sworn to before me this
2nd day of November, 1995
- ------------------------
Notary Public
<PAGE>
ALAN WATERS, as President of Waters Filter & Cooler Inc. (hereinafter
referred to as "Waters"), being duly sworn, deposes and says:
1. I am the President of Waters and I am making this affidavit to
induce Puro Corporation of America (hereinafter referred to as "Puro") to accept
the sixty (60) day or less accounts receivable of Waters. The annexed computer
run represents all of the accounts receivable available to him as of the date
hereof, and that he acknowledges that there will be additional accounts
receivable due and payable up to and including October 31, 1995, yet to be
determined. I hereby agree to be bound by the following conditions: That the
accounts payable are to be offset by the accounts receivable as per the Purchase
Agreement. In the event the accounts payable are greater than the accounts
receivable, then the difference between the two shall be paid to the Purchaser
as per the Purchase Agreement. In the event the accounts receivable are greater
than the accounts payable, then the difference between the two shall be paid to
the Purchaser as per the Purchase Agreement.
2. Based upon an examination of the accounts receivable and payable,
there is currently due to Waters the sum of
<PAGE>
$ 0 and said sum will be paid to Waters out of the first collections
received on behalf of Waters.
/s/ Alan Waters
----------------------------
ALAN WATERS
Sworn to before me this
2nd day of November, 1995
- ----------------------------
Notary Public
AGREED TO AND ACCEPTED:
PURO CORPORATION OF AMERICA
By: /s/ Scott Levy Pres
----------------------
<PAGE>
ALAN WATERS hereby covenants and agrees that he will personally guarantee
all of the terms and conditions, including the restrictive covenant of a certain
Purchase Agreement between Waters Filter & Cooler Inc. and Puro Corporation of
America, and further agrees to be personally bound by the restrictive covenant
contained in said Purchase Agreement, a copy of which is hereby annexed.
/s/ Alan Waters
--------------------
ALAN WATERS
<PAGE>
PURO CORPORATION OF AMERICA
56-45 58TH STREET
MASPETH, NEW YORK 11378
October 31, 1995
Alan Waters
460 Linda Drive
East Meadow, New York 11554
Re: Transition Agreement
Puro Corporation of America with Waters Filter and Cooler Inc.
Dear Mr. Waters:
This will confirm the arrangements, terms and conditions whereby Alan
Waters (hereinafter referred to as "Waters") will be associated with Puro
Corporation of America (hereinafter referred to as "Puro").
You will be retained for a period of two years as a Consultant to Puro for
the orderly retention and smooth transition of the Waters Filter and Cooler Inc.
customers into the Puro firm. You will also be required, on a project to
project basis to be involved in the marketing and sales promotions for the
Waters Filter and Cooler Inc. customers taken over by Puro. You will place
heavy emphasis on the New York City plumbing industry and high-level existing
Sales Association contracts. As Consultant you will be required to devote a
minimum of eight hours a day, four days a week for six months from the date
of this agreement. For the following six months, you will be required to
devote the same daily hours but for a minimum of only three days per week.
For the second year of this agreement, you are required only to work up to
three days per week. You are also required to use your best efforts to
insure Puro's quite enjoyment of the Waters company accounts. This
consulting agreement is in consideration for Puro's purchase of selected
assets of Waters Filter and Cooler Inc. on this date. As further
consideration for this agreement, Puro agrees to provide you and your wife
over the two year period major medical coverage either through Cobra or
Puro's company medical plan.
This agreement shall not be assignable by either party, nor may it be
changed orally.
Very truly yours,
by /s/ Scott Levy Pres.
-----------------------
Dated: October 31, 1995
Agreed and Accepted by
/s/ Alan Waters
------------
<PAGE>
AMENDMENT TO
PURCHASE AGREEMENT DATED OCTOBER 31, 1995
TRANSITION AGREEMENT DATED OCTOBER 31, 1995
BETWEEN
WATERS FILTER & COOLER, INC., AND ALAN WATERS
AND
PURO CORPORATION OF AMERICA
By their signatures below both parties agree to amend the subject Purchase
Agreement as follows:
Section 2b (copy of original attached) shall have a guarantee of $475,000
instead of $590,000.
By their signatures below both parties agree to amend the subject Transition
Agreement (encl) as follows:
Second paragraph, fourth through sixth sentences becomes: As Consultant
you will devote full time at normal working hours to the conduct of the
business.
As Agreed and Accepted this date: March 29, 1996
/s/ Alan Waters /s/ Scott Levy
-------------------------- ----------------------------
Alan Waters, President Scott Levy, President
Waters Filter & Cooler, Inc. Puro Corporation of America
/s/ Alan Waters
----------------------
Alan Waters
<PAGE>
PURO CORPORATION OF AMERICA
56-45 58TH STREET
MASPETH, NEW YORK 11378
October 31, 1995
Alan Waters
460 Linda Drive
East Meadow, New York 11554
Re: Transition Agreement
Puro Corporation of America with Waters Filter and Cooler Inc.
Dear Mr. Waters:
This will confirm the arrangements, terms and conditions whereby Alan
Waters (hereinafter referred to as "Waters") will be associated with Puro
Corporation of America (hereinafter referred to as "Puro").
You will be retained for a period of two years as a Consultant to Puro
for the orderly retention and smooth transition of the Waters Filter and
Cooler Inc. customers into the Puro firm. You will also be required, on a
project to project basis to be involved in the marketing and sales promotions
for the Waters Filter and Cooler Inc. customers taken over by Puro. You will
place heavy emphasis on the New York City plumbing industry and high-level
existing Sales Association contracts. As Consultant you will be required to
devote a minimum of eight hours a day, four days a week for six months from
the date of this agreement. For the following six months, you will be
required to devote the same daily hours but for a minimum of only three days
per week. For the second year of this agreement, you are required only to
work up to three days per week. You are also required to use your best
efforts to insure Puro's quite enjoyment of the Waters company accounts.
This consulting agreement is in consideration for Puro's purchase of selected
assets of Waters Filter and Cooler Inc. on this date. As further
consideration for this agreement, Puro agrees to provide you and your wife
over the two year period major medical coverage either through Cobra or
Puro's company medical plan.
This agreement shall not be assignable by either party, nor may it be
changed orally.
Very truly yours,
by /s/ Scott Levy Pres.
------------------
Dated: October 31, 1995
Agreed and Accepted by
/s/ Alan Waters
--------------------
<PAGE>
REVISION TO
AMENDMENT DATED 3/29/96
OF PURCHASE AGREEMENT DATED OCTOBER 31, 1995
AND TRANSITION AGREEMENT DATED OCTOBER 31, 1995
BETWEEN
WATERS FILTER & COOLER, INC., AND ALAN WATERS
AND
PURO CORPORATION OF AMERICA
In recognition of the assumption of managerial responsibilities for the Service
Department of Puro by Alan Waters, that certain Amendment dated 3/29/96 to the
Purchase and Transition Agreements dated 10/31/95 is hereby revised (copy
attached). The language TO BE REVISED is:
By their signatures below both parties agree to amend the subject
Purchase Agreement as follows:
SECTION 2b (COPY OF ORIGINAL ATTACHED) SHALL HAVE A GUARANTEE OF
$475,000 INSTEAD OF $590,000.
The NEW language shall be:
By their signatures below both parties agree to amend the subject
Purchase Agreement as follows:
SECTION 2b (COPY OF ORIGINAL ATTACHED) SHALL HAVE A GUARANTEE OF
$475,000 LESS 5% PER MONTH FOR EACH MONTH UP TO SEVEN MONTHS (35%)
STARTING 4/1/96 THAT ALAN WATERS CONTINUES TO ASSUME MANAGERIAL
RESPONSIBILITIES FOR THE SERVICE DEPARTMENT OF PURO.
As Agreed and Accepted this date: May 23, 1996
/s/ Alan Waters /s/ Scott Levy
---------------------- -----------------------
Alan Waters, President Scott Levy, President
Waters Filter & Cooler, Inc. Puro Corporation of America
/s/ Alan Waters
----------------------
Alan Waters
<PAGE>
AMENDMENT TO
PURCHASE AGREEMENT DATED OCTOBER 31, 1995
TRANSITION AGREEMENT DATED OCTOBER 31, 1995
BETWEEN
WATERS FILTER & COOLER, INC., AND ALAN WATERS
AND
PURO CORPORATION OF AMERICA
By their signatures below both parties agree to amend the subject Purchase
Agreement as follows:
SECTION 2b (COPY OF ORIGINAL ATTACHED) SHALL HAVE A GUARANTEE OF $475,000
INSTEAD OF $590,000.
By their signatures below both parties agree to amend the subject Transition
Agreement (encl) as follows:
SECOND PARAGRAPH, FOURTH THROUGH SIXTH SENTENCES BECOMES: AS CONSULTANT
YOU WILL DEVOTE FULL TIME AT NORMAL WORKING HOURS TO THE CONDUCT OF THE
BUSINESS.
As Agreed and Accepted this date: March 29, 1996
/s/ Alan Waters /s/ Scott Levy
---------------------------- -----------------------
Alan Waters, President Scott Levy, President
Waters Filter & Cooler, Inc. Puro Corporation of America
/s/ Alan Waters
----------------------------
Alan Waters
<PAGE>
EX-10.9
PURCHASE AGREEMENT
------------------
AGREEMENT (the "Agreement") dated the 31st day of October 1995 by and
among Rainbow Coffee Service Inc., d/b/a Rainbow Water Service a corporation
existing under the laws of the State of New York, (hereinafter referred to as
"Rainbow") and Brendon Murphy and Robert Murphy collectively referred as the
Sellers, and the Puro Corporation of America, a New York Corporation (referred
to as "Puro"), the Purchaser.
WITNESSETH
----------
WHEREAS, Brendon Murphy and Robert Murphy are the original and
controlling shareholders of Rainbow and hold a total of one hundred (100)
shares of the Common Stock, representing one hundred percent of all such
voting and non voting shares issued and outstanding, are desirous to sell
selected assets owned by Rainbow to Puro and Puro assuming selected
liabilities of Rainbow.
1. PURCHASE PRICE:
The purchase price to be paid to the Sellers by the Purchaser for selected
assets of Rainbow shall be THREE HUNDRED FORTY FOUR THOUSAND DOLLARS ($344,000)
which is derived, based and calculated upon the following representations:
(a) The sellers have represented that the most recent twelve month
revenues from cooler rentals (800 accts) by Rainbow to be approximately Seventy
Eight Thousand Dollars ($78,000). Attached hereto as Exhibit 1.
(b) The revenue received during the same twelve month period from water
sales and annual equipment sales and service to be approximately One
Hundred Sixty two Thousand Dollars ($162,000). Attached hereto as Exhibit 2.
(c) The Sellers shall also convey to the Purchaser all operating assets of
Rainbows, including, but not necessarily limited to customer lists, rental
agreements, supply agreements, files, records, telephone numbers, advertising
and non compete agreements, furniture and fixtures, coolers, bottles, crates,
racks, contracts, computer programs, trade and assumed names, inventory, leases
and one GMC/ISUZU Box Truck being presently leased.
The Purchase shall assume the lease on the GMC/ISUZU Box Truck which has an
approximate payment of Four Hundred Eighty Five Dollars ($485.00) per month.
2. PAYMENT OF ASSETS:
The purchase money that may be due and owing for the purchase of the assets
of Rainbow determined pursuant to paragraph 1, shall be paid to Rainbow as
follows:
(a) At the date of closing, by certified check, payable to Rainbow or
whomever else the Seller designates in writing on or before the date of closing,
the sum of One Hundred Seventy Two Thousand Dollars ($172,000).
(b) The giving of a note by the Purchaser in the face amount of One
Hundred Seventy Two Thousand Dollars ($172,000), payable over thirty nine months
as follows: Interest only
<PAGE>
at the rate of nine percent (9%), payable monthly, for three months. Then equal
monthly installments of interest (9%) and principal, in the amount of Five
Thousand Four Hundred Ninety Six Dollars and Fifty Seven Cents ($5,496.57) over
the next thirty six (36) months when said note shall be paid in full. The
amount due the Seller on the note under this subparagraph "b", shall be adjusted
on percentage basis in accordance with the yearly gross increase or decrease in
the Purchasers gross revenues received from the items listed under paragraph 1.,
sub-division "a and b" of this agreement, for the year ending October 31, 1996.
Said amount to be deducted from the balance one year from the date of this
agreement, or added two years from date of this agreement.
3. REPRESENTATIONS OF THE PURCHASER:
(a) Purchaser will assume and pay from the execution of this agreement the
monthly payments due for the leasing of the GMC/ISUZU Box Truck.
(b) Assume all accounts receivables up to sixty days old and all accounts
payable, a list of which shall be attached hereto. Accounts Payable shall be
first deducted from the accounts receivable and if there is a positive accounts
receivable balance, said money shall be paid over to the Seller within ten days
of receipt of the money. If there should be a negative balance deducting the
accounts payable from the receivables, said minus monies shall be
deducted from current payments.
(c) Purchaser shall assume all cooler contracts between Rainbow and its
customers. A list of cooler contracts being assumed is attached hereto.
(d) Purchaser shall fully comply with its obligations under the New York
State Bulk Assets Sales Law.
(e) Purchaser represents that it has full power and legal right to
execute, deliver and perform this agreement. The execution, delivery and
performance of this agreement will not contravene any provision of the
certificate of incorporation or by-laws of the Purchaser.
4. REPRESENTATIONS OF THE SELLERS:
(a) The Sellers represent that Rainbow's Federal, State and Local taxes
have been or will be filed and paid. If for any reason a tax audit is made of
Rainbow, and a claim for past taxes is made to the Purchaser, any money paid
pursuant to these claims shall be deducted from the money due and owing Sellers
in accordance with paragraph 1 of this agreement. In the event of a tax audit,
Puro must notify the Sellers in accordance with paragraph 10 herein.
(b) Sellers further represent that they will fully comply with New York
State's Bulk Sales Law and cooperate with the Purchasers in the compliance of
Bulk Sales Law. Any failure to comply or cooperate by the Sellers which results
in a claim against the Purchaser, shall be offset against any money due and
owing under this agreement.
(c) Sellers agree to present the following lists which shall be attached
to this agreement and be considered a part thereof. Contract Cooler Rental
Customers, Accounts Receivable of less than sixty days, Accounts Payable, Assets
being transferred to Purchaser, Office Equipment, Telephone Numbers used by the
Sellers.
<PAGE>
5. ACCOUNTS RECEIVABLE:
Purchaser agrees to assume the Sellers accounts receivables and use same as
a set off against the accounts payable of the Sellers which are also being
assumed under this agreement. In the event there is a credit balance for the
accounts receivable, the Purchaser agrees to pay over said excess money to the
Sellers within ten days of receipt of same. If there be a minus balance however
between the accounts receivable and accounts payable, this money shall be
deducted from current payments.
6. RESTRICTIVE COVENANT:
Sellers covenant that they will not reestablish, reopen, be engaged in, nor
in any manner whatsoever become interested, directly or indirectly, either as an
employee, as an owner, as a partner, as an agent, or as a private stockholder,
director or officer of a corporation, or otherwise, in any business, trade or
occupation similar to the one operated by the corporation Rainbow, within the
counties of Suffolk, Nassau, Westchester and the City of New York for a period
of Forty months from the date of this agreement.
7. GOVERNING LAW:
This Agreement shall be governed by the laws of the State of New York
without giving effect to the principle of Conflict of Law.
8. ARBITRATION:
Any dispute relating to the interpretation or performance of this Agreement
shall be resolved at the request of either party through binding arbitration in
accordance with the rules of the American Arbitration Association. Judgment of
any award determined by the arbitrators may be entered in any appropriate court
having jurisdiction. In the event arbitration is commenced to enforce any of
the terms of this agreement, the prevailing party in the arbitration shall be
entitled to the costs thereof, including reasonable attorneys fees.
9. CAPTIONS:
The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Agreement
nor the intent of any provision thereof.
10. NOTICE:
All notices, request or other communications required hereunder shall be in
writing and shall be deemed to have been duly given or made, if personally
delivered, or if mailed by United States certified mail, return receipt
requested, to the parties:
The Sellers: 585-16 Bicycle Path, Port Jefferson N.Y. 11776 or
P.O. Box 2296, Setauket N.Y. 11733
The Purchaser: 56-45 58th Street, Maspeth, New York 11378
<PAGE>
or at such other address as shall be specified in writing by either of the
parties to the other in accordance with the terms and conditions of this
paragraph.
11. BROKERAGE:
Each party represents to the other party that it has dealt with no finder
or broker in connection with any of the transactions contemplated by this
agreement or the negotiations looking forward to the consummation of this
agreement and that no broker or other person is entitled to any compensation,
commission or finder's fee in connection with any such transactions or
negotiations, and each party hereby indemnifies each other party against and
agrees to hold such other party harmless from any liability or expense which may
be imposed by or incurred by such other party in connection with any claim by
any such finder or broker based upon any alleged arrangement or communication
with the indemnifying party.
12. EXPENSES:
Whether or not the transaction contemplated by this agreement shall be
consummated, all expenses incurred by the Sellers or the Purchaser, in
connection with the transactions contemplated hereby shall be the responsibility
of and for the account of the party who ordered the particular service or
incurred the particular expense.
This Agreement may not be changed orally. The terms, warranties and
agreements herein contained shall bind and inure to the benefit of the
respective parties hereto, and there respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made and
Executed the day and year first above written.
Rainbow Coffee Service Inc.
by /s/ Brendon Murphy Pres.
---------------------------
/s/ Robert Murphy /s/ Brendon Murphy
- ---------------------- ---------------------------
ROBERT MURPHY Brendon Murphy
Puro Corporation of America
by /s/ Scott Levy Pres.
-----------------------------
<PAGE>
PAYABLES
Exhibit A
#877836-29.05
1. ADP - #895492-29.05
2. Kallmeyer - $238.29 tires
3. llpco 10/6 #73283 148.70
9/15 #72846 34.20
10/12 #73410 92.25
4. Lease Assoc. 190163 - Sept 508.00
#184100 - Oct 508.00
Gulf - Gas 10/6 - 40.05
5. Shell - Gas 9/08 to 10/2 - $261.01
Thru May
6. Yellow Book $28.00 - Oct
<PAGE>
00/30/95 at 5:53 PM RAINBOW WATER SERVICE Page 53
CUSTOMER AGED RECEIVABLES
AGING DATE: 10/30/95
----------------- AGED BALANCE -----------------
CUSTOMER CURRENT 31 - 60 61 - 90 90 +
- ---------------------------- ---------- ---------- ----------- -----------
WILDER Wilderness Fur Dressing
(516) 467-1458
TOTAL DUE: 40.04 27.07 12.97
WILGER Wilger Liaison
(516) 751-1353
TOTAL DUE: 19.21 19.21
WILHELM Walter Wilhelm
(516) 363-6089 Dejavu
TOTAL DUE: 5.97 5.97
WINDFASH Window Fashion Plus
(516) 467-3727
TOTAL DUE: 31.36 31.36
WISEREAL Wiser Real Estate
(516) 289-1133 Donna
TOTAL DUE: 9.71 9.71
WOODGRAI Woodgrain Company
(516) 242-8967 Debbie
TOTAL DUE: 78.79 8.63 32.50 20.57 17.09
WOODKOTT Wood Kottage, Inc.
(516) 254-3090 Steve Kot
TOTAL DUE: 51.10 7.54 7.54 18.93 17.09
WORWIDTR World Wide Travel
(516) 424-7600 Joel
TOTAL DUE: 7.54 7.54
WRIV WRIV Radio
(516) 727-1390
TOTAL DUE: 12.97 12.97
XLN XLN Enterprises
(516) 242-0060
TOTAL DUE: 8.63 8.63
ZAYAS William Zayas
(516) 841-0704
TOTAL DUE: 81.18 10.80 10.80 25.99 33.59
---------------- AGING SUMMARY ----------------
TOTAL OPEN ITEMS 26,556.00 100.0%
CURRENT 14,496.84 54.6%
31 - 60 DAYS 6,606.96 24.9%
61 - 90 DAYS 3,070.82 11.6%
90 + DAYS 2,381.38 9.0%
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENT, that Rainbow Coffee Service Inc. d/b/a Rainbow
Water Service, 585-16 Bicycle Path, Port Jefferson New York 11776, in
consideration of the sum of Three Hundred Forty Four Thousand Dollars
($344,000), lawful money of the United States, paid to me in hand by the Puro
Corporation of America, 56-45 58th Street, Maspeth New York, receipt of which
is hereby acknowledged, has bargained and sold, and by these present does
grant and convey unto Puro Corporation of America, its successors and
assigns, the
a. Accounts, Inventory and Coolers valued at $160,000.00
b. Furniture, Fixtures and Equipment valued at $1,000.00
c. Goodwill value at $183,000.00
list of which are attached hereto as exhibits A and B respectively.
To Have and Hold the same by Puro Corporation of America, its
successors and assigns forever;
And Rainbow Coffee Service Inc. warrants and represents to Puro
Corporation of America that the title conveyed is good, its transfer is
appropriate and rightful, and the accounts, containers and water coolers
described in Exhibit A and B are and have been delivered free of any security
interest, lien and encumbrance thereon.
EXECUTED this 31st day of October 1995 at 56-45 58th Street, Maspeth
New York.
Rainbow Coffee Service Inc.
by /s/Brendon Murphy Pres.
-----------------------------------
/s/Robert Murphy /s/Brendon Murphy
- ------------------------------------- --------------------------------------
Robert Murphy Brendon Murphy
State of New York)
County of Queens)
On October 31st, 1995 before me a notary public for the State of New
York, personally appeared Brendon Murphy, known to me or proved to me to be
the President of Rainbow Coffee Service Inc., the person whose name is
subscribed to the within Bill of Sale and acknowledged to me that he executed
same.
FREDERICK A. ROSSETTI
Notary Public, State of New York
No. 3368450
Qualified in Bronx County
Commission Expires October 31, 1997 /s/Frederick A. Rossetti
-------------------------------------
<PAGE>
SCHEDULE A (PBGC FORM 1)
1995 EIN/PN FROM FORM 1 LINE 3 (a) AND (b): /1/1/2/6/9/3/1/2/5 /0/0/1/ PAGE 2
- ------------------------------------------------------------------------------
SECTION FOUR. CERTIFICATIONS
- ------------------------------------------------------------------------------
10.CERTIFICATION OF PLAN ADMINISTRATOR. ALL SINGLE-EMPLOYER PLAN
ADMINISTRATORS MUST SIGN AND COMPLETE THIS LINE. IN ADDITION, INITIAL, DO
NOT CHECK, BOX (a), (b) OR (c), IF APPLICABLE.
I CERTIFY, UNDER PENALTIES OF PERJURY (18 U.S.C. 1001), THAT I HAVE
EXAMINED THE COMPLETED PBGC FORM 1 AND SCHEDULE A AND TO THE BEST OF MY
KNOWLEDGE AND BELIEF, THE FORM, THE SCHEDULE AND THIS CERTIFICATE ARE IN
CONFORMANCE WITH THE PREMIUM REGULATION AND INSTRUCTIONS, COMPLETE AND
ACCURATE, AND ANY INFORMATION I MADE AVAILABLE TO THE ENROLLED ACTUARY IS
TRUE, CORRECT AND COMPLETE, AND FURTHER THAT:
(a) /----/ NO PARTICIPANT WAS ENTITLED TO A VESTED BENEFIT UNDER THE PLAN (BY
(Initials)ITS TERMS OR AS REQUIRED BY LAW) AS OF THE LAST DAY OF THE PRECEDING
PLAN YEAR (OR IF THIS IS A NEW OR NEWLY COVERED PLAN, AS OF THE
FIRST DAY OF THE PREMIUM PAYMENT YEAR).
(b)/----/ THE PLAN WAS A PLAN DESCRIBED IN SECTION 412(i) OF THE INTERNAL
(Initials)REVENUE CODE AND REGULATIONS THEREUNDER AT ALL TIMES DURING THE
PRECEDING PLAN YEAR (OR IF THIS IS A NEW OR NEWLY COVERED PLAN,
AS OF THE FIRST DAY OF THE PREMIUM PAYMENT YEAR).
(c)/----/ THE ADJUSTED VALUE OF VESTED BENEFITS ON LINE 2(b) IS THE SAME AS
(Initials)THE PLAN VALUE OF VESTED BENEFITS ENTERED ON LINE 2(a) BECAUSE
THE PLAN INTEREST RATES USED TO VALUE THE VESTED BENEFITS ENTERED
ON LINES 2(a)(1) AND 2(a)(2) WERE EQUAL TO OR LESS THAN THE REQUIRED
INTEREST RATE.
/s/ ROBERT MURPHY
- ----------------------------------------------- Date 09/01/1995
Signature of Single-Employer Plan Administrator
/R/O/B/E/R/T/ /M/U/R/P/H/Y/
TYPED/PRINTED FIRST TYPED/PRINTED LAST NAME OF
NAME OF INDIVIDUAL WHO SIGNS INDIVIDUAL WHO SIGNS
11. CERTIFICATION OF ENROLLED ACTUARY. AN ENROLLED ACTUARY MUST SIGN AND
COMPLETE THE CERTIFICATION BELOW IF: (1) THE BOX ON LINE 1(a) IS CHECKED; OR
(2) ANY ONE OR MORE OF BOXES (a) THROUGH (e) BELOW IS APPLICABLE. (SEE THE
"CERTIFICATION REQUIREMENTS" INSTRUCTIONS IN PART H, ITEM 5, FOR THE FILING
METHOD YOU SELECTED TO DETERMINE WHICH OF BOXES (a) THROUGH (e) BELOW ARE
APPLICABLE.)
NOTE: IF ANY ONE OR MORE OF BOXES (a) THROUGH (e) BELOW IS APPLICABLE,
THE ENROLLED ACTUARY MUST ALSO INITIAL THE APPLICABLE BOX(ES).
INITIAL, DO NOT CHECK, THE APPLICABLE BOXES.
I CERTIFY, UNDER PENALTIES OF PERJURY (18 U.S.C. 1001), THAT I HAVE
EXAMINED THE COMPLETED SCHEDULE A AND TO THE BEST OF MY KNOWLEDGE AND BELIEF,
THE SCHEDULE AND THIS CERTIFICATE ARE IN CONFORMANCE WITH THE PREMIUM
REGULATION AND INSTRUCTIONS, COMPLETE AND ACCURATE, AND ANY INFORMATION I
MADE AVAILABLE TO THE PLAN ADMINISTRATOR IS TRUE, CORRECT AND COMPLETE, AND
FURTHER THAT:
(a)/----/ THE PLAN HAD 500 OR MORE PARTICIPANTS AS OF THE LAST DAY OF THE
(Initials)PRECEDING PLAN YEAR (OR IF THIS IS A NEW OR NEWLY COVERED PLAN, AS
OF THE FIRST DAY OF THE PREMIUM PAYMENT YEAR); THE ACTUARIAL VALUE
OF PLAN ASSETS EQUALS OR EXCEEDS THE VALUE OF ALL ACCRUED BENEFITS
UNDER THE PLAN (VALUED AT THE REQUIRED INTEREST RATE) AND THE ENTRY
ON LINE 2(a) IS THE PRESENT VALUE OF ACCRUED BENEFITS.
(b)/----/ THE PLAN HAD NO UNFUNDED VESTED BENEFITS AND FEWER THAN 500
(Initials)PARTICIPANTS BOTH AS OF THE LAST DAY OF THE PRECEDING PLAN YEAR (OR
IF THIS IS A NEW OR NEWLY COVERED PLAN, AS OF THE FIRST DAY OF THE
PREMIUM PAYMENT YEAR).
(c)/----/ THE ADJUSTED VALUE OF VESTED BENEFITS ON LINE 2(b) IS THE SAME AS
(Initials)THE PLAN VALUE OF VESTED BENEFITS ENTERED ON LINE 2(a), SCHEDULE A,
BECAUSE THE PLAN INTEREST RATES USED TO VALUE THE VESTED BENEFITS
ENTERED ON LINES 2(a)(1) AND 2(a)(2) WERE EQUAL TO OR LESS THAN THE
REQUIRED INTEREST RATE.
(d)/----/ THE ADJUSTED UNFUNDED VESTED BENEFITS REPORTED ON SCHEDULE A
(Initials)REFLECT, IN A MANNER CONSISTENT WITH GENERALLY ACCEPTED ACTUARIAL
PRINCIPLES AND PRACTICES, THE OCCURRENCE, IF ANY, OF ANY OF THE
SIGNIFICANT EVENTS DESCRIBED IN THE PREMIUM REGULATION AND
INSTRUCTIONS. (NOTE: IF YOU INITIAL THIS BOX,YOU MUST COMPLETE THE
FOLLOWING INFORMATION.)
(1) CHECK EACH SIGNIFICANT EVENT THAT OCCURRED BETWEEN THE DETERMINATION DATE
ENTERED ON LINE 2 OF THIS SCHEDULE A AND THE LAST DAY OF THE PLAN YEAR
PRECEDING THE PREMIUM PAYMENT YEAR (SEE PART H.6 OF INSTRUCTIONS FOR
DEFINITIONS):
<TABLE>
<S> <C>
/--/S.E.(1) /--/S.E.(2) /--/S.E.(3) /--/S.E.(4) /--/S.E.(5) /--/S.E.(6) /--/S.E.(7) /--/NO SIGNIFICANT EVENTS
(2) TOTAL AMOUNT INCLUDED IN LINE 4 DUE TO SIGNIFICANT EVENTS
(IF THIS AMOUNT IS NEGATIVE, PLEASE CHECK THIS BOX: /--/).............../--//--//--//--//--//--//--//--/
(e)/----/ THE PLAN MEETS THE REQUIREMENTS FOR THE EXEMPTION APPLICABLE TO
(Initials)PLANS AT THE FULL FUNDING LIMIT.
/s/ MICHAEL FRANK /0/7/2/6/1/9/9/5/
- -----------------------------------------------------------
SIGNATURE OF ENROLLED ACTUARY DATE
/M/I/C/H/A/E/L/ /F/R/A/N/K/ 93-2440
-------
TYPED/PRINTED FIRST NAME OF INDIVIDUAL WHO SIGNS TYPED/PRINTED LAST NAME OF INDIVIDUAL WHO SIGNS ENROLLMENT NUMBER
MICHAEL FRANK, FSA
100 ARDEN ST. APT. 5B EA#93-2440
NEW YORK, NEW YORK 10040 (212) 567-1464 /N/Y/ /1/0/0/4/0/
- --------------------------------------------------------------------------------------
STREET ADDRESS STATE ZIP CODE
</TABLE>
<PAGE>
VARIABLE PROMISSORY NOTE
$172,000.00 OCTOBER 31, 1995
For Value received, Puro Corporation of America maintaining offices at
56-45 58th Street, Maspeth New York 11378 promises to pay to the order of
Rainbow Coffee Service Inc. maintaining offices at 585 Bicycle Path, Port
Jefferson New York 11776 One Hundred Seventy Two Thousand Dollars ($172,000),
with interest at nine percent (9%) per annum in the following manner:
Interest only payment of One Thousand Two Hundred Ninety Dollars and Seventy
Five Cents on December 1, 1995 and on the first day of each month thereafter
through February 1, 1996. Principal and interest payments in the amount of
Five Thousand Four Hundred Ninety Six Dollars and Fifty Seven Cents
($5,496.57) payable on March 1, 1996 and monthly thereafter until February 1,
1999, when the entire amount is fully paid with interest from the date
hereof. Payments shall be made at such locations as Rainbow Coffee Service
Inc. may from time to time designate in writing. If any installment if not
paid within 15 days of the due date, all installments shall become due and
payable forthwith, at the option of the holder. This note shall be governed
by the laws of the State of New York, without giving effect to the principle
of conflict of laws. Rainbow Coffee Service Inc. may at any time negotiate
and assign this note, but SAID NOTE IS SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN THE PURCHASE AGREEMENT EXECUTED SIMULTANEOUS HERETO BETWEEN PURO
CORPORATION OF AMERICA, RAINBOW SERVICE INC. AND BRENDON MURPHY.
Protest Waived.
Attest: Puro Corporation of America
/s/ JACK C. WEST by /s/ SCOTT LEVY Pres.
- ---------------- ---------------------
<PAGE>
State of New York)
County of Queens)
On October 31st 1995, before me, a notary public for the State of New
York, personally appeared Brendon Murphy and Robert Murphy known to me or
proved to me to be the person whose name is subscribed to the within document
and acknowledged to me that he executed same.
LADONNA K. REINHART /s/ LADONNA K. REINHART
NOTARY PUBLIC, State of New York -----------------------
No. 41-4819811 Notary
Qualified in Queens County
Commission Expires Aug. 31, 1996
<PAGE>
PURO CORPORATION OF AMERICA
56-45 58TH STREET
MASPETH, NEW YORK 11378
October 31, 1995
Brendon Murphy
585-16 Bicycle Path
Port Jefferson, New York 11776
Re: Transition Agreement
Puro Corporation of America with Rainbow Coffee Service Inc.
Dear Mr. Murphy:
This will confirm the arrangements, terms and conditions whereby
Brendon Murphy (hereinafter referred to as "Murphy" and/or "Employee") will
be employed by Puro Corporation of America (hereinafter referred to as
"Puro").
You will be retained for a period of two years as a Employee of Puro
for the orderly retention and smooth transition of the Rainbow Coffee Service
Inc. customers into the Puro firm. You will also be required, on a project to
project basis to be involved in the marketing and sales promotions for the
Rainbow Coffee Service Inc. customer taken over by Puro. As an Employee you
will be required to devote a minimum of eight hours a day, five days a week
for two years from the date of this agreement. You are also required to use
your best efforts to insure Puro's quite enjoyment of of the Rainbow's
company accounts. As compensation for the hours devoted to these duties, you
will be paid the salary of fifteen thousand dollars ($15,000) per year in
weekly installments, less appropriate deductions required by law together
with major medical coverage either through Cobra or Puro's company medical
plan and a car or van for you to carry out your duties. You will also be
entitled to any and all other benefits now enjoyed by the employee's of Puro.
However either party, Puro or yourself, may cancel this agreement only on just
cause upon ninety days written notice to the other party***. If retained by Puro
for two years as a Employee, and the sales from the Rainbow accounts exceed
the sum of $240,000 per year for the second year, you will be entitled to a
ten percent commission on that portion of the money that exceed the said
$240,000.
This agreement shall not be assignable by either party, nor may it be
changed orally.
Very truly yours,
Dated: October 31, 1995 by /s/ SCOTT LEVY Pres.
Agreed and Accepted by -----------------------
/s/ BRENDON MURPHY ***salary is guaranteed by Puro
for two years, regardless of
termination.
<PAGE>
AMENDMENT TO
PURCHASE AGREEMENT (10/31/1995)
SALE OF
RAINBOW COFFEE SERVICE, INC.
TO
PURO CORPORATION OF AMERICA
By their signatures below both parties agree to amend the subject Purchase
Agreement as follows:
Section 2b (copy of original attached) last sentence shall include the
following insert after "...Purchasers gross revenues...":(CALCULATED AS THE
SUM TOTAL OF PURO'S LONG ISLAND GROSS REVENUES NOT INCLUDING SALES OF
NATURE'S BEST WATER COMPANY). October 31, 1996 in the same sentence shall
change to DECEMBER 31, 1996.
As Agreed and Accepted this date: March 29, 1996
/s/ BRENDAN MURPHY /s/ SCOTT LEVY
- ------------------ --------------
Brendan Murphy Scott Levy, President
Rainbow Coffee Service, Inc. Puro Corporation of America
/s/ BRENDAN MURPHY
- ------------------
Brendan Murphy
<PAGE>
EX-10.10
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, entered into as of the 30th day of June, 1996, by and
between MOUNTAINWOOD SPRING WATER CO., INC., a New Jersey Corporation, and WHITE
MOUNTAIN COMPANY, INC., a New Jersey Corporation, both having their
administrative offices at 18-22 Bank Street, Suite 208, Summit, New Jersey 07901
(hereinafter collectively the "Seller") and PURO WATER GROUP, INC., a Delaware
Corporation, having an office at 101 North Park Street, East Orange, New Jersey,
(hereinafter the "Buyer").
DESCRIPTION OF TRANSACTION
This transaction comprises the acquisition by Buyer of certain of the
assets, accounts, customer lists, goodwill, etc., owned by the Seller, which
comprise solely the Seller's "direct" or "retail" business (the "Purchased
Business"), all as more particularly set forth herein. Seller shall retain
ownership of all of its other assets relating to its "bulk" and "wholesale"
business, which it shall continue to operate.
1
<PAGE>
WITNESSETH:
WHEREAS, in consideration of the promises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE
PURCHASED ASSETS; EXCLUDED ASSETS
1.01 PURCHASED ASSETS. Upon the terms and conditions hereinafter set
forth, and for the purchase price as set forth in Article II Seller shall sell,
assign and transfer to Buyer and Buyer shall purchase and acquire from Seller at
the Closing (as hereinafter defined) all of the "Purchased Assets" as follows:
(a) All of the customers and accounts, as more fully set forth on
Exhibit "A" to be attached hereto and made a part hereof (the "Customers");
(b) Approximately 1450 coolers (hot and cold, cold, refrigerated, etc.)
utilized by the Customers together with all leases from Seller to the Customers.
A listing of the coolers and a specimen copy of the lease to be attached hereto
as Exhibit "B".
(c) All of Seller's inventory and stock-in-trade as of the date of
Closing;
2
<PAGE>
(d) All telephone numbers currently in usage by Seller (including New
Jersey and out of State and 800 lines) regarding the Purchased Business;
(e) All customer lists, original leases, and all original customer
files;
(f) All product and customer sales histories;
(g) All copyrights, names, labels and trademarks used in the conduct of
the Purchased Business, if any, and if none exists, the common law right to
usage of all such marks;
(h) All equipment and bottles utilized to properly service the
Customers (E.G. all bottles, crates, racks, etc.), as well as any
equipment, parts, supplies, tools, coolers, owned by Seller; and
(i) The following vehicles, which are being sold "as is":
1995 International Truck (4 Bay/160 bottles)
1985 International Truck (4 Bay/160 bottles)
1990 Ford Truck (4 Bay/160 bottles)
1988 International Truck (4 Bay/160 bottles)
Highcube (120 bottles)
Van (80 bottles)
All appropriate documents necessary to transfer and register will be executed
and delivered.
All of the foregoing being referred to as the "Purchased Assets". All
of the above Purchased Assets shall be delivered by the Seller to the Buyer in
"as is" condition.
3
<PAGE>
1.02 EXCLUDED ASSETS. The following assets of Seller (the "Excluded
Assets") are not included in the purchase and sale hereunder:
(a) Seller's cash on hand and any accounts and notes receivable;
(b) Seller's books and records; provided, however, that Buyer shall
have access to Seller's books and records in accordance with Section 7.03
hereof;
(c) Any asset of Seller not specifically included in the Purchased
Assets.
1.03 SELLER'S ACCOUNT RECEIVABLES
The account receivables of Seller shall remain the property of the
Seller and shall not be transferred to Buyer. Seller shall furnish to Buyer a
complete list of all uncollected Account Receivables setting forth the name and
address of debtor and the amount owed by each. Buyer agrees to pay over to
Seller all amounts received from the debtors on such list at least monthly after
the Closing Date, until each such receivable is paid in full. All sums
received, unless specifically allocated by any debtor, but not if made at
Buyer's request, shall be applied to the indebtedness from each debtor in order
of oldest maturity first. In the event any such receivable remains unpaid or
uncollected at the end of one hundred twenty (120) days, Seller shall be at
liberty to pursue collection in its sole
4
<PAGE>
discretion, but Buyer shall nevertheless remit to Seller any amounts it may
thereafter receive from any such debtor promptly after receipt thereof.
ARTICLE II
PURCHASE PRICE - PAYMENT
2.01 PRICE OF BUSINESS AND ASSETS; PAYMENT. The purchase price for the
purchase and sale hereunder shall consist of a payment of ONE MILLION TWO
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($1,250,000) payable as follows:
(a) At closing by bank or certified funds $ 500,000.00
(b) Execution and delivery of a Negotiable
Promissory Note in form and substance
similar to Exhibit "C" the terms and
conditions of which are incorporated
herein by reference (the "Negotiable
Promissory Note") $ 500,000.00
(c) Execution and delivery of a Non-Negotiable
Promissory Note in form and substance similar
to Exhibit "D" the terms and conditions
of which are incorporated herein by
reference (the "Non-Negotiable Promissory
Note") $ 250,000.00
TOTAL $1,250,000.00
-------------
-------------
2.02 SECURITY FOR NOTE. As collateral security for the Negotiable
Promissory Note described above, the Buyer will
5
<PAGE>
deliver a Letter of Credit, issued by European American Bank or such other
commercial bank acceptable to the Seller in its reasonable discretion, which
shall be in the form of Exhibit "E" attached hereto and incorporated herein as
if fully set forth (the "Letter of Credit"), modified to relate to the terms of
the Negotiable Promissory Note.
2.03. PURCHASE PRICE ALLOCATION. The Payment of the purchase price
shall be allocated among the Purchased Assets pursuant to a schedule to be
agreed upon by the parties at the Closing.
Seller and Buyer agree that this allocation shall represent the fair
market value for the Purchased Assets and the Non Competition Agreements.
2.04 ADJUSTMENT TO PURCHASE PRICE. The parties agree that the Purchase
Price has been determined based on the mutual expectation of the parties that
for the twelve (12) month period immediately following the Closing (the "First
Year") the gross sales to the Customers, exclusive of UMDNJ, will be, at least,
$932,000 (the "First year Revenue"). When and in the event the gross sales
reflected on the Gross Sales Statement (as defined herein) is less than
$832,000, representing +- 85% of the First Year Revenue, the parties agree to
adjust the Purchase Price as follows:
6
<PAGE>
Gross Sales equal to
or greater than $832,000 - No adjustment
Gross Sales less than
$832,000 - An adjustment equal
to $1.30 of every dollar
of Gross Sales
less than $832,000;
provided however, that the maximum total adjustment shall, in no event,
exceed $250,000.00.
For purposes of this Section, gross sales shall include the aggregate
amount charged, net of sales tax, to the Customers, for the rental of
coolers, the sales of water, paper and allied products as well as coffee and
other products and beverages sold by Buyer; provided, however, that in any
instance where the rental fee for coolers or the price that is less than the
price charged by Seller for the same rental or product than that charged as
of the Closing Date ("Seller's Price") then solely for purposes of the
calculation of gross sales, the amount charged by the Buyer shall be
increased to be the amount that would have been charged at Seller's price
("Gross Sales"). Within thirty (30) days of the first anniversary of the
Closing Date, Seller and Buyer shall prepare a statement of Gross Sales for
the one year period following the Closing (the "Gross Sales Statement").
Seller agrees that Buyer's remedy for this adjustment is to credit against
the principal balance due on the
7
<PAGE>
Non-Negotiable Promissory Note the amount of any adjustment determined in
accordance with this Section 2.04 and the monthly payment due under the
Non-Negotiable Promissory Note shall be adjusted to reflect the new principal
balance. The parties agree to meet within thirty (30) days after the First
Year to review any proposed adjustment(s) and to execute and deliver an
amendment to the Non-Negotiable Promissory Note to reflect any adjusted
principal balance which adjustment(s) shall be deemed effective July 1, 1997.
If the parties are unable to agree on any proposed adjustment(s), the
mechanism of Section 12.04 shall be utilized.
The Buyer agrees to provide sales information on the Customers on a
monthly basis and Seller shall have the right to reasonable access to the
sales and revenue books and records of the Buyer to verify the accuracy of
all sales information relative to sales to the Customers.
Buyer agrees to use its best efforts, consistent with its practices with
its existing customers to maximize the sales potential to the Customers and
not to raise the Seller's Price for a period of one year.
Any loss of Gross Sales due to the poor performance of service by the
Buyer after the Closing shall NOT be deducted from the Gross Sales
calculation.
8
<PAGE>
ARTICLE III
ASSUMPTION AND PAYMENT OF
SPECIFIC CONTRACTS OR LIABILITIES
3.01 ASSUMPTION. It is understood and agreed by the parties hereto
that Buyer shall assume by an instrument acceptable to Seller and its
counsel, as additional consideration for the Purchased Assets in addition to
the Payment the following specific contracts or liabilities:
(a) SALES ORDERS. Any and all liability of the Seller arising from
and/or accrued in connection with orders on hand of the Seller yet unshipped
prior to the Closing (the "Unshipped Orders"), excepting any claims for
sales commissions claimed by any person not employed by Buyer. The Buyer
agrees to fulfill all Unshipped Orders after the Closing. The Seller
represents that all Unshipped Orders were booked in the ordinary and normal
course of its business using previously established gross profit margins.
(b) INVENTORY PURCHASES. Any and all liability of the Seller pursuant
to any Purchase Orders (the "Inventory Purchases") of the Seller
outstanding at the Closing requiring the Seller to purchase inventory items
for resale in the normal course of its business. Buyer agrees to accept such
orders and to satisfy all payment for same. From and after the date of this
Agreement, the Seller agrees not to place any Purchase Orders for
9
<PAGE>
Inventory Purchases for delivery after June 27, 1996 without the prior
approval of the Buyer.
3.02 NO OTHER LIABILITIES. Except as set forth herein, the Buyer is
not assuming, adopting, or taking over and shall not be deemed to have
assumed adopted or taken over, and Sellers and Stockholders hereby indemnify
the Buyer with respect to any obligation, liabilities or responsibilities of
the Seller inclusive of but not limited to the following:
(a) any liability of Seller for federal, state or local taxes of any
nature or description;
(b) any liability or obligation of Seller for damages with respect to
any breach of warranty or default in the performance by Seller of any
agreement including product liability;
(c) any liability for claims of creditors for debts incurred by Seller
prior to the Closing.
(d) any liability or obligation, contingent or otherwise, arising out
of any investigation or litigation or violation of law, rules or regulations
existing prior to the Closing Date or arising out of the Sellers conduct;
(e) any accrued obligations in connection with the Excluded Assets or
Seller's insurance policies;
(f) any liability or obligation in respect of any retirement,
severance, vacation, IRA or Keogh plan of Seller; and
10
<PAGE>
(g) any liabilities or obligations of Seller to any bank or finance
company or any other person under any note, covenant, agreement or instrument
for the payment of money.
of Seller.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that the following
statements are true:
4.01 POWER AND AUTHORITY. Seller has full power and authority to
execute and deliver this Agreement and such other agreements and instruments
as are to be executed and delivered by it pursuant hereto and to consummate
the transaction contemplated hereby and thereby.
4.02 CORPORATE ACTS. All proceedings required to be taken by or on the
part of Seller to authorize it to execute, deliver and perform this Agreement
and such other agreements and instruments have been duly and properly taken.
4.03 GOOD STANDING. Sellers are corporations validly organized under
the laws of the State of New Jersey and in good standing in such State.
4.04 EXECUTION AND DELIVERY. This Agreement has been duly executed and
delivered by Seller and constitutes, and such other agreements and
instruments when duly executed and delivered
11
<PAGE>
by Seller, will constitute, legal valid and binding obligations of Seller,
enforceable in accordance with their respective terms.
4.05 NO BREACH. The execution and delivery by Seller, of this
Agreement and such other agreements and instruments, and its consummation of
the transactions contemplated hereby and thereby, will not violate, conflict
with, or result in any breach of, or constitute a default (of an event which
with notice or lapse of time or both would become a default) under, or result
in the creation of a lien or encumbrance on any of the properties or assets
of Seller, pursuant to any indenture, mortgage, lease, agreement or other
instrument to which Seller, is a party or by which Seller, or its properties
or assets may be bound or affected.
4.06 GOOD TITLE. Seller is now, and on the closing date will be, the
legal and equitable owner of merchantable title to all of the property and
assets to be sold and transferred to Buyer hereunder, free and clear of any
and all liens, charges, encumbrances, security interests and other burdens of
every kind.
4.07 NO VIOLATION. To the best of Seller's knowledge, information and
belief, there are no violations against the Seller and the personal property
sold herein by any local, state or federal agency. Seller further warrants
and represents that it owes no taxes to the local, state, federal or other
agency for
12
<PAGE>
income or any other taxes that it will not pay and that it and its
shareholders will indemnify the Buyer from any claims which may be made for
any said taxes which may constitute a lien on the assets of Seller herein
being conveyed.
4.08 CONVEYANCE FREE AND CLEAR. The bill of sale and instruments of
assignment to be delivered at the closing will transfer all of the Purchased
Assets enumerated in the attached schedules, free of all encumbrances, and
will contain the usual warranties and affidavit of title.
4.09 LIABILITIES. Seller, will pay in full all debts and liabilities
of Seller, including any and all business and employment tax liabilities
which may be or become due and owing, and Seller, and Thomas E. Durkin, III,
and William R. Egan, individually, agree to indemnify and hold Buyer harmless
from any and all such liabilities, including any and all taxes owed by Seller.
4.10. REVENUE. The gross sales booked by Seller from the Purchased
Business for the year 1995 was not less than $932,000, exclusive of UMDNJ.
4.11 NO APPROVAL. No approval, authorization, consent or other order
or action of or filing with any court, administrative agency, other
governmental authority, or other third party is required for the execution
and delivery by Seller of this
13
<PAGE>
Agreement or such other agreements or instruments, or consummation of the
transactions contemplated hereby or thereby.
4.12 LITIGATION. Seller is not engaged in or threatened with any
action, investigation or proceeding before any court or governmental agency
affecting Seller or any of its properties, assets or business.
4.13 COMPLIANCE WITH LAWS. Seller is in compliance with all federal,
state and local laws, rules, regulations and order applicable to the
Purchased Business, including without limitation, zoning, anti-pollution,
occupational safety and health laws and regulations, and has all licenses and
permits required for the proper conduct of the business.
4.14 LABOR CONTRACTS. Seller is not a party to a collective bargaining
agreement with any labor union; nor is Seller a party to any pension,
profit-sharing or other employee benefit plan.
4.15 TAXES. Seller has or will file all federal, state and local tax
return required to be filed, pertaining to Seller, its business or otherwise,
and all such tax returns are true, correct and complete. All taxes due or
collectible by or for any governmental agency from the Seller have been, or
will be, paid in full.
4.16 FULL DISCLOSURE. No representation, warranty or covenant made by
Seller in this Agreement, and no certificate,
14
<PAGE>
schedule or exhibit given or delivered to Buyer in connection with or
pursuant to this Agreement, contains any knowingly untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained in this Agreement or the matters disclosed in such
certificate, schedule or exhibit, in the light of circumstances under which
such statements or disclosures were made, not misleading.
4.17 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and agreements made herein and in the Exhibits hereto by the
Seller shall remain operative and in full force and effect for two (2) years
from and after the Closing Date, except that representations, warranties and
agreements based upon tax claims or litigation shall survive for their
respective statutes of limitation period.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby warrants to Seller that the following statements are true:
5.01 POWER OF AUTHORITY. Buyer has full power and authority to execute
and deliver this Agreement and such other agreements and instruments to be
executed and delivered by it
15
<PAGE>
pursuant hereto and to consummate the transaction contemplated hereby and
thereby.
5.02 CORPORATE ACTS. All corporate acts and other proceedings required
to be taken by or on the part of Buyer to authorize it to execute, deliver
and perform this Agreement and such other agreements and instruments and the
transactions contemplated hereby have been duly and properly taken.
5.03 EXECUTION AND DELIVERY. This Agreement has been duly executed and
delivered by Buyer and constitutes, and such other agreements and instruments
when duly executed and delivered by Buyer will constitute, legal, valid and
binding obligations of Buyer enforceable in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally from time to time in effect, and
subject to any equitable principles limiting the right to obtain specific
performance of certain obligations of Buyer hereunder the thereunder.
5.04 NO BREACH. The execution and delivery by Buyer of this Agreement
and such other agreements and instruments, and its consummation of the
transactions contemplated hereby and thereby, will not violate, conflict
with, or result in any breach of, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result
in the
16
<PAGE>
creation of a lien or encumbrance on any of the properties or assets of Buyer
pursuant to, the Certificate of Incorporation or By-laws of Buyer or any
indenture, mortgage, lease, agreement or other instrument to which Buyer is a
party or by which Buyer or its properties or assets may be bound or affected.
5.05 NO APPROVAL. No approval, authorization, consent or other or
action of or filing with any court, administrative agency, governmental
authority, or other third party is required for the execution and delivery by
Buyer of this Agreement or such other agreements or instruments or
consummation of the transactions contemplated hereby or thereby.
5.06 NO OTHER REPRESENTATIONS OF SELLER. The Buyer acknowledges and
agrees that it has examined and inspected the Purchased Assets to be sold and
transferred to Buyer hereunder and is satisfied with the quality and quantity
thereof and their value, and agree to accept the same all in their "as is"
condition and state of repair. The Buyer further represents to the Sellers
that the Purchased Assets have been inspected and that it has been assured by
means independently of the Seller or of any agent of the Seller of the truth
of all facts material to this Agreement, and that the Purchased Assets, as
they are described in this Agreement, are and have been purchased by the
Buyer as a result of such inspection or investigation and not by or through
any representations made by the Seller, or by an agent
17
<PAGE>
of the Seller. The Buyer hereby expressly waives any and all claims for
damages or for rescission or cancellation of this Agreement because of any
representations made by the Seller or by any agent of the Seller, other than
such representations as may be contained in this Agreement. The Buyer further
agrees that the Seller and any and all agents of the Seller shall not be
liable for or on account of any inducements, promises, representations, or
agreements not contained in this Agreement, that no agent or employee of the
Seller is or has been authorized by the Seller to make any representations
with respect to the Purchased Business, and that if any such representations
have been made they are wholly unauthorized and not binding on the Seller.
Buyer further represents that it has been and is represented by independent
counsel of its choosing and has engaged and sought other professional advice
as it, its officers, directors and shareholders deemed appropriate under the
circumstances.
5.07 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Buyer shall survive the Closing hereof for a period of two
(2) years.
18
<PAGE>
ARTICLE VI
CERTAIN AGREEMENTS AND ASSURANCES
OF SELLER PRIOR TO CLOSING
6.01 DUE DILIGENCE. Buyer acknowledges that Seller has granted
reasonable access to Buyer's representatives for the performance of due
diligence.
6.02 ACTION CONSISTENT WITH AGREEMENT. Seller shall not voluntarily
undertake any course of action inconsistent with the satisfaction of the
requirements of the conditions applicable to them set forth in this
Agreement, and Seller shall promptly do all such acts and take all such
measures as may be appropriate to enable it to perform as early as
possible the obligations herein provided to be performed by it.
ARTICLE VII
POST-CLOSING COVENANTS AND AGREEMENTS OF SELLER AND BUYER
7.01 SELLER'S COVENANT REGARDING OBLIGATIONS. From and after the
date of the Closing, Seller shall, in a timely fashion, fully pay, or
otherwise satisfy, all creditors, discharge any and all obligations to
any taxing authority, and satisfy all obligations and liabilities of
Seller not specifically assumed by the Buyer hereunder. Seller, will
pay in full all liabilities of Seller, including any and all business
tax liabilities which may be or become due and owing, and Seller, and
Thomas E. Durkin, III
19
<PAGE>
and William R. Egan, individually, agree to indemnify and hold Buyer
harmless from any and all such liabilities, including any and all
taxes owed by Seller, if any. The covenant contained in this
Section 7.01 shall survive the Closing hereof for the same period as
the survival of the Representations and Warranties set forth in
Section 4.17.
7.03 ACCESS TO RECORDS AFTER CLOSING. After the Closing,
Seller agrees that it will give, or cause to be given, to the
Buyer and its representatives, during normal business hours and
at Buyer's expense, such reasonable access to the books, records
and files of Seller, as the case may be with respect to the
Purchased Business as is reasonably necessary to allow Buyer to
obtain information regarding products, deliveries, Customers,
sales and inventory suppliers regarding the Purchased Business,
and to make copies of such information to the extent reasonably
necessary.
7.04 TELEPHONE NUMBERS USED BY SELLER. Seller agrees to
take any action reasonably requested by Buyer to effect a transfer,
at Buyer's expense, from Seller to Buyer of all telephone numbers
in use by Seller as of the Closing Date (including New Jersey
and out of State and 800 lines) applicable to the Purchased
Business.
7.05 CUSTOMER NOTICE. The Seller and William R. Egan shall
join in a "Welcome" letter to the Customers and William R.
20
<PAGE>
Egan shall personally introduce the appropriate person(s) of the
Buyer to the twenty (20) largest and "key" Customers to be
identified by the Seller.
7.06. TRANSITION. For a period of sixty (60) days from the
Closing, William R. Egan will make himself reasonably available
to the Buyer, if requested, and upon reasonable advance notice,
without charge or fee, at East Orange, New Jersey. For a period
of one (1) year from the Closing, Thomas E. Durkin, III, will make
himself reasonably available to the Buyer, if requested, and upon
reasonable advance notice, without charge or fee, at One Gateway
Center, Suite 1700, Newark, New Jersey.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to proceed with the Closing shall be
subject to the fulfillment of the obligations herein contained, the
delivery of documents herein referred to, and the fulfillment of the
conditions set forth below, the fulfillment of any of which Seller
may waive:
8.01 PAYMENT. The payment required by Section 2.02 shall have
been made.
8.02 DELIVERY OF NOTES. The Negotiable Promissory Note and the
Non-Negotiable Promissory Note shall be executed and delivered.
21
<PAGE>
8.03 LETTER OF CREDIT. The Letter of Credit shall be executed
and delivered.
8.04 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer which are contained in Article V of this Agreement
shall be true as of the Closing as though such representations and
warranties were made as of the Closing.
8.05 SUPPLY AGREEMENT. The parties shall have entered into an
agreement for the supply in bulk of spring water to the East Orange,
New Jersey, facility of the Buyer, in form and substance similar to
Exhibit "F" attached hereto.
8.06 OPTION. The parties shall have entered into a mutually
satisfactory agreement granting the Sellers the option to purchase
up to 50,000 shares of the Buyer's Common Stock at a price equal
to one hundred percent (100%) of the per share price offered by
the Buyer in connection with any initial public offering of SEC
registered shares of any class of Common Stock of the Buyer
(the "Option Agreement").
8.07 COVENANTS AND AGREEMENTS. Buyer shall have performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with by it prior to or at the
date of Closing.
8.08 OFFICER'S CERTIFICATE. Buyer shall have delivered to Seller
a certificate, in form and substance satisfactory to Seller, of an
officer of Buyer, dated the date of Closing,
22
<PAGE>
certifying to the fulfillment of the conditions specified in
Sections 8.04 and 8.07 hereinabove.
8.09 RESOLUTIONS AND OPINION. Buyer shall have delivered to Seller
a certified copy of the resolutions of the Board of Directors of Buyer
authorizing this Agreement and the transactions contemplated herein.
Buyer shall also have delivered the opinion of Buyer's counsel as to such
matters as may be reasonably requested by Seller or its counsel.
8.10 APPROVAL OF COUNSEL. All actions, proceedings, instruments,
agreements and documents required to carry out the transactions
contemplated by this Agreement and incidental thereto and all other
related legal matters shall have been resolved satisfactorily to and
approved by Durkin & Durkin, counsel to Seller, and such counsel shall
have been furnished with such copies (certified, if requested) of all
such actions, proceedings, instruments, agreements and documents as
they have reasonably requested.
ARTICLE IX
CONDITION PRECEDENT TO
OBLIGATIONS OF BUYER
The obligation of Buyer to proceed with the Closing shall be
subject to the fulfillment of the obligations herein contained, the
delivery of documents herein referred to, and the
23
<PAGE>
fulfillment of the conditions set forth below, the fulfillment of
any of which Buyer may waive:
9.01 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller which are contained in this Agreement,
shall be true as of the Closing as though such representations
and warranties were made as of the Closing.
9.02 SUPPLY AGREEMENT. The parties shall have entered
into an agreement for the supply in bulk of spring water to
the East Orange, New Jersey, facility of the Buyer.
9.03 OPTION AGREEMENT. The parties shall have entered
into the Option Agreement.
9.04 COVENANTS AND AGREEMENTS. Seller shall have
performed and complied with all covenants and agreements required
by this Agreement to be performed or complied with by it prior to
or at the date of the Closing.
9.05 OFFICER'S CERTIFICATE. Seller shall have delivered
to Buyer a certificate, in form and substance satisfactory to
Buyer, of an appropriate officer of Seller, dated the date of the
Closing, certifying, in such detail as Buyer may reasonably request,
to the fulfillment of the conditions specified in Sections 9.01
and 9.04 hereinabove.
9.06 RESOLUTIONS AND OPINION. Seller shall have delivered
to Buyer (i) a certified copy of the resolution of the Board of
Directors of Seller authorizing this Agreement and the
24
<PAGE>
transactions contemplated herein; (ii) a written consent to the proposed
purchase and sale executed by all of the shareholders of Seller; and (iii)
opinion of Seller's counsel as to such matters as may be reasonably requested
by Buyer or its counsel.
9.07 NO LITIGATION. There shall not be pending any litigation,
arbitrations, proceeding or governmental investigation involving Seller as a
party since the date of execution of this Agreement.
9.07 APPROVAL OF COUNSEL. All actions, proceedings, instruments,
agreements and documents required to carry out the transactions contemplated
by this Agreement and incidental thereto and all other related legal matters
shall have been resolved satisfactorily to and approved by Lev & Berlin,
Esqs., of Norwalk, Connecticut, counsel to Buyer, and such counsel shall have
been furnished with such copies (certified, if requested) of all such
actions, proceedings, instruments, agreements and documents as they have
reasonably requested.
ARTICLE X
NON-COMPETITION AGREEMENT
10.01 NON-COMPETITION AGREEMENT. The Seller, William R. Egan and Thomas
E. Durkin, III agree that from and after the Closing they will not, without
the Buyer's prior written consent, directly or indirectly, own, manage,
operate, join, control, or
25
<PAGE>
participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner or otherwise with, any business
for a period of five (5) years after closing that will, in any manner,
directly or indirectly compete with, or become interested in any competitor
of the Buyer regarding the Purchased Business throughout the States of New
Jersey, New York, Pennsylvania and Connecticut. The parties agree that the
remedy at law for any breach by them of the foregoing will be inadequate and
that the Buyer shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damage to the Buyer.
ARTICLE XI
THE CLOSING
11.01 TIME, DATE AND PLACE. The Closing hereunder (the "Closing")
shall take place on June 27, 1996, and shall be conducted at the offices of
Durkin and Durkin, 1700 One Gateway Center, Newark, New Jersey 07102.
11.02 DOCUMENTS TO BE DELIVERED BY SELLER AT THE CLOSING. At the
Closing hereunder, Seller shall deliver to Buyer:
(a) a duly executed bill of sale (the "Bill of Sale") in the form and
substance set forth in the annexed Exhibit "G", made a part of this Agreement;
26
<PAGE>
(b) a duly executed Assignment of Leases in the form and substance set
forth in the annexed Exhibit "H";
(c) a duly executed certificate in the form described in Section 9.05
hereinabove;
(d) certified resolutions as described in Section 9.06 hereinabove;
(e) such other documents, etc., as may be reasonably required by the
Buyer or its counsel; and
(f) such other documents, etc, as may be reasonably required by the
Seller or its counsel;
(g) motor vehicle titles duly endorsed; and
(h) original customer files and original customer files for accounts
closed in the last two (2) years.
11.03 DOCUMENTS TO BE DELIVERED BY BUYER AT THE CLOSING. At the
Closing hereunder, Buyer will deliver to Seller:
(a) a duly executed Assignment and Assumption of Contracts and/or
Liabilities;
(b) an executed officer's certificate in the form described in Section
8.08 hereinabove;
(c) certified resolutions, as described in Section 8.09 hereinabove;
(d) duly executed and acknowledged Letter of Credit;
(e) duly executed and acknowledged Promissory Notes; and
(f) duly executed and acknowledged Option Agreement.
27
<PAGE>
11.04 FURTHER ACTIONS. The parties further agree to deliver, each to
the other, after the Closing, any further documents or evidences of title or
of undertakings that may reasonably be required to effectuate this Agreement
and to carry out the intent and purpose hereof or thereof.
ARTICLE XII
INDEMNIFICATION
11.01 INDEMNIFICATION BY SELLER. Seller and Thomas E. Durkin, III and
William R. Egan (the "Individuals") shall jointly and severally indemnify
Buyer and hold it harmless from and against any and all loss, cost, liability
and expense, including attorney's fees and costs of suit, which Buyer may
incur as a result of any claim, demand or action against it arising out of
Seller's conduct of the Business prior to the Closing and sale to Buyer
hereunder, or any damage or deficiency resulting from any agreement on the
part of Seller under this Agreement, or for any material misrepresentation in
or omissions from any other instrument furnished or to be furnished to Buyer
under this Agreement.
12.02 CLAIMS FOR INDEMNIFICATION. Whenever any claim of
indemnification shall arise in favor of Buyer under this Article XII, Buyer
shall notify Seller in writing by personal delivery or certified mail, return
receipt requested, within thirty (30) days
28
<PAGE>
after Buyer has actual knowledge of the facts constituting the basis for such
a claim. Such notice shall specify all facts known to Buyer giving rise to
such indemnification right and the amount or an estimate of the amount of the
liability arising therefrom. The right to indemnification hereunder and the
amount of the estimated amount thereof, as set forth in such notice, shall be
deemed agreed to by Seller unless, within thirty (30) days after the receipt
of such notice, Buyer is notified in writing that Seller disputes the right
to indemnification as set forth or estimated in such notice.
12.03 THIRD PARTY CLAIMS. If the facts giving rise to any such
indemnification right shall involve any actual or threatened claim or demand
by any third party against the Buyer or any possible claim by the Buyer
against any Third Party, such claim by or against a third party shall be
referred to as a "Third-Party Claim". If Seller shall give Buyer an agreement
in writing, in form and substance reasonably satisfactory to counsel to
Buyer, agreeing to indemnify and save Buyer harmless from all costs and
liability arising from any Third-Party Claim, Seller may, at their own
expense, undertake full responsibility for the defense or prosecution of such
Third-Party Claim and may contest or settle it on such terms as they may
choose, except that no settlement of any action involving claims other than
for money damages may be made without the prior written consent of Buyer
29
<PAGE>
(such consent not be unreasonably withheld). If by reason of any Third-Party
Claim, a lien, attachment, garnishment or execution is placed upon the
Purchased Asset thereof, or any of the property or assets of Buyer or Seller
if they desire to exercise their rights to defend or prosecute such suit,
they shall furnish a satisfactory indemnity bond to obtain the prompt release
of such lien, attachment, garnishment or execution.
12.04 SET-OFF
(a) The Buyer may set off against the portion of Non-Negotiable Note
not then paid any loss, damage, cost or expenses for which the Seller or the
Individuals may be responsible pursuant to this Agreement, subject, however,
to the following terms and conditions:
(1) the Buyer shall give written notice, in accordance with
Section 14.04 of this Agreement, to the Sellers and the Individuals of any
claimed breach of any such representation or warranty made or obligation
incurred, which notice shall set forth the amount of loss, damage, cost or
expense which the Buyer claims to have sustained by reason thereof;
(2) unless otherwise agreed, in writing, by the parties, set off
shall be effected on the date of notice of such claim and such set off shall
be charged against any unpaid portion of the Non-Negotiable Promissory Note;
30
<PAGE>
(3) if, such claim is contested, the Seller or the Individuals shall
notify the Buyer in writing within 10 days from the date of such notice (the
"Notice of Contest Period") of an intention to dispute the claim. If such
dispute is not resolved within 30 days after Notice of Contest is given (the
"Resolution Period"), then such dispute shall be resolved by a committee of
three arbitrators (one jointly appointed by the Seller and the Individuals,
one appointed by the Buyer and one appointed by the other two so appointed),
which shall be appointed within 60 days after the expiration of the
Resolution Period. The arbitrators shall abide by the rules of the American
Arbitration Association and their decision shall be made within 45 days from
the date of appointment and shall be final and binding on all parties. The
arbitration shall take place in Essex County, New Jersey; and
(b) The remedies provided for in this Section 12.04 shall be in addition
to and not in lieu of any other remedies available to the Buyer under this
Agreement or otherwise.
ARTICLE XIII
NOTICE TO DIVISION OF TAXATION
13.01 SELLER'S ACCRUED TAXES. Any amounts due the State of New Jersey
with respect to accrued taxes of Seller as of the Closing shall be paid by
Seller. Thomas E. Durkin, III and
31
<PAGE>
William R. Egan, individually, guarantee performance by the Seller regarding
this provision.
ARTICLE XIV
MISCELLANEOUS
14.01 NO BROKERS. Seller represents and warrants to Buyer and Buyer
represents and warrants to Seller, that neither it nor any party acting on
its behalf has incurred any liability, either express or implied, to any
"broker" or "finder" or similar person in respect of any transactions
contemplated hereby.
14.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement with the exhibits
hereto and other documents referred to herein, constitutes the entire
understanding and contains all warranties of the parties hereto relative to
the subject matter hereof. This Agreement may be amended only by a written
instrument executed on behalf of Seller and Buyer, or by a duly authorized
officer of each.
14.03 NON-DISCLOSURE. Each party agrees that neither will impair the
reputation of the other nor discuss any difference or agreement of the
parties nor the terms and conditions of this Agreement and the Supply
Agreement nor the negotiations thereof. Each party agrees that it is in their
mutual best interests for their respective businesses post closing to enjoy
the benefits of
32
<PAGE>
a positive image with their customers, suppliers, vendors and others.
14.04 GOVERNING LAW. All questions relating to the validity,
interpretation or performance of this Agreement shall be deterimined in
accordance with the law of the State of New Jersey.
14.05 NOTICES. Any notice or communication of any party hereto to
another shall be deemed to be duly given if and when sent be certified mail,
return receipt requested, to the parties at the following addresses:
If to Seller: Mountain Spring Water Co., Inc.
White Mountain Company, Inc.
c/o Thomas E. Durkin, III, Esq.
Durkin & Durkin, Esqs.
One Gateway Center, Suite 1700
Newark, New Jersey 07102
With Copy to: William R. Egan
18 Madison Terrace
Short Hills, New Jersey 07078
If to Buyer: Puro Water Group, Inc.
101 North Park Street
East Orange, New Jersey
With Copy to: Duane Berlin, Esq.
LEV & BERLIN, ESQS.
535 Connecticut Avenue
Norwalk, Connecticut 06854
or to any changed address that the parties may designate by like notice. The
effective date of such notice shall be its mailing date.
33
<PAGE>
14.06 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed and delivered shall be deemed an
original yet all of which together shall constitute but one and the same
instrument.
14.07 HEADINGS. The article and section headings in this Agreement are
for convenience of reference only and shall not be deemed to alter or affect
any provisions thereof.
14.08 NON-ASSIGNABILITY. This Agreement shall not be assignable by
either party hereto without the prior written consent of the other party.
Nothing in this Agreement, expressed or implied, is intended to confer upon
any person, other than the parties hereto and their successors, and right or
remedy under or by reason of this Agreement.
14.09 EXPENSES. Except as may otherwise be provided herein, the parties
hereto shall be responsible for their respective costs and expenses,
including attorneys' fees, incurred with respect to the purchase and sale
hereunder.
14.10 FURTHER ASSURANCES. Each of the parties hereto shall cooperate and
take such action, give such assurances and execute such documents as may be
reasonably requested by the other party in order to effectuate the purpose
and provisions of this Agreement.
14.11 ACCESS AND INFORMATION. The Seller will give to the Buyer and the
Buyer's counsel accountants and other
34
<PAGE>
representatives, full access, during normal business hours throughout the
period prior to the Closing, to all of the sellers properties, revenue and
sales, contracts, commitments and records, and to furnish the Buyer during
such period with all such information concerning the Purchased Assets as the
Buyer reasonably may request.
[end of page 35]
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
ATTEST: MOUNTAINWOOD SPRING WATER CO., INC.
/s/ illegible By: /s/ Thomas E. Durkin, III
- -------------------------------- -----------------------------------------
a duly authorized officer
ATTEST: WHITE MOUNTAIN COMPANY, INC.
/s/ illegible By: /s/ Thomas E. Durkin, III
- -------------------------------- -----------------------------------------
a duly authorized officer
ATTEST: PURO WATER GROUP, INC.
By: /s/ Jack C. West
- -------------------------------- -----------------------------------------
a duly authorized officer
WE AGREE TO THE TERMS AND CONDITIONS OF THIS AGREEMENT:
/s/ William R. Egan /s/ Thomas E. Durkin, III
- -------------------------------- -----------------------------------------
William R. Egan Thomas E. Durkin, III
i:\wpfiles\clara\mountainwood\1995\puro\agree10
36
<PAGE>
EX-10.11
[Letterhead of Mountainwood Spring Water Co., Inc.]
November 7, 1996
Mr. Jack West
PURO WATER GROUP, INC.
56-45 58th Street
Maspeth, New York 11378-0010
Re: Mountainwood to Puro
Dear Jack:
This letter shall serve to confirm that Mountainwood Spring Water Co., Inc.
and White Mountain Company, Inc. (collectively, the "Company") hereby waive
Section 8.06 of the Agreement dated as of June 27, 1996 by and between the
Company and Puro Water Group, Inc. ("Puro") and any other rights the Company may
have to be granted options, warrants or other convertible securities of Puro.
Very truly yours,
By: /s/ Thomas E. Durkin, III
--------------------------
Its: Chief Executive Officer
TEDIII:acb
Enclosure
Agreed and accepted as of the date first written above:
Puro Water Group, Inc.
By: /s/ Jack C. West
--------------------------
Its: President
<PAGE>
EX-10.12
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made on or as of this
31st day of January, 1996 by and between Puro Water Group, Inc., a
corporation duly organized under the laws of the State of Delaware ("Buyer"),
Electrified Companies Inc., a corporation duly organized under the laws of
the State of New Jersey ("Seller"), Robert Brundage, an individual with an
address of 10 Randall Drive, Short Hills, New Jersey 07078 and Lyle Brundage,
an individual with an address of 8 Tower Drive, Maplewood, New Jersey 07040
(together, the "Stockholders").
WHEREAS Seller is the owner of certain assets used in connection with
the operation of its business; and
WHEREAS the Stockholders together own all of the issued and
outstanding capital stock of Seller; and
WHEREAS Buyer desires to purchase the hereinafter described assets of
Seller pursuant to the terms and conditions set forth herein; and
WHEREAS Seller desires to sell and transfer such assets to Buyer
pursuant to the terms and conditions set forth herein:
NOW, THEREFORE, for and in consideration of the premises and mutual
promises and covenants hereinafter contained, it is agreed between Buyer,
Seller and the Stockholders as follows:
1. SALE OF ASSETS. Subject to the terms and conditions set forth herein,
Seller shall sell, assign, convey, transfer and set over to Buyer, and Buyer
shall purchase, assume
<PAGE>
and accept from Seller, free and clear of any and all liens, claims,
encumbrances, liabilities, obligations, security interests and debts except
as specifically set forth on Schedules 2 and 4.4 annexed hereto, full and
complete title to the following tangible and intangible properties and assets
of Seller, wherever located, set forth in the bill of sale described below
(the "Assets"): customer lists and customer databases, including names and
addresses, supplier lists, including names and addresses, software programs,
manuals, documentation and the like, patents, copyrights, trademarks,
tradenames, servicemarks, servicenames, programs (including source codes and
documentation) and other intellectual property of Seller including but not
limited to the names Electrified Companies and "American Eagle" as set forth
in Schedule 4.8 hereof (the "Intellectual Property") and any derivative
thereof, machinery, fixtures, furnishings, equipment, including equipment
rented to or on a no fee loan basis (e.g. coffee brewers) and in the
possession of Seller's customers, including but not limited to water coolers
and containers of all types (specifically excluding therefrom that certain
1990 Jaguar and artwork and other personal items of the Stockholders),
computer hardware, software and peripherals, supplies, inventory, accounts
receivable and rights under contracts and leases to which the Seller is a
party (specifically excluding therefrom a lease for a certain BMW automobile
and the rental deposit of $550 therefore) (the "Contracts"). In that
connection, on the date of the closing of the transactions contemplated
herein (the "Closing"), Seller shall deliver to Buyer: (i) a bill of sale in
the form of Exhibit 1(i) covering the Assets; (ii) all title documents
relating to all vehicles set forth on Schedule 1(ii) annexed
2
<PAGE>
hereto duly endorsed for transfer to Buyer; (iii) assignments of the
Intellectual Property; and (iv) assignments of the Contracts and if so
required, consent to such assignment from any other party thereto.
2. LIABILITIES. Buyer does not hereby and shall not at any time assume
any liabilities or obligations of Seller of any nature whatsoever except as
specifically set forth on Schedule 2 annexed hereto.
3. CONSIDERATION.
3.1 As consideration for the sale of the Assets Buyer shall (a) pay
to Seller on the date of the Closing (the "Closing Date"), Five Million
Dollars ($5,000,000) in the following manner: (i) One Million Dollars
($1,000,000) by bank or certified check or wire transfer; (ii) Five Hundred
Thousand Dollars ($500,000) on the terms and conditions set forth in and in
the form of that certain Promissory Note set forth on Exhibit 3.1(a)(ii)
annexed hereto (the "$500,000 Note"), which shall be secured by a letter of
credit provided by Buyer issued by a financial institution and in form and
substance reasonably satisfactory to Seller; (iii) Two Million Nine Hundred
Thousand Dollars ($2,900,000) on the terms and conditions set forth in and in
the form of that certain Promissory Note set forth on Exhibit 3.1(a)(iii)
annexed hereto (the "$2,900,000 Note"), which shall be secured by a letter of
credit provided by Buyer issued by a financial institution reasonably
satisfactory to Seller and in form and substance reasonably satisfactory to
Seller; and (iv) Six Hundred Thousand Dollars ($600,000) on the terms and
conditions set forth in and in the form of that certain
3
<PAGE>
Promissory Note set forth on Exhibit 3.1(a)(iv) annexed hereto (the "$600,000
Note"), which shall be secured by a letter of credit provided by Buyer issued
by a financial institution reasonably satisfactory to Seller and in form and
substance reasonably satisfactory to Seller, (b) pay and satisfy that certain
loan made by Summit Bank to Seller, having a current balance of $304,338.08
plus accrued interest through February 1, 1996 of $1,390.88, (c) pay and
satisfy that certain loan made by Broad National Bank to Seller, having a
current outstanding balance of $132,039.30 plus accrued interest through
February 1, 1996 of $32.81, and (d) assume those certain debts and
liabilities set forth on Schedule 2 annexed hereto (collectively the
"Consideration"). The Consideration shall be allocated in accordance with
Schedule 3.1.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND THE
STOCKHOLDERS. Seller and the Stockholders jointly and severally represent,
warrant, and covenant to Buyer as of the date hereof and at the Closing as
follows:
4.1 EXISTENCE/AUTHORIZATION. Seller is a corporation duly organized
and validly existing under the laws of the State of New Jersey. Seller has
the corporate power to own and operate its properties and the Assets and to
carry on its business as it is now being conducted. See Schedule 4.1 annexed
hereto.
4.2 CORPORATE POWER. Each of Seller and the Stockholders has full
power and authority to execute and deliver this Agreement and such other
agreements and instruments to be executed and delivered by them pursuant
hereto, and to consummate the
4
<PAGE>
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of Seller to authorize it
to execute, deliver and perform this Agreement and such other agreements,
instruments and transactions contemplated hereby have been duly and properly
taken.
4.3 BINDING OBLIGATION: GOVERNMENTAL CONSENTS.
(a) This Agreement has been duly executed and delivered by
Seller and the Stockholders and constitutes, and such other agreements and
instruments contemplated hereby when duly executed and delivered by Seller
and the Stockholders will constitute, legal, valid and binding obligations of
Seller and the Stockholders enforceable in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally from time to time in effect, and
subject to any equitable principles limiting the right to obtain specific
performance of certain obligations of Seller and the Stockholders hereunder
and thereunder.
(b) Except as set forth in Schedule 4.3(b), all consents of
governmental and other regulatory authorities and of other parties required
to be received by or on the part of Seller and the Stockholders to enable
them to enter into and carry out this Agreement and the transactions
contemplated hereby have been obtained. Without limiting the foregoing, and
except as set forth in Schedule 4.3(b), Seller and the Stockholders have made
all such filings and submissions which may be required under
5
<PAGE>
applicable law for Seller and the Stockholders to consummate the transactions
contemplated hereby.
(c) Except as set forth in Schedule 4.3(c), neither the
execution and delivery of this Agreement nor the consummation by Seller and
the Stockholders of the transactions contemplated hereby will (i) violate or
conflict with any of the provisions of the Articles of Incorporation or
By-laws of Seller; or (ii) violate or constitute a default under any note,
bond, mortgage, indenture, contract (including but not limited to the
Contracts), agreement, license or other instrument or any order, judgment or
ruling of any governmental authority to which Seller or the Stockholders is
or are a party or by which any of their respective properties are bound.
(d) No other consent, approval, license, permit, or
authorization of, or registration, declaration or filing with, any state or
federal court, administrative agency or commission or other governmental
authority or instrumentality, or of any other third party, is required to be
obtained or made by Seller or the Stockholders in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby other than those that may be required solely
by reason of Buyer's (as opposed to any third party's) participation in the
transactions contemplated hereby.
4.4 TITLE TO ASSETS.
Seller has good and valid title to all of the Assets, free and
clear of all mortgages, liens, or encumbrances of any nature whatsoever
except such as are disclosed on
6
<PAGE>
Schedule 4.4 hereto (the "Permitted Liens"). The performance by Seller and
the Stockholders of their obligations hereunder will vest in the Buyer full
and complete title in and to the Assets, free and clear of any and all liens,
claims and encumbrances of any nature whatsoever except the Permitted Liens.
4.5 CONDITION OF ASSETS. All of the Assets described on Schedule 1(i)
are in operating condition and repair, except those Assets currently
undergoing repair, maintenance and/or renovation.
4.6 CUSTOMER INFORMATION. At the Closing, Seller shall deliver to
Buyer hard copy and electronic or magnetic media files, to the extent such
exist, containing customer lists and customer databases used by or for Seller
(the "Customer Information") as of Closing. The Customer Information will set
forth the name and address of all of Seller's customers as of the Closing
Date, to the best of Seller's knowledge and belief. Except as set forth in
Schedule 4.6, none of Seller's materially large (i.e. in excess of $6,000 per
year in gross sales) customers has ceased within the last 120 days, nor
indicated any intention to materially reduce the amount of such business.
Seller is the owner of all right, title and interest in and to the Customer
Information and Seller is not a party to any agreement to lease, sell, or
license said Customer Information, except as set forth in Schedule 4.6
annexed hereto.
7
<PAGE>
4.7 REAL PROPERTY. Schedule 4.7(a) sets forth a complete list of all
real property and interests in real property leased by Seller. Schedule 4.7(b)
sets forth a complete list of all real property and interests in real
property owned by Seller. Seller has good leasehold interest in all real
property shown on Schedule 4.7(a) which are leased by Seller and good fee
title interest in all real property and interests in real property shown on
Schedule 4.7(b) which are owned by Seller. To the best of Seller's knowledge,
Seller is in compliance with all statutes, laws, rules, regulations and
ordinances of any governmental authority or instrumentality relating to its
leased real property and the use thereof by Seller, including but not limited
to all federal, state and local statutes, laws, rules, regulations and
ordinances relating to environmental matters.
4.8 INTELLECTUAL PROPERTY. Schedule 4.8 sets forth a true and
complete list of all patents, trademarks, trade names, servicemarks,
servicenames, copyrights and applications therefor, programs (including
source codes and other documentation) and other intellectual property owned
by or registered in the name of, or used in the business of, Seller
(collectively, the "Intellectual Property"). Except as set forth in
Schedule 4.8, to the best of Seller's knowledge, Seller possesses adequate
and enforceable rights to use in its business as presently conducted (without
payment) all of its Intellectual Property. To the best of Seller's knowledge,
use of the Intellectual Property by Seller does not violate or infringe upon
any rights of any third parties, and there are no opposition or cancellation
proceedings or infringement suits pending or, to the knowledge of Seller and
the Stockholders,
8
<PAGE>
threatened with respect to any of the Intellectual Property. Seller shall
cooperate with Buyer subsequent to Closing to perfect Buyer's right and
interest to any such Intellectual Property including the registration
thereof. Seller shall, as soon as practicable after the Closing, cause the
name of Seller to be changed to a name that does not include the words
Electrified Companies, or any combination or derivation therof.
4.9 INTENTIONALLY OMITTED
4.10 LITIGATION. Except as indicated on Schedule 4.10, there is no
action, suit, claim, proceeding at law or in equity by any person or entity,
or any arbitration or administrative or other proceeding by or before any
board, panel, tribunal or other such entity, or to the knowledge, information
and belief of Seller and the Stockholders, any investigation by any
governmental or other instrumentality or agency, pending, or, to the
knowledge, information and belief of Seller and the Stockholders, threatened,
against or affecting the Assets of the transactions contemplated hereby or
which could affect the right or ability of Seller or the Stockholders to
transfer and sell the Assets to the Buyer or otherwise consummate the
transactions contemplated herein. Neither Seller nor the Stockholders knows
of any valid basis for any such action, proceeding or investigation. Seller
is not subject to any judgement, order or decree entered in any lawsuit or
prodeeding, nor is Seller or the Stockholders aware of any circumstances that
could give rise to a claim which may have a material adverse affect on the
Assets or on any of Seller's operations, business practices or prospects or
on its ability to acquire any property or conduct business.
9
<PAGE>
4.11 FINANCIAL STATEMENTS.
(a) Schedule 4.11(a)(i) sets forth the reviewed balance sheet of
Seller as of December 31, 1994 (the "1994 Balance Sheet") and the related
statement of income and retained earnings and cash flows for the year (12
months) then ended (collectively the "1994 Financial Statements"). Schedule
4.11(a)(ii) sets forth the internally prepared year-end balance sheet of
Seller as of December 31, 1995 (the "1995 Balance Sheet") and the related
statement of income earnings for the year (12 months) then ended
(collectively the "1995 Financial Statements"). To the actual knowledge of
Seller, the information in Seller's books and records upon which the 1994 and
1995 Financial Statements have been based is true, accurate and complete
subject to the disclosures set forth in the Schedules hereto.
(b) Subject ot Schedule 4.11(b), the 1994 and 1995 Financial
Statements have been prepared from the books and records of the Seller and
the 1994 Financial Statements have been reviewed in conformity with generally
accepted accounting principles. Generally accepted accounting principles
require that management record an allowance for doubtful accounts against the
outstanding accounts receivable at the balance sheet date. Management has not
recorded this allowance, but rather uses the direct write-off method.
(c) From January 1, 1996 through the Closing Date, Seller has
conducted its business and affairs in the ordinary course; there has been no
material adverse change in the assets, liabilities, sales, income or business
of Seller since January 1, 1996, nor
10
<PAGE>
do the turnover, costs (direct or indirect) or margin of profitability of
Seller show any material deterioration compared with such position as of
December 31, 1995; since January 1, 1996, no debtor has been released by
Seller on terms that it pay less than the book value of its debt, and, except
as set forth on Schedule 4.11(c), no debt owing to Seller has been deferred,
subordinated or written-off or has proved to any extent unrecoverable (a
"Write-Off"), and no debt shall be the subject of a Write-Off from the date
hereof through the date of the Closing; none of the outstanding receivables
or claims of Seller are subject to the expiration of any statutes of
limitations before the Closing Date; Seller has not introduced any material
change with respect to the operation of its business, including its method or
practice of accounting; and Seller has not increased the carrying value of
any of its assets (whether tangible or intangible).
4.12 UNDISCLOSED LIABILITIES. Except as set forth in Schedule 4.12,
Seller does not have any liabilities or obligations of any nature (whether
accrued, absolute, contingent, unasserted or otherwise) required by generally
accepted accounting principles and practices to be reflected on a balance
sheet or in notes thereto, except (i) as set forth or reflected on the 1994
and 1995 Balance Sheets or described in notes therein (and Balance Sheet
Allowances not reflected therein), (ii) for items disclosed in this Agreement
or the Schedules or Exhibits hereto, (iii) for purchase contracts and orders
for inventory in the ordinary course of business consistent with past
practice, and (iv) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of
11
<PAGE>
the 1995 Balance Sheet and not in violation of this Agreement (all
liabilities and obligations set forth in (i)-(iv) above being herein called
"Disclosed Liabilities").
4.13 COMPLETE INFORMATION. Seller and the Stockholders have heretofore
or herein and in the Schedules attached hereto, furnished to Buyer and its
agents information relating to the business and operations of Seller. Seller
and the Stockholders have not knowingly withheld nor omitted any material
adverse information from Buyer. All such information is complete and accurate
in all material respects.
4.14 TAXES.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" shall
mean, without limitation, all local, state, federal and foreign or other
taxes (including franchise taxes or fees) and assessments, any Social
Security taxes, any direct tax, withholding tax, payroll tax, any stamp
taxes, sales or use taxes and capital taxes, and customs charges, including
all interest, penalties and additions imposed with respect to such amounts
not disclosed on the 1994 or 1995 Financial Statements, or set forth
on Schedule 4.11(a)(i) or (ii).
(b) Seller has duly filed in a timely manner all Tax, employee and
other reports and returns required to be filed by it. Such reports and
returns were completed in accordance with applicable laws and were true and
correct in all material respects. Seller has duly paid all Taxes and other
charges due and payable or lawfully claimed to be due from it by every Tax
authority for the periods covered by such reports and
12
<PAGE>
returns which are not prescribed by the statute of limitations. Seller has
withheld all Taxes required to be withheld by an employer in the State of New
Jersey and covenants to make all appropriate remittances in connection
therewith in a timely manner, except for such taxes due for the current
period, payment of which is not yet due, which payment will be made by the
Buyer.
(c) Any sales or other tax payable in connection with the sale of
the Assets to Buyer hereunder shall be paid by Seller.
4.15 INTENTIONALLY OMITTED
4.16 COMPLIANCE WITH APPLICABLE LAWS
(a) Neither Seller nor the Stockholders have received notice of any
violation of any applicable statutes, laws, ordinances, rules and regulations
of any governmental authority or instrumentality, domestic or foreign
(including, without limitation, laws relating to environmental matters) with
respect to the Assets of the Seller.
(b) To the best of Seller's knowledge, Seller has obtained and is in
possession of all permits, approvals and consents (the "Permits") of all
governmental authorities and/or instrumentalities necessary for the operation
of the business related to the Assets. A schedule of each of each of the
Permits along with expiration dates is annexed hereto as Schedule 4.16(b).
All of the Permits are in full force and effect, except as set forth in
Schedule 4.16(b). None of the Permits have been revoked and no issuer of any
of the Permits has threatened or indicated an intention to revoke any Permit.
Buyer acknowledges
13
<PAGE>
that the Permits are non-transferrable. Seller agrees to provide Buyer
with reasonable assistance and cooperation in obtaining the Permits.
(c) Except as set forth on Schedule 4.16(c), to the best of Seller's
knowledge, during the period of Seller's operations on each of the premises
which it occupies, there are no present or past conditions in any way
relating to any Assets, including without limitation leased real property,
involving or resulting from any past or present spill, discharge, leak,
emission, injection, escape, dumping or release of any kind whatsoever of any
substance or exposure of any type in any workplace or to any medium,
including, but not limited to, air, land, surface waters or ground waters, or
from any generation, transportation, treatment, storage or disposal of waste
materials, raw materials or products of any kind or from storage, use or
handling of any hazardous or toxic materials or other substances that is
likely to lead to imposition of any liability (collectively, "Environmental
Matters"). Except as set forth in Schedule 4.16(c), there are no above-ground
or underground storage tanks or septic systems on any property of Seller.
Without limiting any other indemnificiation set forth herein, Seller and the
Stockholders hereby jointly and severally agree to indemnify and defend Buyer
against and hold it harmless from any loss, liability, claim, damage or
expense (including reasonable legal fees and expenses) suffered or incurred
by Buyer to the extent arising from Environmental Matters, which resulted
from Seller's conduct.
14
<PAGE>
4.17 INVENTORIES. Except as set forth herein, the inventories reflected
on the 1994 Balance Sheet, the 1995 Balance Sheet or thereafter acquired by
Seller consist of items of a quality and quantity usable in the ordinary
course of Seller's business consistent with past practice at the amounts
reflected on said Balance Sheets (which amounts reflect normal obsolescence)
in the case of inventories reflected therein, or, in the case of such
inventories acquired after the date of the 1995 Balance Sheet, at the amounts
reflected on the books of Seller, subject to market price fluctuations in the
ordinary course of business beyond the control of Seller. Except as set forth
herein, the inventories acquired on or after January 1, 1996 consist of items
of a quality and quantity usable in the ordinary course of Seller's business
consistent with past practice at the amounts reflected on the books of Seller
(which amounts reflect normal obsolescence), subject to market price
fluctuations in the ordinary course of business beyond the control of Seller.
4.18 SALARY INCREASES AND BONUSES. Since January 1, 1996, Seller has
not paid any bonuses or granted any salary increases except (i) bonuses and
salary increases of non-executive employees in the ordinary course of
business in accordance with past practice.
4.19 INTENTIONALLY OMITTED
4.20 LABOR LAW MATTERS. To the best of Seller's knowledge, Seller (i)
is in full compliance with all applicable federal and state laws relating to
employment and employment policies, wages, hours, term and conditions
employment, and (ii) has complied in all respects with social security and
pension payment obligations.
15
<PAGE>
4.21 RECORDS AND SYSTEMS. Except as set forth in Schedule 4.8, all the
records and systems (including but not limited to computer systems) and all
data and information of Seller are recorded, stored, maintained or operated
or otherwise held by Seller, are included in the Assets, and are not wholly
or partly dependent on any facilities which are not under the exclusive
ownership or control of Seller.
4.22 SOFTWARE LICENSES. Except as set forth on Schedule 4.8, Seller is
licensed to use all software necessary to enable it to continue to conduct
its business and use its computerized records for the foreseeable future in
the same manner in which they have been used prior to the Closing Date. All
such licenses to use are included in the Assets, and Seller does not share
any user rights in respect of such software with any other person or entity,
but consent is required to assign Seller's rights in such licenses to Buyer.
Seller uses an outside payroll service to which it transmits its payroll
electronically.
4.23 EMPLOYEES, COMPENSATION, BENEFIT PLANS AND COLLECTIVE
BARGAINING AGREEMENTS
(a) Seller is not a party to any written non-union employment
agreements.
(b) Without limiting any other indemnification set forth
herein, Seller and the Stockholders hereby jointly and severally agree to
indemnify Buyer, defend against and hold Buyer harmless from and against any
and all claims and/or lawsuits of past or present employees of Seller arising
in connection with any act or omission of Seller or its
16
<PAGE>
employees and/or agents occurring on or prior to the Closing Date
attributable to the employment by Seller of said employees.
(c) Except as set forth on Schedule 4.23(c), no sum is due to
any current or past employee of Seller arising from his or her employment or
services contract or other arrangement.
(d) Except for the distribution of a divided to the
Stockholders in the approximate aggregate amount of $22,000 as of December
31, 1995, Seller has not made or agreed to make any payments to employees of
Seller or retired employees of Seller that will not be tax deductible.
(e) To the best of Seller's knowledge, Seller has
continuously complied, in all respects, with all applicable requirements of
the labor law, social security law, health and safety regulations and all
other regulations concerning the employment of Seller's employees.
(f) To the best of Seller's knowledge, Seller is not in
default of any of its labor related obligations and there exists no
employment dispute of any kind related to employment matters nor to Seller's
or the Stockholders' knowledge is any such dispute threatened, except as set
forth in Schedule 4.23(c). Seller has complied in all material respects with
the payment and withholding of all applicable labor and related taxes and
contributions, and has supplied in this regard all required information.
17
<PAGE>
(g) Except as set forth on Schedule 4.23(g), no employee or
group of employees of Seller is a member of any labor union, nor is Seller a
party to or bound by any collective bargaining agreement or other agreement
covering the rights and obligations of Seller to its employees.
(h) Attached as Schedule 4.23(h) is a list of all pension,
retirement or employee health or welfare benefit plans, maintained by Seller
for the benefit of Seller's past and present employees. Except for amounts
due and payable for the current payroll period, all amounts to be paid under
such plans have been completely and timely paid. There is no unfunded
liability with respect to such plans, except for current obligations. Without
limiting any other indemnification set forth herein, Seller and the
Stockholders hereby jointly and severally agree to indemnify Buyer and defend
against and hold Buyer harmless from and against any and all claims and/or
lawsuits arising from Seller's conduct, relating to any pension, retirement
or employee health, welfare or benefit plan maintained by Seller and any
successor liability or obligation in connection therewith.
4.24 RELEASE OF SECURITY INTERESTS. As of the Closing, Seller and the
Stockholders will have obtained an absolute release or waiver of security
interest from all persons and entities maintaining a security interest (other
than Permitted Liens) in any of the Assets.
18
<PAGE>
4.25 NON-COMPETITION/NON-SOLICITATION. Seller covenants that it shall
not, directly or indirectly, for a period of Five (5) years after the Closing
Date, without prior express written consent of the Buyer:
(i) be engaged in any work or other activity anywhere within
300 miles of East Orange, New Jersey, its territories or possessions
(the "Territory"), or elsewhere if the business located in such
other jurisdiction includes conduct set forth in the Paragraph 4.25(i)
in the Territory, whether as owner, stockholder, partner, consultant,
employer, employee or otherwise, involving the manufacture, marketing
sales or distribution of a product or service the same or similar to a
product or service produced and/or marketed and/or provided by the
Seller as of the date hereof or any of its subsidiaries or affiliated
companies as of the Closing Date,
(ii) either on behalf of itself or any other person, firm or
company anywhere in the Territory, or elsewhere if the business located
in such jurisdiction includes conduct set forth in this Paragraph
4.25(ii) in the Territory, canvass or solicit orders from or in any
way interfere with any person, firm or company who shall at any time
have been directly or indirectly a customer or customers of the Seller
as of the date hereof, or any of its subsidiaries or affiliated
companies, nor
19
<PAGE>
(iii) employ, solicit or endeavor to entice away from the Seller as of
the date hereof or any of its subsidiaries or affiliated companies any
person who is or was an employee of such company during the three (3)
years immediately preceding the Closing Date.
4.26 INTENTIONALLY OMITTED
4.27 BROKERS/FINDERS. Each party represents to the other that it has
not employed any broker, finder, investment banker or other person and none
of the foregoing has incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby. Without limiting any other indemnification set forth herein, each
party hereby jointly and severally indemnifies the other and holds the other
harmless from and against any and all claims, liabilities and/or causes of
action for any brokerage fees, commissions, finders fees or the like arising
out of the transactions contemplated hereby.
4.28 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts receivable
and accounts payable of the Seller are fairly reflected in the 1994 and 1995
Balance Sheets and will be fairly reflected on the books of the Seller at the
date of Closing, except as disclosed in the footnotes thereto and the
schedules hereto.
4.29 BUSINESS INTERESTS. Other than as set forth on Schedule 4.29,
Seller does not directly or indirectly own any capital stock of or other
equity interest in any corporation, partnership, limited liability company or
other entity, and Seller is not a
20
<PAGE>
member of or participant in any partnership, joint venture or similar entity.
Other than as set forth in Schedule 4.29, from January 1, 1996 through the
date of the Closing, Seller has not make or caused to be made any payment to
any subsidiary or affiliate of Seller outside of the ordinary cause of
Seller's business.
4.30 INTENTIONALLY OMITTED
4.31 EMPLOYMENT/CONSULTING AGREEMENTS. Seller and the Stockholders
shall, at the Closing, cause David Brundage to enter into an Employment
Agreement with Buyer in the form of Exhibit 4.31 (a) annexed hereto. Each of
the Stockholders shall, at the Closing, enter into a Consulting Agreement
with Buyer in the form of Exhibit 4.31(b)(i) or (ii), as applicable, annexed
hereto.
4.32 DIVIDENDS. Other than as set forth on Schedule 4.32, Seller has
not, from January 1, 1996 through the date of the Closing, paid or declared
any dividend with respect to any or all of Seller's capital stock.
4.33 NOTE RECEIVABLE. Seller hereby confirms that the principal balance
due under that certain promissory note in the original principal amount of
$200,000, made by Lectromatic Ice Machine Service, Inc. was $148,267 as of
December 31, 1995, that the maker of said note has made no payments to Seller
thereunder out of the ordinary course and/or not in accordance with the terms
thereof since said date and that, to the best of Seller's knowledge, no
defense exists to the enforcement and collection of said promissory note nor
to the enforcement of any other instrument serving as security therefor.
21
<PAGE>
4.34 STATEMENTS AS TO KNOWLEDGE. All representations, warranties, and
covenants of Seller and/or the Stockholders set forth herein which are
qualified as to knowledge are deemed to be made after diligent inquiry by
each party making such representations, warranties and covenants and with
respect to the Seller, shall be limited to the actual knowledge of the
Stockholders.
5. REPRESENTATIONS WARRANTIES AND COVENANTS OF BUYER.
Buyer hereby represents, warrants and covenants to Seller and the
Stockholders as of the date hereof and at the Closing as follows:
5.1 EXISTENCE. Buyer is a corporation duly organized and validly
existing under the laws of the State of Delaware. Buyer has the corporate
power to own and operate its properties and to carry on its business as it is
now being conducted.
5.2 CORPORATE POWER. Buyer has full corporate power and authority to
execute and deliver this Agreement and such other agreements and instruments
to be executed and delivered by it pursuant hereto, and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of the Buyer to authorize
it to execute, deliver and perform this Agreement and such other agreements,
instruments and transactions contemplated hereby have been duly and properly
taken.
5.3 BINDING OBLIGATION: GOVERNMENTAL CONSENTS. This Agreement has been
duly executed and delivered by Buyer and constitutes, and such other
agreements and
22
<PAGE>
instruments when duly executed and delivered by Buyer will constitute, legal,
valid and binding obligations of Buyer enforceable in accordance with their
respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally from time to time in
effect, and subject to any equitable principles limiting the right to obtain
specific performance of certain obligations of Buyer hereunder and
thereunder. All consents of governmental and other regulatory authorities and
of other parties required to be received by or on the part of Buyer to enable
it to enter in to and carry out this Agreement and the transactions
contemplated hereby have been obtained. Without limiting the foregoing, Buyer
has made all such filings and submissions which may be required under
applicable law for Buyer to consummate the transactions contemplated hereby.
Neither the execution and delivery of this Agreement nor the consummation by
Buyer of the transactions contemplated hereby will (i) violate or conflict
with any of the provisions of the Articles of Incorporation or By-laws of
Buyer; or (ii) violate or constitute a default under any note, bond,
mortgage, indenture, contract, agreement, license or other instrument or any
order, judgment or ruling of any governmental authority to which Buyer is a
party or by which any of its properties are bound. No other consent,
approval, license, permit, or authorization of, or registration, declaration
or filing with, any state or federal court, administrative agency or
commission or other governmental authority or instrumentality, or of any
other third party, is required to be obtained or made by Buyer in connection
with
23
<PAGE>
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby other than those that may be required solely
by reason of Seller's or the Stockholders' (as opposed to any third party's)
participation in the transactions contemplated hereby.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY SELLER AND THE STOCKHOLDERS. Seller and the
Stockholders hereby jointly and severally agree to indemnify and defend Buyer
against and hold it harmless from any loss, liability, claim , damage or
expense suffered or incurred by Buyer to the extent arising from any breach
of any representation, warranty or covenant of the Stockholders and/or
Seller contained in this Agreement. In addition, Seller and the Stockholders
hereby jointly and severally agree to indemnify Buyer against all liability
for reasonable legal, accounting and other fees and expenses directly
attributable to any such indemnification. Notwithstanding anything contained
herein to the contrary, the foregoing indemnification. Notwithstanding
anything contained herein the to contrary, the foregoing indemnification
shall be limited by and subject to the following:
(a) There should be no indemnification by the Seller for any
claim or group of claims which, in the aggregate, are an amount less than
$35,000.00, except with respect to claims arising as a result of Seller's
nonpayment of New York State sales tax, for which claims there shall be no
minimum amount.
(b) The amounts of such indemnification shall not exceed the
sum of $600,000, except in the case of material misrepresentation or omission
with respect to
24
<PAGE>
paragraphs 4.4 or 4.12, in which case the maximum amount of said
indemnification under this agreement in the aggregate, shall be the sum of
$1,000,000.
(c) The foregoing indemnification shall, in any event,
expire and be null, void and of no further effect two (2) years from the
Closing Date hereof, provided, however, that such expiration shall in no way
affect any claim for indemnification which had been asserted prior to said
date.
6.2 INDEMNIFICATION OF BUYER. Buyer shall indemnify and defend
Seller and the Stockholders against, and hold them harmless from, any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by Seller and the Stockholders to the extent
arising from any breach of any representation, warranty or covenant of Buyer
set forth herein or arising from the conduct of the business relating to the
Assets after the Closing. In addition, Buyer agrees to indemnify Seller and
the Stockholders against all liability for reasonable legal, accounting and
other fees and expenses directly attributable to any such indemnification.
Notwithstanding the foregoing, the foregoing indemnification shall be subject
to and inclusive of the following:
(a) In the event that a claim for indemnification results from
a breach by the Buyer to pay any of the liabilities or obligations of Seller
specifically assumed by Buyer, pursuant to paragraph 2 above and that certain
Assumption of Liabilities by and between Buyer and Seller of even date
herewith, and the aggregate amount of such claim
25
<PAGE>
or claims exceeds $2,500, then, in addition to any other rights of
indemnification and/or remedies available to Seller, Seller shall have the
following rights and remedies:
(i) if the liability does not relate to taxes owed to a
governmental entity which has the power to lien, encumber or freeze
the personal assets of the Stockholders, then, in the event said
creditor initiates collection proceedings against the Seller or the
Stockholders, then Buyer must either pay the Seller, or the creditor
within thirty (30) days of receipt from the Seller of notice of such
collection action or, in the alternative, must present and
diligently prosecute a bona fide defense to said debt. If Buyer
fails to make such payment or present such defense within the time
set forth above, then Seller may immediately declare the $600,000
Note due and payable and enforce collection thereof against the
Buyer. In the event that the payable, debt or liability is a tax due
to a governmental agency which has the power to lien, encumber or
freeze the assets of the Seller or the Stockholders, then Buyer must
make payment to the creditor or to the Seller within three (3) days
of receipt of notice that said creditor has liened, encumbered or
frozen the assets of Seller or Stockholders. Upon Buyer's failure to
make such payment, then Seller may declare the $600,000 Note
immediately due and payable.
26
<PAGE>
6.3 PROCEDURES RELATING TO INDEMNIFICATION.
(a) In order for a party (the "Indemnified Party") to be entitled
to any indemnification provided for under Paragraph 6.1 or 6.2 of this
Agreement in respect of, arising out of, or involving a Claim (as hereinafter
defined) or demand made by any person, firm, governmental authority or
corporation against the Indemnified Party (a "Claim" or a "Third Party
Claim"), such Indemnified Party shall notify the indemnifying party as soon
as practicable following receipt of written notice of said Third Party Claim;
PROVIDED, HOWEVER, that the failure to give or delay in giving such
notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually prejudiced as
a result of such failure or delay. Thereafter, the Indemnified Party shall
deliver to the indemnifying party, as soon as practicable following the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third Party Claim. In providing notice to the indemnifying party, the
Indemnified Party acknowledges its responsibility to provide said notice as
promptly as possible in order that the indemnifying party shall be able to
engage counsel and to submit appropriate answers to any Third Party Claim
within the time period required by law.
(b) If a Third Party Claim is made against an Indemnified Party,
the indemnifying party shall assume the defense thereof with counsel selected
by the indemnifying party and reasonably acceptable to the Indemnified Party.
The Indemnified
27
<PAGE>
Party may participate in the defense of such Third Party Claim; PROVIDED,
HOWEVER, the indemnifying party will not be liable to the Indemnified Party
for legal expenses incurred by the Indemnified Party in connection with such
defense subsequent to the assumption thereof by the indemnifying party. The
indemnifying party shall be liable for the fees and expenses of counsel
employed by the Indemnified Party for any period during which the
indemnifying party has not assumed the defense thereof. All of the parties
hereto shall cooperate in the defense or prosecution of any Third Party
Claim. Such cooperation shall include the retention and (upon the indemnifying
party's written request) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
The Indemnified Party shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent.
7. DURATION OF REPRESENTATIONS. The representations, warranties,
covenants and indemnities in this Agreement and in any other document
delivered in connection herewith (other than those with respect to Taxes
which shall continue until the later of (i) the expiration of any statute of
limitations attributable to said matters, and (ii) the final resolution of
any action commenced in connection with Taxes) shall survive the Closing and
shall terminate on the later of (i) the close of business on the date Two (2)
28
<PAGE>
years following the Closing Date, and (ii) the final resolution of any claim,
with respect to that claim, made within said Two (2) year period.
8. CONFIDENTIAL INFORMATION.
Each party agrees to maintain as confidential all information which is
delivered to it by the other and agrees further not to disclose the same to
any third party whatsoever or use any such information for any purpose except
in connection with the implementation of the undertakings of the parties
described herein, PROVIDED, HOWEVER, that the Buyer may be required to release
information concerning the transactions contemplated hereby in furtherance of
its responsibilities as a publicly traded company. In such event, Buyer shall
use its best efforts to give advance notice of such release to the Stockholders.
9. CLOSING. The Closing of the transactions contemplated hereby shall
take place at the offices of Seller's counsel, Sorokin, Sorokin, Gross, Hyde
& Williams, One Corporate Center, Hartford, Connecticut 06103 and shall occur
on or about January 31, 1996 at 1:00 p.m.
10. INTENTIONALLY OMITTED
11. MISCELLANEOUS PROVISIONS.
11.1 FURTHER ASSURANCES. Each party hereto agrees to execute and
deliver such other documents, agreements or instruments and take such further
action as may be reasonably requested by any other party hereto for the
implementation of this Agreement and the consummation of the transactions
contemplated hereby.
29
<PAGE>
11.2 NOTICES. Any notices required or permitted hereunder shall be
sufficiently given if in writing and personally delivered, by facsimile and
confirmed by telephone, or by nationally recognized overnight courier,
addressed as follows or to such other address as the parties shall have given
notice of pursuant hereto:
(a) If to the Seller or the Stockholders:
Electrified Companies, Inc.
c/o Robert Brundage
10 Randall Drive
Short Hills, NJ 07078
with a copy to:
Sorokin, Sorokin, Gross, Hyde & Williams
One Corporate Center
Hartford, Connecticut 06103
Telephone (860) 525-6645
Facsimile (860) 522-1781
Attention Morris M. Banks, Esq.
(b) If to Buyer:
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378-0010
Telephone (718) 326-7000
Facsimile (718) 894-8357
Attention Messrs. Jack C. West and Scott Levy
with a copy to:
Lev & Berlin, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Telephone (203) 838-8500
Facsimile (203) 854-1652
Attention Duane L. Berlin, Esq.
30
<PAGE>
All such notices shall be effective upon the earlier of receipt or, in the
case of registered mail, seven (7) days after depositing in the mail, postage
prepaid, return receipt requested and addressed as shown above.
11.3 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) represents the entire understanding and agreement between
the parties with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by
written instrument making specific reference to this Agreement signed by the
parties hereto. This Agreement supersedes all prior agreements and
arrangements between the parties hereto and their affiliates. In the event of
any inconsistency, ambiguity or contradiction between the terms of this Asset
Purchase Agreement and the Notes referenced in paragraph 3 hereof, the terms
of the Notes shall prevail.
11.4 SUCCESSORS AND ASSIGNS; BENEFITS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and, except
as otherwise provided below, their respective successors and assigns. Nothing
contained in this Agreement or in any of the Schedules or Exhibits hereto is
intended to create any rights in any person or entity that is not a party to
this Agreement and no person or entity shall be deemed to be a third party
beneficiary hereof of thereof.
31
<PAGE>
11.5 SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.6 APPLICABLE LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New
Jersey, without regard to the principles thereof relating to conflicts law.
The parties hereto consent to the jurisdiction of the courts of the State of
New Jersey and the United States District Court for the District of New
Jersey.
11.7 EXPENSES. Except as otherwise provided herein, the parties
hereto shall pay their own respective fees and expenses, including without
limitation, attorneys' fees.
11.8 SEVERABILITY. If any provision of this Agreement shall be held
by any court of competent jurisdiction to be illegal, void or unenforceable,
such provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.
11.9 PUBLICITY. None of the parties hereto shall issue any press
release or make any other public statement or announcement relating to,
connected with or arising out of this Agreement or the matters contained
herein, without obtaining the prior written approval of the other parties
hereto to the contents and the manner of presentation and publication
thereof. Notwithstanding the foregoing, after the Closing Buyer or Seller may
32
<PAGE>
individually issue any such release, statement or announcement as it
reasonably deems appropriate.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument. This Agreement
may be executed by telecopied signatures with the same effect as original
signatures.
11.11 SCHEDULES AND EXHIBITS. All Schedules and Exhibits referenced
herein are incorporated herein by reference and shall be initialed by both
parties in order to be deemed an integral part of this Agreement. The
contents of such Schedules and Exhibits are deemed to be disclosures to Buyer
by Seller and the Stockholders. In the event that any Schedule or Exhibit
provided for herein is incomplete or has not been prepared by Seller or the
Stockholders and attached hereto as of the execution and delivery of this
Agreement, it shall be a condition precedent to Closing that such Schedule or
Exhibit shall be in form and substance reasonably satisfactory to Buyer.
11.12 POST-CLOSING ACCESS. For a period of three (3) months
following the Closing Date, Buyer shall accord to Seller and Seller's agents
reasonable access to the Seller's books and records located on the premises
of the business in East Orange, New Jersey, during normal business hours for
the purpose of removal of same. In addition, Seller and its agents shall be
accorded reasonable access under the Buyer's supervision to the Seller's
computer to generate financial information through the Closing Date. If and
to the extent
33
<PAGE>
that any of such records are reasonably necessary to the Buyer's conduct and
operation of the business, then Buyer may copy such material prior to
Seller's removal of same.
PURO WATER GROUP, INC. ELECTRIFIED COMPANIES INC.
By: /s/ Jack West By: /s/ Robert Brundage
------------------------- -----------------------------
Its Co-President Its President
/s/ Robert H. Brundage
--------------------------------
Robert Brundage
Individually
/s/ Lyle Brundage
-------------------------------
Lyle Brundage
Individually
34
<PAGE>
EX-10.13
NET LEASE
R & L PROPERTIES COMPANY, Landlord
to
PURO WATER GROUP, INC., Tenant
Date: January 31, 1996
Property Address:
101 North Park Street
East Orange, New Jersey
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 - DEFINITIONS, DEMISE AND TERM 1
1.01 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 - Condition of Premises . . . . . . . . . . . . . . . . . . . . 1
1.03 - Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - RENTS 2
2.01 - Monthly Payments . . . . . . . . . . . . . . . . . . . . . . 2
2.02 - Rent to be Net . . . . . . . . . . . . . . . . . . . . . . . 2
2.03 - Additional Rent . . . . . . . . . . . . . . . . . . . . . . . 2
2.04 - Annual Rent Payment . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 - PAYMENT OF IMPOSITIONS 4
3.01 - Payment of Taxes, Assessments, Etc. . . . . . . . . . . . . . 4
3.02 - Landlord's Income Tax . . . . . . . . . . . . . . . . . . . . 4
3.03 - Evidence of Payment . . . . . . . . . . . . . . . . . . . . . 5
3.04 - Tenant's Right to Contest Impositions . . . . . . . . . . . . 6
3.05 - Landlord's Obligation to Join in Proceedings . . . . . . . . 6
3.06 - Tenant as Attorney-in-Fact . . . . . . . . . . . . . . . . . 6
ARTICLE 4 - SURRENDER 7
4.01 - Surrender of Premises . . . . . . . . . . . . . . . . . . . . 7
4.02 - Abandonment of Tenant's Property . . . . . . . . . . . . . . 7
4.03 - Survival of Provisions . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5 - INSURANCE 7
5.01 - Tenant's Casualty Insurance . . . . . . . . . . . . . . . . . 7
5.02 - Tenant's Liability and Rent Insurance . . . . . . . . . . . . 7
5.03 - Tenant's Additional Insurance . . . . . . . . . . . . . . . . 8
5.04 - Evidence of Premium Payment . . . . . . . . . . . . . . . . . 9
5.05 - Landlord and Mortgagee Named Insureds . . . . . . . . . . . . 10
ARTICLE 6 - SERVICES TO AND REPAIRS AND MAINTENANCE OF THE PREMISES 10
6.01 - Tenant to Maintain Premises . . . . . . . . . . . . . . . . . 10
6.02 - Standard for Repairs . . . . . . . . . . . . . . . . . . . . 11
6.03 - No Services by Landlord . . . . . . . . . . . . . . . . . . . 11
6.04 - Major Replacement . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
ARTICLE 7 - COMPLIANCE WITH LAWS, ORDINANCES, ETC. 11
7.01 - Compliance with Laws . . . . . . . . . . . . . . . . . . . . 11
7.02 - Tenant's Right to Contest Law . . . . . . . . . . . . . . . . 12
ARTICLE 8 - LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS 12
8.01 - Tenant's Failure to Pay Impositions . . . . . . . . . . . . . 12
8.02 - Landlord's Damages . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9 - TENANT'S ALTERATIONS 13
9.01 - Tenant's Right to Alter Premises. . . . . . . . . . . . . . . 13
ARTICLE 10 - LIENS AND ENCUMBRANCES 15
10.01 - No Liens, Encumbrances, Etc. . . . . . . . . . . . . . . . . 15
10.02 - Discharge or Bonding of Liens . . . . . . . . . . . . . . . 15
10.03 - No Consent of Landlord . . . . . . . . . . . . . . . . . . . 15
10.04 - Tenant's Observance of Agreements . . . . . . . . . . . . . 15
ARTICLE 11 - USE OF PROPERTY 16
11.01 - Use of Premises . . . . . . . . . . . . . . . . . . . . . . 16
11.02 - No Waste . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 12 - ENTRY ON PROPERTY BY LANDLORD 16
12.01 - Landlord's Right to Entry . . . . . . . . . . . . . . . . . 16
ARTICLE 13 - INDEMNIFICATION OF LANDLORD 17
13.01 - Tenant to Indemnify Landlord . . . . . . . . . . . . . . . . 17
ARTICLE 14 - DAMAGE OR DESTRUCTION 18
14.01 - Tenant to Restore Premises . . . . . . . . . . . . . . . . . 18
14.02 - Tenant's Reimbursement from Insurance Proceeds . . . . . . . 18
14.03 - Obligation to Continue Net Rent . . . . . . . . . . . . . . 19
ARTICLE 15 - CONDEMNATION 20
15.01 - Total Taking . . . . . . . . . . . . . . . . . . . . . . . . 20
15.02 - Partial Taking . . . . . . . . . . . . . . . . . . . . . . . 20
15.03 - Temporary Taking . . . . . . . . . . . . . . . . . . . . . . 21
15.04 - Reimbursement from Condemnation Proceeds . . . . . . . . . . 21
15.05 - Obligation to Continue Net Rent . . . . . . . . . . . . . . 22
<PAGE>
ARTICLE 16 - PERMITTED MORTGAGES 22
16.01 - Right to Mortgage Premises . . . . . . . . . . . . . . . . . 22
ARTICLE 17 - ASSIGNMENTS, SUBLEASES, TRANSFERS OF TENANT'S INTEREST 23
17.01 - Assignment of Lease . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 18 - DEFAULT 23
18.01 - Acts of Default . . . . . . . . . . . . . . . . . . . . . . 23
18.02 - Waiver of Notice to Quit . . . . . . . . . . . . . . . . . . 24
18.03 - Surrender of Premises . . . . . . . . . . . . . . . . . . . 24
18.04 - Waiver of Right of Redemption . . . . . . . . . . . . . . . 24
18.05 - Failure of Strict Performance . . . . . . . . . . . . . . . 25
18.06 - Landlord's Injunctive Remedy . . . . . . . . . . . . . . . . 25
18.07 - Cumulative Rights . . . . . . . . . . . . . . . . . . . . . 25
18.08 - Interest Charge . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 19 - STATEMENTS 26
19.01 - Lease Status Statements . . . . . . . . . . . . . . . . . . 26
ARTICLE 20 - INVALIDITY OF PARTICULAR PROVISIONS 26
20.01 - Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 21 - NOTICES 26
21.01 - How Notice Served . . . . . . . . . . . . . . . . . . . . . 26
21.02 - When Notice Served . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 22 - CONDITION OF AND TITLE TO PROPERTY, QUIET ENJOYMENT 27
22.01 - Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . 27
22.02 - Landlord for the Time Being . . . . . . . . . . . . . . . . 27
ARTICLE 23 - REAL ESTATE COMMISSION 27
23.01 - No Brokerage . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 24 - ARBITRATION 27
24.01 - Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 25 - ENVIRONMENTAL INDEMNITY 28
<PAGE>
ARTICLE 26 - MISCELLANEOUS 29
26.01 - Settlement of Disputes . . . . . . . . . . . . . . . . . . . 29
26.02 - Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 30
26.03 - Security Deposits . . . . . . . . . . . . . . . . . . . . . 30
26.04 - Lease Construction . . . . . . . . . . . . . . . . . . . . . 30
26.05 - Benefits and Burdens . . . . . . . . . . . . . . . . . . . . 30
26.06 - Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 27 - RELATIONSHIP OF PARTIES 30
27.01 - No Partnership . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 28 - LEASE NOT TO BE RECORDED 30
28.01 - Notice of Lease . . . . . . . . . . . . . . . . . . . . . . 30
<PAGE>
NET LEASE
THIS LEASE, made as of the 31st day of January, 1996, between R & L
PROPERTIES COMPANY a partnership comprised of Lyle Brundage and Robert
Brundage (hereinafter called "Landlord"), and PURO WATER GROUP, INC.
(hereinafter called "Tenant").
W I T N E S S E T H :
ARTICLE 1
Definitions, Demise and Term
SECTION 1.01. DEFINITIONS. For purposes of this lease, unless the
context otherwise requires:
(a) the term "Premises" shall mean the land in property known as
101 North Park Street, and adjacent parking lot, East Orange, New Jersey,
including all buildings and improvements of every kind and nature now or
hereafter located thereon, as more particularly bounded and described on
EXHIBIT A attached hereto;
(b) the term "Landlord" shall mean the owner or owners of the
Premises from time to time;
SECTION 1.02. CONDITIONS OF PREMISES. For and in consideration of the
rents herein reserved and all of the covenants and conditions herein
contained, Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises, subject, however, to the following:
(a) the condition and state of repair of the Premises as of the
commencement date of the term of this lease;
(b) the encumbrances shown on EXHIBIT B, provided such do not
interfere with use of the Premises as a water bottling and distribution plant
("Permitted Encumbrances").
SECTION 1.03. TERM. The term of this lease shall commence as of
February 1, 1996, (the "Commencement Date") and end on the last day of
January, 2007, ("Lease Term"), provided that Tenant is not in default under
this Lease it shall have two options to extend the term of this Lease for an
additional five (5) years each (hereinafter called "Extended Terms") from the
expiration of the then current term of this Lease, provided Landlord shall
receive before such expiration at least (6) months notice in writing by the
Tenant that the Tenant elects
-1-
<PAGE>
to extend the original term of this Lease. Except for the Annual Net Rent
Payment set forth in Section 4.1 hereafter or unless otherwise specifically
provided herein, all terms and conditions of this Lease shall apply to the
Extended Terms.
ARTICLE 2
Rents
SECTION 2.01. MONTHLY PAYMENTS. Tenant shall pay to Landlord the Net
Rent, as defined in this ARTICLE 2, without abatement, deduction, or set-off.
Net Rent shall be payable in twelve (12) equal monthly installments on the
first day of each month in advance. Net Rent for any portion of a month
included in the term shall be prorated. The Net Rent shall be paid in
addition to all other payments to be made by the Tenant as hereinafter
provided. Net Rent and all other payments shall be payable to Landlord at the
address set forth above or such other place as Landlord may designate by
notice to Tenant.
SECTION 2.02. RENT TO BE NET. The parties intend the Net Rent shall be
net to Landlord, so that this lease shall yield net to Landlord, the Net Rent
specified in SECTION 2.04 herof in each year during the Lease Term. All
costs, expenses and charges of every kind and nature relating to the Premises
and the Buildings which may arise or become due during the Lease Term shall
be paid by Tenant, except as otherwise specified herein, and Tenant shall
indemnify and save Landlord harmless from and against the same.
SECTION 2.03. ADDITIONAL RENT. Tenant will pay, as additional rent, and
(except as may be otherwise expressly provided in this lease) without notice,
abatement, deduction or set-off, all sums, Impositions (as defined in ARTICLE
3 hereof), costs, expenses and other payments which Tenant in any of the
provisions of this lease assumes or agrees to pay, and, in the event of any
nonpayment thereof, Landlord shall have all the rights and remedies provided
for herein or by law in the case of nonpayment of the Net Rent.
SECTION 2.04. ANNUAL NET RENT PAYMENT. Net Rent during the Lease Term
shall be as follows:
YEARLY MONTHLY
----------- ----------
February 1, 1996 - January 31, 1997 $120,000.00 $10,000.00
February 1, 1997 - January 31, 1998 $120,000.00 $10,000.00
February 1, 1998 - January 31, 1999 $120,000.00 $10,000.00
-2-
<PAGE>
February 1, 1999 - January 31, 2000 $120,000.00 $10,000.00
February 1, 2000 - January 31, 2001 $120,000.00 $10,000.00
February 1, 2001 - January 31, 2007 The Annual Net Rent shall be a sum
equal to the annual Net Rent of the
previous lease year adjusted based upon
the Price Index as hereinafter defined
and provided.
Extended Terms The Annual Net Rent for any lease year
during any Extended Term shall be a sum
equal to the annual Net Rent of the
previous lease year, based upon the Price
Index as hereinafter defined and
provided.
For the purposes of this paragraph, the period of February 1, 2001
through January 31, 2007 (or during any Extended Term) and each successive
one year period thereafter occurring during the Term of this Lease is
hereinafter referred to as a "One Year Period". The annual net rent payable
by Tenant to Landlord during each One Year Period shall be determined by
multiplying the annual net rent payable by Tenant to Landlord during the year
immediately preceding each One Year Period (the "Immediately Preceding Year")
by a fraction, the numerator of which shall be a number which is equivalent
to the Basic Standard Index Figure of the Price Index (as hereinafter defined
and provided) for the month immediately preceding the commencement of such
One Year Period and the denominator of which shall be a number which is
equivalent to the Basic Standard Index Figure of the Price Index for the
month within which such Immediately Preceding Year commenced: provided that,
in no event whatsoever and under no circumstances shall the amount of the
annual net rent to be paid by Tenant to Landlord during any applicable One
Year Period be less than the abount of the annual net rent to be paid by
Tenant to Landlord during the applicable Immediately Preceding Year.
-3-
<PAGE>
ARTICLE 3
PAYMENT OF IMPOSITIONS
SECTION 3.01. PAYMENT OF TAXES, ASSESSMENTS, ETC. Tenant shall pay (except
as hereinafter provided in SECTIONS 3.02 and 3.04 hereof), before any fine,
penalty, interest or cost may be added thereto, or become due or be imposed by
operation of law for the nonpayment thereof, all taxes, assessments, water and
sewer rents, rates and charges, transit taxes, charges for public utilities,
excises, levies, license and permit fees and other governmental charges,
general and special, ordinary and extraordinary, unforeseen and foreseen, of any
kind and nature whatsoever which at any time prior to or during the Lease Term
may be assessed, levied, confirmed, imposed upon, or become due and payable in
respect of, or become a lien on,
(i) the Premises or any part thereof or any appurtenances thereto,
(ii) the rent, income or other payments received by Tenant or anyone
claiming by, through or under Tenant,
(iii) any use or occupation of the Premises;
(iv) such franchises as may be appurtenant to the use of the Premises; and
(v) this transaction or any document to which Tenant is a party, creating or
transferring an interest or estate in the Premises;
(collectively hereinafter the "Impositions," and any of the same hereinafter an
"Imposition"); provided, however, that
(a) if, by law, any Imposition may at the option of the taxpayer be paid
in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Tenant may exercise that option and shall pay such
installments as they become due with any interest thereon during the Lease
Term before any fine, penalty, further interest or cost may be added thereto.
The amount of any such installment which becomes due and payable after the
expiration of the Lease Term shall be Landlord's sole obligation; and
(b) any Imposition, other than Impositions which have been converted into
installment payments by Tenant, as referred to in Paragraph (a) of this SECTION
3.01, relating to a fiscal period of the taxing authority, less than all of
which period is included within the Lease Term, whether or not such
-4-
<PAGE>
Imposition shall be assessed, levied, confirmed, imposed upon or become a lien
upon the Premises or shall become payable during the Lease Term, shall be
adjusted between Landlord and Tenant as of the expiration of the Lease Term.
Tenant shall pay that portion of such Imposition which relates to a portion of
the Lease Term, and Landlord shall pay the remainder thereof. However, if Tenant
shall be in default in the performance of any of Tenant's undertakings under
this lease then the amount of any such default shall be offset against any
amount for taxes owning from Landlord to Tenant.
SECTION 3.02. LANDLORD'S INCOME TAX. Nothing herein contained shall
require Tenant to pay municipal, state or federal income taxes assessed against
Landlord, municipal, state or federal capital levy, estate, succession,
inheritance or transfer taxes of Landlord, or corporation franchise taxes
imposed upon any corporate owner of the fee of the Premises; provided, however,
that if at any time during the Lease Term the methods of taxation prevailing at
the commencement of the Lease Term shall be altered so that in lieu of or as a
substitute for the whole or any part of the taxes, assessments, levies,
impositions or charges now assessed on real estate and the improvements thereon,
there shall be assessed:
(i) a tax, assessment levy, imposition or charge, wholly or partially as a
capital levy or otherwise, on the rents received therefrom; or
(ii) a tax, assessment, levy, imposition or charge measured by or based in
whole or in part upon the Premises and imposed upon Landlord; or
(iii) a license fee measured by the rent payable by Tenant under this lease;
then all such taxes, assessments, levies, impositions or charges or the part
thereof so measured or based, shall be deemed to be included within the term
"Impositions" for the purposes hereof, to the extent such "Impositions" would be
payable if the Premises were the only property of Landlord subject to such
Impositions, and Tenant shall pay and discharge the same as herein provided for
the payment of Impositions.
SECTION 3.03. EVIDENCE OF PAYMENT. Tenant will furnish to Landlord, within
fifteen (15) days after the date when any Imposition would become delinquent,
official receipts of the appropriate taxing authority, or other evidence
satisfactory to Landlord, evidencing the payment thereof.
-5-
<PAGE>
SECTION 3.04. TENANT'S RIGHT TO CONTEST IMPOSITIONS. Tenant shall have the
right to contest the amount or validity, in whole or in part, of any Imposition
by appropriate proceedings diligently conducted in good faith but only after
payment of such Imposition unless such payment would operate as a bar to such
contest or interfere materially with the prosecution thereof, in which event,
notwithstanding the provisions of this Article, Tenant may defer payment of such
Imposition, if neither the Premises nor any part thereof would by reason of such
deferment be in danger of being forfeited.
Upon termination of any such proceedings, Tenant shall pay the deferred
amount of the Imposition as finally determined in such proceedings, together
with any costs, fees, interest, penalties or other liabilities in connection
therewith.
Landlord shall have the right to seek a reduction in the assessed
valuation of the Premises and to prosecute any action or proceeding
theretofore commenced by Tenant, if such assessed valuation shall relate to
any period subsequent to the termination of this lease. To the extent to
which any tax refund payable as a result of any proceeding to review the
assessed valuation which Landlord or Tenant institutes is based upon a
payment made by any one other than Landlord and shall not relate or pertain
to a period subject to apportionment between Landlord and Tenant, Tenant
shall be authorized to collect the same; provided, however, that Tenant shall
reimburse Landlord forthwith for all reasonable expenses and fees incurred by
Landlord in connection therewith, in the proportion that the Tenant's share
of the refund bears to the total refund.
SECTION 3.05. LANDLORD'S OBLIGATION TO JOIN IN PROCEEDINGS. Landlord shall
not be required to join in any proceedings referred to in this Article unless
the provisions of any law, rule or regulation at the time in effect shall
require that such proceedings be brought by and/or in the name of Landlord in
which event Landlord shall join in such proceedings or permit the same to be
brought in its name. Landlord shall not be subjected to any liability for the
payment of any costs and shall not be entitled to any refund of any Imposition
and penalties or interest thereon paid by Landlord but previously reimbursed in
full by Tenant.
SECTION 3.06. TENANT AS ATTORNEY-IN-FACT. Landlord appoints Tenant the
attorney-in-fact of Landlord for the purpose of making all payments to be made
by Tenant other than Landlord. In case any person or entity to whom any sum is
directly payable by Tenant under any of the provisions of this lease shall
refuse to accept payment of such sum from Tenant,
-6-
<PAGE>
Tenant shall thereupon give written notice of such fact to Landlord and shall
pay such sum directly to Landlord and Landlord shall thereupon pay such sum to
such person or entity.
ARTICLE 4
SURRENDER
SECTION 4.01. SURRENDER OF PREMISES. On the last day of the Lease Term or
upon any earlier termination of this lease, or upon any re-entry by Landlord
upon the Premises pursuant to ARTICLE 18 hereon, Tenant shall surrender the
Premises into the possession and use of the Landlord without delay, in good
order, condition and repair, reasonable wear and tear and damage or destruction
by fire and other casualty excepted. If damage by fire or other casualty exists
at the time of termination hereof, to the extent that the Premises have not been
restored, all proceeds of insurance shall be assigned to Landlord. The Premises
shall be free and clear of all lettings and occupancies other than leases to
tenants of the Premises permitted by this lease and free and clear of all liens
and encumbrances other than those, if any, permitted by this lease or created or
consented to by Landlord, and easements, or other encumbrances existing on the
Commencement Date of this lease.
SECTION 4.02. ABANDONMENT OF TENANT'S PROPERTY. Any personal property of
Tenant which shall remain on the Premises after the surrender, abandonment or
vacation (voluntarily or involuntarily) of this Lease may at the option of the
Landlord be deemed to have been abandoned by Tenant and either may be retained
by Landlord as its property or be disposed of without accountability in such
manner as Landlord may see fit.
Landlord shall not be responsible for any loss or damage occurring to any
property owned by Tenant or any tenant of the Building.
SECTION 4.03. SURVIVAL OF PROVISIONS. The provisions of this ARTICLE 4
shall survive any termination of this lease.
ARTICLE 5
INSURANCE
SECTION 5.01. TENANT'S CASUALTY INSURANCE. Throughout the Lease Term,
Tenant, at its sole cost and expense, shall keep in full force and effect a
policy of insurance with a company authorized to do business in New Jersey and
with a rating
-7-
<PAGE>
acceptable to Landlord, naming the Landlord as insured and insuring the
buildings and improvements on the Premises against loss or damage by fire, with
such extended coverage, vandalism and malicious mischief coverage as is standard
in the area, due regard being given to the height and type of buildings, their
construction, use and occupancy, in an amount sufficient to prevent Landlord or
Tenant from being a co-insurer within the terms of such policy or policies and
in an amount not less than ninety (90%) percent of the full insurable value as
determined by the insurer (i.e. actual replacement cost without regard to
physical depreciation) of the buildings and improvements exclusive of the cost
of foundations, excavations and footings below the lowest basement floor,
without any deduction being made for depreciation, to the extent such insurance
is available. In the event that construction is in process at any time during
the Lease Term on a substantial improvement on the Premises, fire and extended
coverage insurance shall be carried by Tenant on the improvement during the
course of construction with so-called builders' risk coverage in completed
value form. Replacement value shall be determined from time to time, but not
more frequently than once in any twenty-four (24) consecutive calendar months,
at the request of Landlord, by one of the insurers, or, at the option of
Landlord, by an appraiser, architect or contractor who shall be mutually and
reasonably acceptable to Landlord and Tenant. No omission on the part of
Landlord to request any such determination shall relieve the Tenant of its
obligations to carry the insurance required under this section and any such
determination to the contrary notwithstanding, Landlord may require Tenant to
furnish additional insurance of the nature in this SECTION 5.01 above specified
at any time Landlord reasonably deems such insurance to be inadequate.
SECTION 5.02. TENANT'S LIABILITY AND RENT INSURANCE. Tenant at its sole
cost and expense shall maintain:
(a) Comprehensive general public liability insurance against claims for
bodily injury, death or property damage, occurring on, in or about the
Premises and on, in or about the adjoining streets, property and passageways,
such insurance to afford minimum protection during the Lease Term of not less
than $5,000,000.00 for bodily injury or death and property damage written on
an occurrence basis with a flat limit.
(b) Boiler and machinery insurance, provided the Premises contain equipment
of the nature ordinarily covered by such a policy.
-8-
<PAGE>
(c) Rent insurance against loss of gross rental income from the Premises for
a period of one year due to the risks referred to in SECTION 5.01 (including
those embraced by extended coverages standard in the area) in an amount
sufficient to prevent Tenant from being a co-insurer within the terms of such
policy or policies, but in any event in an amount not less than the amount of
Net Rent hereunder for twelve (12) months (and if obtainable in such additional
amounts equal to Tenant's obligations to pay all Impositions and additional rent
due hereunder). Tenant hereby assigns to Landlord so much of its interest in the
proceeds of such insurance so that in the event the Premises are damaged, there
shall be paid to Landlord to hold on deposit so much of the proceeds of such
insurance to the extent of the recovery, as shall in the aggregate equal the
amount of Net Rent for twelve (12) months, which amount shall be held or applied
by Landlord on account of the payment of such Net Rent until the restoration of
the Premises, at which time, provided Tenant is not then in default, the
balance, if any, of such deposit shall be returned by Landlord to Tenant.
Tenant shall not violate or permit to be violated any of the conditions
or provisions of any policy provided for in SECTION 5.01 or 5.02 and Tenant
shall so perform and satisfy the requirements of the companies writing such
policies that at all times companies of good standing reasonably satisfactory
to Landlord shall be willing to write and/or to continue such insurance.
SECTION 5.03. TENANT'S ADDITIONAL INSURANCE. Tenant may effect for its
own account any insurance not required under the provisions of this lease,
but any insurance effected by tenant on the Premises, whether or not required
under this ARTICLE 5 shall be for the mutual benefit of Landlord and Tenant
and shall be subject to all provisions of this ARTICLE 5 and of ARTICLE 14
hereof. Tenant shall promptly notify Landlord of the issuance of any such
insurance.
SECTION 5.04. EVIDENCE OF PREMIUM PAYMENT. All insurance provided for in
this Article shall be effected under valid and enforceable policies issued by
insurers licensed to do business in the state in which the Premises are located.
Any insurance provided for in this Article may contain a normal deductible
clause consistent with the type of policy issued. Upon the execution of this
lease, and thereafter not less than fifteen (15) days prior to the expiration
dates of the expiring policies theretofore furnished pursuant to this Article,
originals of the policies, or copies, if the originals have been lodged with a
Permitted Mortgagee, as described in ARTICLE 16 hereof (or, in the case of
general public liability insurance, certificates of the insurers satisfactory to
-9-
<PAGE>
Landlord) bearing notations evidencing the payment of premiums or accompanied by
other evidence reasonably satisfactory to Landlord of such payment, shall be
delivered by Tenant to Landlord. Each policy of insurance procured pursuant to
SECTION 5.01 and of SECTION 5.02 shall contain, if obtainable, (a) a waiver by
the insurer of the right of subrogation against any tenant of the Buildings for
negligence of such tenant, (b) a statement that the insurance shall not be
invalidated should any insured waive in writing prior to the loss any or all
right of recovery against any party for loss accruing to the property described
in the insurance policy, and (c) a statement that the coverage afforded thereby
shall not be affected by the performance of any work in or about the Premises.
SECTION 5.05. LANDLORD AND MORTGAGEE NAMED INSUREDS. All policies of
insurance provided for in SECTION 5.02(a) hereof shall name Landlord and any
mortgagees of the Premises as insureds. Any policy of insurance provided for in
SECTION 5.01 may be made payable, subject to the provisions of this lease, to
any Permitted Mortgagee as its interest may appear pursuant to a standard
mortgagee clause. The loss, if any, under any policies provided for in such
SECTION 5.01 and in PARAGRAPHS (c) and (d) of SECTION 3.02 shall be adjusted
with the insurance companies by Landlord, Tenant,and any Permitted Mortgagee.
All such policies shall provide that the loss, if any, thereunder shall be
adjusted and paid as hereinabove provided. Each such policy shall contain (if
obtainable) a provision that no act or omission of Tenant shall affect or limit
the obligation of the insurance company so to pay the amount of any loss
sustained and an agreement by the insurer that such policy shall not be canceled
without at least fifteen (15) days' prior written notice to Landlord, and to the
Permitted Mortgagee, if any.
ARTICLE 6
SERVICES TO AND REPAIRS AND
MAINTENANCE OF THE PREMISES
SECTION 6.01. TENANT TO MAINTAIN PREMISES. During the Lease Term Tenant
will take good care of the Premises and will maintain and keep the same in good
order and condition, and make all necessary repairs thereto, interior and
exterior, structural and nonstructural, ordinary and extraordinary, and foreseen
and unforeseen as Tenant deems necessary or as Landlord may require by giving
Tenant notice of same. When used in this ARTICLE 6, the term "repairs" shall
include all
-10-
<PAGE>
necessary replacements, renewals, alterations, additions and betterments. All
repairs made by Tenant shall be equal in quality and class to the original
work.
SECTION 6.02. STANDARD FOR REPAIRS. The necessity for and adequacy of
repairs pursuant to SECTION 6.01 hereof shall be measured by the standard
which is appropriate for buildings of similar construction, class and age.
SECTION 6.03. NO SERVICES BY LANDLORD. Landlord shall not be required to
furnish any services or facilities, or to make any repairs or alterations in
or to the Premises except as provided herein.
SECTION 6.04. MAJOR REPLACEMENT. Notwithstanding anything in this Article
to the contrary, Replacements (as opposed to repair) of HVAC and other major
mechanical and structural components shall be the obligation of the Landlord,
provided however, that Tenant shall pay as Additional Rent annually an amount
equal to a number the numerator of which is the cost to Landlord for such
replacement and the denominator of which is the estimated life of the item
replaced determined according to Generally Accepted Accounting Principles.
Such amount shall be payable in monthly installments equal to 1/12 of the
annual amount due.
ARTICLE 7
COMPLIANCE WITH LAWS, ORDINANCES, ETC.
SECTION 7.01. COMPLIANCE WITH LAWS. During the Lease Term, Tenant, at its
sole cost and expense, shall promptly comply with all present and future
laws, ordinances, orders, rules regulations and requirements of all federal,
state and municipal governments, courts, departments, commissions, boards and
officers, any national or local Board of Fire Underwriters, or any other body
exercising functions similar to those of any of the foregoing, which may be
applicable to the Premises and the sidewalks, streets, curbs and other public
improvements adjoining the Premises or to the use or manner of use of the
Premises or the owners, tenants, or occupants thereof. The foregoing shall
apply whether or not such law, ordinance, order, rule, regulation or
requirement shall necessitate structural changes or improvements, or the
removal of any encroachments or projections, ornamental, structural or
otherwise, onto or over the streets adjacent to the Premises, or onto or over
other property contiguous or adjacent thereto.
Notwithstanding the foregoing, Tenant shall not be required to undertake
any work repair or expense relating to bringing the Premises into such
compliance due to violations or
-11-
<PAGE>
conditions that existed prior to Commencement Date or to make structural
changes not relating to or arising from the business carried on by Tenant.
SECTION 7.02. TENANT'S RIGHT TO CONTEST LAW. Tenant shall have the right
to contest by appropriate proceedings diligently conducted in good faith, in
the name of Tenant or Landlord or both, without cost or expense to Landlord,
the validity or application of any law, or requirement of the nature referred
to in SECTION 7.01 hereof. If by the terms of any such law or requirement,
compliance therewith, pending the prosecution of any such proceeding may
legally be delayed without the incurrence of any lien, charge or liability of
any kind against the Premises or Tenant's leasehold interest therein, and
without subjecting Tenant or Landlord to any liability, civil or criminal,
for failure so to comply therewith, Tenant may delay compliance therewith
until the final determination of such proceeding. If any lien, charge or
civil liability would be incurred by reason of any such delay, Tenant
nevertheless, with the prior written consent of Landlord (such consent not to
be unreasonably withheld), may contest as aforesaid, provided that such delay
would not subject Landlord to criminal liability and Tenant (i) furnishes to
Landlord security, reasonably satisfactory to Landlord against any loss or
injury by reason of such contest or delay, and (ii) prosecutes the contest
with due diligence.
Landlord shall not be required to join in any proceedings referred to in
this Section unless the provisions of any applicable law, rule or regulation
at the time in effect shall require that such proceedings be brought by
and/or in the name of the Landlord, in which event Landlord shall join in
such proceedings or permit the same to be brought in its name. Tenant may
delegate the right to bring any such proceeding to any person or entity
having an interest in the Premises or any part thereof.
ARTICLE 8
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
SECTION 8.01. TENANT'S FAILURE TO PAY IMPOSITIONS. If Tenant shall at any
time fail to pay any Imposition and additional rent in accordance with the
provisions of ARTICLE 3 hereof, or to pay for or maintain any of the
insurance policies provided for in ARTICLE 5 hereof, or to make any other
payment or perform any other act on its part or be made or
performed hereunder, then Landlord, after thirty (30) days' notice to Tenant
(or in the case of any emergency as may be reasonable
-12-
<PAGE>
under the circumstances) and without waiving or releasing Tenant from any
obligation of Tenant hereunder, may (but shall not be required to):
(a) pay any Imposition payable by Tenant pursuant to the provisions of
ARTICLE 5 hereof, or
(b) pay for and maintain, any of the insurance policies provided for in
ARTICLE 5, hereof, or
(c) make any other payment or perform any other act on Tenant's part to
be made or performed as in this lease provided, and may enter upon the
Premises for the purpose and take all such action thereon as may be
necessary therefor.
SECTION 8.02. LANDLORD'S DAMAGES. All sums so paid by Landlord and all
costs and expenses incurred by Landlord in connection with the performance of
any such act, together with interest thereon at the highest rate permitted by
the Connecticut usury laws, General Statutes Section 37-1 ET SEQ, as may be
amended, shall constitute additional rent payable by Tenant under this lease
and shall be paid by Tenant to Landlord on demand. Landlord shall not be
limited in the proof of any damages which Landlord claims against tenant
arising out of or by reason of Tenant's failure to provide and keep in force
insurance as aforesaid, to the amount of the insurance premiums not paid or
incurred by tenants, and which would have been payable upon such insurance.
Landlord shall also be entitled to establish as damages for such breach, the
uninsured amount of any loss, damages and expense of suit incurred by reason
of damage to the Premises occurring during any period when Tenant shall have
failed to provide the insurance as aforesaid. Any amount so established by
the Landlord for damages to the Premises, however, shall be subject to the
provisions of ARTICLE 15 hereof.
ARTICLE 9
TENANT'S ALTERATIONS
SECTION 9.01. TENANT'S RIGHT TO ALTER PREMISES. Tenant shall have the
right at any time and from time to time during the Lease Term to make, at its
sole cost and expense, alterations in or of the Premises, subject, however,
in all cases to the following:
(a) No alteration involving an estimated cost of more than Twenty-Five
Thousand ($25,000.000) Dollars shall be undertaken except after twenty (20)
days prior written notice to Landlord.
-13-
<PAGE>
(b) No alteration, involving an estimated cost of more than Fifty
Thousand ($50,000.00) Dollars including any restoration required by ARTICLE
14 or 15 hereof, shall be made without the prior written consent of Landlord
and with plans and specifications approved in writing by Landlord, such
consent and approval not to be unreasonably withheld or delayed.
(c) No change or alteration shall be undertaken until Tenant shall have
procured and paid for, so far as the same may be required from time to time,
all permits and authorization of all municipal and other governmental
authorities having jurisdiction. Landlord shall join in the application for
such permits of authorizations whenever such action is necessary but without
any liability or expense to Landlord.
(d) Any alteration shall, when completed, be of such a character as not
to reduce the value or usefulness of the Premises.
(e) Any alteration shall be made promptly and in a good and workmanlike
manner and in compliance with all applicable laws and requirements of all
federal, state and municipal government authorities, any national or local
Board of Fire Underwriters, or any other body hereafter exercising functions
similar to those of any of the foregoing.
(f) The cost of any such alteration shall be paid in cash or its
equivalent so that the Premises shall at all times be free of liens for labor
and materials supplied or claimed to have been supplied to the Premises.
(g) Workmen's Compensation Insurance covering all persons employed in
connection with the work and with respect to whom death or bodily injury
claims could be asserted against Landlord, Tenant or the Premises and general
liability insurance for the mutual benefit of Tenant and Landlord with limits
of not less than $1,000,000.00 in the event of bodily injury or death and
property damage written on a per occurrence basis with a flat limit shall be
maintained by Tenant at Tenant's sole cost and expense at all times when any
work is in process in connection with any alteration. All such insurance
shall be in a company or companies of recognized responsibility, and all
policies or certificates therefor issued by the respective insurers, bearing
notations evidencing the payments of premiums or accompanied by other
evidence reasonably satisfactory to landlord of such payment, shall be
delivered to Landlord prior to the commencement of the work.
-14-
<PAGE>
(h) Nothing contained in this ARTICLE 9 shall require prior written
consent of the Landlord in the case of construction of leasehold improvements
for any tenant of the Premises.
ARTICLE 10
LIENS AND ENCUMBRANCES
SECTION 10.01. NO LIENS, ENCUMBRANCES, ETC. Except for Permitted
Mortgages described in ARTICLE 16, Tenant will discharge any lien,
encumbrance or charge which might be or becomes a lien, encumbrance or
charge upon the Premises or any part thereof; provided that any Imposition
may after the same becomes a lien on the Premises be paid or contested in
accordance with ARTICLE 5 hereof. Any mechanic's, laborer's or
materialman's lien may be discharged in accordance with SECTION 10.02 hereof.
SECTION 10.02. DISCHARGE OR BONDING OF LIENS. If any mechanic's, laborer's
or materialman's lien shall at any time be filed against any part of the
Premises, Tenant, within sixty (60) days after notice of the filing thereof,
will cause the same to be discharged of record. If Tenant shall fail to cause
such lien to be discharged within the period aforesaid, then, in addition to
any other right or remedy, Landlord may, but shall not be obligated to,
discharge the same by paying the amount claimed to be due. Any amount so paid
by Landlord and all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon at the highest rate per annum
permitted by the New Jersey Usury laws, General Statutes Section 37-1, ET
SEQ, as may be amended, from the respective dates of Landlord's making of the
payment or incurring of the expense shall constitute additional rent payable
by Tenant under this lease and shall be paid by Tenant to Landlord on demand.
SECTION 10.03. NO CONSENT OF LANDLORD. Nothing in this lease shall be
construed in any way as constituting the consent or request of Landlord,
express or implied to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials for any
specific improvement or repair of the Premises.
SECTION 10.04. TENANT'S OBSERVANCE OF AGREEMENTS. Tenant shall observe
and perform all of the terms and conditions of any Permitted Encumbrances
recorded in the Land Records of the applicable town, country or state wherein
the Premises are located, excluding the obligations of Landlord under this
-15-
<PAGE>
Lease. Tenant shall indemnify and save Landlord harmless from any claims or
liability arising out of Tenant's failure to observe and perform any such
condition or agreement.
ARTICLE 11
USE OF PROPERTY
SECTION 11.01 USE OF PREMISES. Tenant will use the Premises and
improvements thereon in a lawful manner and primarily as a bottled water
plant unless changing conditions in the area where the Premises are located
reasonably require a different use for economic benefit and Landlord has
consented to such use change. Tenant will not use or allow the Premises, or
any part thereof, to be used or occupied for any unlawful purpose or in
violation of any certificate of occupancy or certificate of compliance
affecting the use of the Premises, or any part thereof. Tenant also will not
suffer any act to be done or and condition to exist or any article to be
brought thereon, which may constitute a public or private nuisance, or which
may make voidable any applicable insurance.
SECTION 11.02. NO WASTE. Tenant will not do or suffer any waste or damage
to the Premises or any part thereof.
ARTICLE 12
ENTRY ON PROPERTY BY LANDLORD
SECTION 12.01. LANDLORD'S RIGHT OF ENTRY. Tenant will permit Landlord
and its authorized representatives to enter the Premises at all reasonable
times, with prior notice except in emergency, for the purpose of:
(a) inspecting the same;
(b) making any necessary repairs thereto;
(c) performing any other work therein that may be necessary by reason of
Tenant's failure to make any such repairs or perform any such other work or
to commence the same for thirty (30) days after written notice from Landlord;
or
(d) showing the same to prospective purchasers or mortgagees.
Nothing herein shall imply any duty upon the part of Landlord to do any such
work. Performance thereof by Landlord shall not
-16-
<PAGE>
constitute a waiver of Tenant's default in failing to perform the same.
Landlord may, during the progress of any such work in the Premises keep and
store therein or elsewhere upon the Premises and shall not be liable for
inconvenience, disturbance, loss of business or other damage of Tenant by
reason of making such repairs or the performance of any such work, or on
account of bringing materials and equipment into or through the Premises and
the obligations of Tenant under this lease shall not be affected thereby.
ARTICLE 13
INDEMNIFICATION OF LANDLORD
SECTION 13.01. TENANT TO INDEMNIFY LANDLORD. Tenant will indemnify and
save harmless Landlord against and from all liabilities of every kind and
nature arising from or relating to The Premises, including reasonable
architects' and attorneys' fees, which may be assessed against Landlord,
excluding liability which arises from Landlord's negligence or willfull
misconduct including, but not be limited to:
(a) any work or thing done by Tenant in, on or about the Premises,
(b) any use, nonuse, possession, occupation, condition, operation,
maintenance or management of the Premises, or any part thereof or any street,
alley, sidewalk, parking area, curb, utility, vault, passageway, or space
adjacent thereto;
(c) any negligence on the part of Tenant or any of its agents,
contractors, servants, employees, tenants, licensees or invitees;
(d) any accident, injury or damage to any person or property
occurring in, on or about the Premises, or any street, alley, sidewalk, curb,
vault, passageway or space adjacent thereto;
(e) any failure by Tenant to perform or comply with any of the
terms or conditions contained in this lease on its part to be performed; or
(f) any tax attributable to the execution, delivery or recording of
this lease or any modification hereof except taxes payable by Landlord under
SECTION 3.02 hereof.
-17-
<PAGE>
In case any action of proceeding is brought against Landlord by
reason of any such claim, Tenant, upon written notice from Landlord, will at
Tenant's expense resist or defend such action or proceeding by counsel
approved by Landlord in writing; such approval not to be unreasonably
withheld or delayed.
ARTICLE 14
DAMAGE OR DESTRUCTION
SECTION 14.01. TENANT TO RESTORE PREMISES. In case of casualty to the
Premises resulting in damage or destruction exceeding Ten Thousand
($10,000.00) Dollars in the aggregate, Tenant shall promptly give written
notice thereof to Landlord. Regardless of the amount of any such damage or
destruction Tenant shall, at its sole cost and expense, restore, repair or
replace (collectively hereinafter "restore" or "restoration") the Premises as
nearly as possible to its value, condition and character immediately prior to
such damage or destruction and in conformity with the provisions of ARTICLE 8
hereof. Such restoration shall be commenced promptly and prosecuted with
reasonable diligence. If the insurance proceeds are insufficient to restore
the Premises, then Tenant shall complete such restoration at its own cost and
expense.
SECTION 14.02. TENANT'S REIMBURSEMENT FROM INSURANCE PROCEEDS. Except
for rental insurance proceeds, all insurance proceeds received by Landlord on
account of such damage or destruction, less the actual fees and expenses, if
any, incurred in connection with adjustment of the loss, shall be applied by
Landlord to pay or reimburse Tenant for the payment of the cost of the
restoration, including the cost of temporary restoration for the protection
of the Premises pending the completion of permanent restoration and shall be
paid out from time to time as such restoration progresses upon the written
request of Tenant which shall be accompanied by the following:
(1) A certificate signed by Tenant, dated not more than thirty (30)
days prior to such request (hereinafter "Certificate"), setting forth the
following:
(a) that the sum then requested either has been paid by Tenant,
or is justly due to contractors, subcontractors, materialmen, engineers,
architects or other persons who have rendered or furnished materials for the
restoration therein specified, the names and addresses of such persons, a
brief description of such services and materials, the several amounts so paid
or due to each of said
-18-
<PAGE>
persons, that no part of such expenditures has been or is being made the
basis, in any previous or then pending request, for the withdrawl of the
insurance money or has been made out of the proceeds of insurance received by
Tenant, and that the sum then requested does not exceed the value of the
services and materials described in the Certificate.
(b) that except for the amount, if any, stated in the foregoing
Certificate to be due for services or materials, there is no outstanding
indebtedness known to the persons signing the Certificate, after due inquiry,
which is then due for services or materials in connection with such
restoration; and
(c) that the cost, as estimated by the persons signing the
Certificate, of completing the restoration, does not exceed the insurance
money plus any amount deposited by Tenant to defray such cost.
The Certificate shall be signed also by the architect and/or
engineer and/or construction superintendent in charge of the restoration, who
shall be selected by Tenant and approved in writing by Landlord, which
approval shall not be unreasonably withheld.
(2) Releases of all rights of lien signed by all mechanics and
materialmen who have rendered services or supplied material with respect to
the Premises.
Upon compliance with the foregoing provisions of this SECTION
14.02, Landlord shall, out of such insurance money, pay or cause to be paid
to Tenant or the persons named in the Certificate the respective amounts
stated therein to have been paid by Tenant or to be due to them, as the case
may be.
Upon receipt by Landlord of, (a) a Certificate that the restoration
has been completed and paid for in full and rent payments are current, and
(b) releases pursuant to Subparagraph (2) of this SECTION 14.02, any balance
of the insurance money held by Landlord hereunder shall be paid to Tenant.
SECTION 14.03. OBLIGATION TO CONTINUE NET RENT. No destruction of or
damage to the Premises, or any part thereof, by fire or any other casualty
shall terminate or permit Tenant to surrender this lease or shall relieve the
Tenant from its liability to pay the Net Rent and other charges payable under
this lease except to the extent that Net Rent shall be paid by the
application thereto by Landlord of the proceeds of rent insurance pursuant to
SECTION 5.02(c), or from any of its other
-19-
<PAGE>
obligations under this lease. Tenant waives any rights now or hereafter
conferred upon it by statute or otherwise to quit and surrender this lease or
the Premises or any part thereof, or to any suspension, abatement or
reduction of rent on account of any such destruction or damage,
ARTICLE 15
CONDEMNATION
SECTION 15.01. TOTAL TAKING.
(a) If at any time during the Lease Term, title to the whole or
substantially all of the Premises shall be taken by the exercise of the right
of condemnation or eminent domain, this lease shall, at the option of
Landlord, terminate and expire on the date of such taking and the rent
provided to be paid by Tenant shall be apportioned and paid to the date of
such taking. In such event, Impositions also will be apportioned.
(b) Landlord reserves all rights to awards for damages to the
Premises and the leasehold hereby created now accrued or hereafter by reason
of any exercise of the right of eminent domain, or by reason of anything
lawfully done in pursuance of any public or other authority. By way of
confirmation Tenant grants to Landlord all Tenant's rights to such awards and
agrees to execute and deliver any further instruments of assignment thereof
as Landlord may request. Landlord's rights to awards hereunder do not include
a separate award for Tenant's moving expenses, if any, or awards for damages
to Tenant's trade fixtures, interior partitions installed by Tenant and other
installations made by Tenant which Tenant is entitled to remove upon
termination of this Lease.
SECTION 15.02. PARTIAL TAKING. If at any time during the Lease Term
title to less than the whole or substantially all of the Premises shall be
taken by exercise of the right of condemnation or eminent domain, then:
(a) If such taking does not substantially affect the then user of
the Premises then there shall be no change in Net Rent.
(b) If such taking does substantially affect the then user of the
Premises, then the Net Rent shall be reduced to a fair and reasonable rental
value for the Premises, taking into consideration the use of the Premises
after any restoration thereof.
-20-
<PAGE>
SECTION 15.03. TEMPORARY TAKING. If the temporary use of the whole or
any part of the Premises shall be taken by any lawful power or authority,
by the exercise of the right of condemnation or eminent domain, Tenant shall
give prompt notice thereof to Landlord, the Lease Term shall not be reduced
or affected in any way, Tenant shall continue to pay in full the Net Rent and
other charges herein reserved without reduction or abatement, and Tenant
shall be entitled to receive for itself any award or payment made for such
use; provided, however, that:
(a) If the taking is for a period not extending beyond the Lease
Term and if such award or payment is made in a lump sum, the same shall be
paid to and held by Landlord as a fund which Landlord shall apply from time
to time to the payments due to Landlord from Tenant under this Lease. If such
taking results in changes in the Premises which would necessitate an
expenditure to restore the Premises to their former condition, however, then
a portion of such award or payment considered by Landlord as appropriate to
cover the expenses of such restoration shall be retained and applied by
Landlord toward the restoration of the Premises to their condition prior to
such taking.
(b) If the taking is for a period extending beyond the Lease Term,
such award or payment shall be apportioned between Landlord and Tenant as of
the stated expiration date of such term. Tenant's share thereof shall, if
paid in a lump sum, be paid to Landlord and applied in accordance with the
provisions of PARAGRAPH (a) of this section; provided, however, that the
amount of any award or payment allowed or retained for restoration of the
Premises, shall remain the property of Landlord if the lease shall expire
prior to the restoration of the Premises to their condition prior to the
taking.
Tenant shall also pay all fees and expenses of every character of
the Landlord in connection with the eventualities provided for in this
section, except that if such fees and expenses are incurred pursuant to
PARAGRAPH (b) hereof, they shall be apportioned in the same manner as
provided therein. Tenant shall be entitled to receive at the end of any year
of any such taking any surplus remaining of said award, after making
provision for all payments required pursuant to PARAGRAPHS (a) and (b) of
this section. Nothing hereunder, however, shall affect Tenant's obligation to
pay Net Rent or any other charges under this Lease.
SECTION 15.04. REIMBURSEMENT FROM CONDEMNATION PROCEEDS. In the case of
any taking covered by the provisions of this Article, Landlord and Tenant
shall be entitled to reimbursement
-21-
<PAGE>
from any award of all reasonable fees and
expenses incurred in the determination and collection of any such awards.
SECTION 15.05. OBLIGATION TO CONTINUE NET RENT. Net Rent shall not be
reduced as a result of any taking by the exercise of the right of
condemnation or eminent domain except as provided in this Article.
ARTICLE 16
PERMITTED MORTGAGES
SECTION 16.01. RIGHT TO MORTGAGE PREMISES. At the time of execution
hereof any mortgage existing on the Premises shall be a Permitted Mortgage.
Further, Landlord may at any time thereafter place modifications of any
existing mortgages or any other mortgages on the Premises, all of which
shall be Permitted Mortgages. If the holders of said mortgages so require,
this Lease, and all rights of Tenant hereunder, shall be subject and
subordinate in all respects to all mortgages and building loan agreements,
which may now or hereafter affect the Premises (hereinafter "Superior
Mortgages"), whether or not the Superior Mortgages shall also cover other
lands and/or buildings, to each and every advance made or hereafter to be
made under the Superior Mortgages, and to all renewals and modifications of
the Superior Mortgages and spreaders, consolidations and correlations of the
Superior Mortgages; provided, however, that Landlord shall make reasonable
efforts to see that the holder of such Superior Mortgages agrees not to
disturb the possession and other rights of Tenant under this Lease so long as
Tenant continues to perform its obligations hereunder, and in the event of
acquisition of title by said holder through foreclosure proceedings or
otherwise, to accept Tenant as Tenant of the Premises under the terms and
conditions hereunder. Tenant agrees to recognize such holder or any other
person acquiring title to the Premises as Landlord.
This Section shall be self-operating and no further instrument of
subordination shall be required. In confirmation of such subordination, if
requested by Landlord, Tenant shall promptly execute and deliver any
instrument, in recordable form, that the holder of any Superior Mortgage or
any of their respective successors in interest may request to evidence such
subordination. Tenant hereby constitutes and appoints Landlord
attorney-in-fact for Tenant to execute any such instrument for and on behalf
of Tenant.
-22-
<PAGE>
ARTICLE 17
ASSIGNMENTS, SUBLEASES,
TRANSFERS OF TENANT'S INTEREST
SECTION 17.01. ASSIGNMENT OF LEASE. Without the consent of Landlord,
in its sole discretion, Tenant shall not assign, transfer or otherwise
dispose of, whether by operation of law or otherwise, or mortgage, pledge or
otherwise hypothecate its interest in this lease, or any lease to a tenant of
the Premises or any rents therefrom, or the Premises. Tenant, however, may
lease and/or sublease any portion of the Premises to customary users and
occupants thereof; provided, however, that Tenant remains primarily liable
for the performance of the terms of this lease.
ARTICLE 18
DEFAULT
SECTION 18.01. ACTS OF DEFAULT. Each of the following shall constitute
an "Event of Default" hereunder:
(a) Failure to pay any rent or other charge payable under this
lease within a period of ten (10) days after the same is due and payable;
provided, however, that failure to pay rent shall not be a default hereunder
unless the Landlord has first notified the Tenant in writing of the failure
to pay said rent and has given it five (5) days within which to cure said
default.
(b) Failure of Tenant to perform or comply with any of the
agreements, terms or conditions contained in this lease, other than those
referred to in the foregoing PARAGRAPH (A) which default continues for a
period of thirty (30) days after written notice thereof from to Tenant. In
connection with a default which cannot be cured with due diligence within
thirty (30) days, however, the time of Tenant within which to cure the same
shall be extended for such time as may be necessary to cure the same with due
diligence, provided Tenant commences promptly and proceeds diligently to cure
the same and further provided that such period of time shall not be so
extended as to subject Landlord to any criminal liability.
(c) The filing of Tenant of a voluntary petition in or the filing
by Tenant of any petition or answer seeking any reorganization, liquidation,
or similar relief under the present or any future federal bankruptcy act,
federal, state or other statute or law, or Tenant's seeking or consenting to
or
-23-
<PAGE>
acquiescing in the appointment of any trustee, receiver or liquidator of
Tenant or of all or any substantial part of its properties or of the Premises
or any interest of Tenant therein.
(d) If within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, liquidation or similar
relief under the present or any future federal bankruptcy act, federal, state
or other statute or law, such proceeding shall not have been dismissed, of
if, within sixty (60) days after the appointment, without the consent or
acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant of
all or any substantial part of its properties or of the Premises or any
interest of Tenant therein, such appointment shall not have been vacated or
stayed on appeal or otherwise, or if, within sixty (60) days after the
expiration of any such stay, such appointment shall not have been vacated.
(e) Tenant abandons the Premises.
(f) The occurrence of an event of default or acceleration under any
note issued pursuant to that certain Asset Purchase Agreement between Tenant
and Electrified Companies, Inc., a New Jersey Corporation of even date
herewith or occurrence of an event of default in any mortgage or other
instrument securing said notes.
This Lease and all rights of Tenant under this Lease shall expire
and terminate upon the occurrence of an Event of Default.
SECTION 18.02. WAIVER OF NOTICE TO QUIT. Intentionally omitted.
SECTION 18.03. SURRENDER OF PREMISES. Upon any such expiration or
termination of this lease, Tenant shall quit and peacefully surrender the
Premises to Landlord. Landlord, upon or at any time after such expiration or
termination, may, without further notice, enter upon the Premises, possess
itself thereof, by force, summary proceedings, or otherwise, and may
dispossess Tenant and remove Tenant and all other persons and property from
the Premises and the right to receive all rental income of and from the same.
SECTION 18.04. WAIVER OF RIGHT OF REDEMPTION. Tenant hereby waives, so
far as permitted by law, any and all right of redemption or re-entry or
repossession or to restore the operation of this lease in case Tenant shall
be dispossessed by a judgment or by warrant of any court or judge or in case
of re-entry or repossession by Landlord or in case of any
-24-
<PAGE>
expiration or termination of this lease. The terms "enter", "re-enter",
"entry" and "re-entry" as used in this lease are not restricted to their
technical legal meaning.
SECTION 18.05. FAILURE OF STRICT PERFORMANCE. No failure by Landlord
to insist upon the strict performance of any agreement or condition of this
lease or to exercise any right or remedy consequent upon a breach thereof,
and no acceptance of full or partial rent during the continuance of any such
breach shall constitute a waiver of any such breach or of such agreement or
condition. No agreement or condition of this lease to be performed or
complied with by Tenant, and no breach thereof, shall be waived or modified
except by a written agreement executed by Landlord. No waiver of any breach
shall affect or alter this lease, but each and every agreement or condition
of this lease shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
SECTION 18.06. LANDLORD'S INJUNCTIVE REMEDY. In the event of any
breach or threatened breach by Tenant of any of the agreements or conditions
contained in this Lease, Landlord shall be entitled to enjoin such breach or
threatened breach and shall have the right to invoke any right and remedy
allowed at law or in equity or by statute or otherwise as though re-entry,
summary proceedings and other remedies were not provided for in this lease.
SECTION 18.07. CUMULATIVE RIGHTS. Each right and remedy of Landlord
provided for in this lease shall be cumulative and shall be in addition to
every other right or remedy provided for in this lease or now or hereafter
existing at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by Landlord of any one or more of the rights or
remedies provided for in this lease or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided for in
this lease or now or hereafter existing at law or in equity or by statute or
otherwise.
SECTION 18.08. INTEREST CHARGE. Interest at the highest rate per
annum permitted by the New Jersey usury laws, as may be amended, shall accrue
upon any Net Rent or other charges, payable under this lease during any
period while the payment thereof by Tenant may be delayed.
-25-
<PAGE>
ARTICLE 19
STATEMENTS
SECTION 19.01. LEASE STATUS STATEMENTS. At any time and from time to
time, Landlord on at least twenty (20) days' prior written request by Tenant,
and Tenant on at least twenty (20) days' prior written request by Landlord,
will deliver to the party making such request a statement in writing
certifying that; (a) this lease is unmodified and in full force and effect,
or if there shall have been modifications that the same is in full force and
effect as modified and stating the modifications; (b) the dates to which the
Net Rent and other charges have been paid; and (c) whether or not, to the
best knowledge of the party executing such certificate, the party requesting
such statement is in default in performance of any agreement or condition
contained in this lease and, if so, specifying each such default of which the
executing party may have knowledge.
ARTICLE 20
INVALIDITY OF PARTICULAR PROVISIONS
SECTION 20.01. INVALIDITY. If any term of this lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affect thereby. Each term of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
ARTICLE 21
NOTICES
SECTION 21.01. HOW NOTICE SERVED. All notices, demands and request
required under this lease shall be in writing. All such notices, demands and
requests shall be deemed to have been properly given if served personally, or
if sent by United States registered mail, postage prepaid, addressed as
hereinafter provided. All notices, demands, payments and requests mailed to
Landlord at the address above provided, or at such other address as Landlord
may from time to time designate by written notice to Tenant. All such notices,
-26-
<PAGE>
demands and requests mailed to Tenant shall be addressed to Tenant at the
address above provided or at such other address as Tenant may from time to
time designate by written notice to Landlord.
SECTION 21.02. WHEN NOTICE SERVED. Notices, demands and requests which
shall be served by certified mail upon Landlord and Tenant in the manner
aforesaid, shall be deemed sufficiently served with postmarked.
ARTICLE 22
CONDITION OF AND TITLE TO
PROPERTY, QUIET ENJOYMENT
SECTION 22.01. QUIET ENJOYMENT. Landlord agrees that Tenant upon
paying the Net Rent and other charges herein provided for and observing and
keeping all agreements and conditions of this lease on its part to be
observed and kept, shall quietly have and enjoy the Premises during the term
of this lease without hindrance or molestation by and one claiming by, or
through Landlord, subject, however, to the exceptions, reservations and
conditions of this lease and claims of Permitted Mortgagees of the Premises.
SECTION 22.02. LANDLORD FOR THE TIME BEING. In case Landlord shall
convey the Premises, all such liabilities and obligations of Landlord
hereunder shall be assigned to the grantee without the necessity of the
execution of a further instrument. Landlord shall be relieved of all
liabilities and obligations hereunder upon such conveyance; provided,
however, that any funds held by Landlord hereunder in which Tenant has an
interest hereunder shall be turned over to such grantee.
ARTICLE 23
REAL ESTATE COMMISSION
SECTION 23.01. NO BROKERAGE. The Tenant represents to the Landlord that
it has not dealt with any agent in connection with this lease of the Premises.
ARTICLE 24
ARBITRATION
SECTION 24.01. ARBITRATION. In any case in which it is provided by the
terms of this lease that any matter shall be determined by arbitration, such
arbitration shall be conducted
-27-
<PAGE>
in accordance with the rules then obtaining of the American Arbitration
Association, before three arbitrators, one chosen by Landlord, one by Tenant
and one by the arbitrators thus chosen and judgment upon the award rendered
may be entered in any court having jurisdiction thereof. Landlord and Tenant
shall each be entitled to present evidence and argument to the appraisers and
to the arbitrators. The costs of the arbitration shall be borne equally by
the parties. Notwithstanding arbitration proceedings, all rent and any other
charges payable by Tenant under this Lease shall continue to be paid when due
unless finally ordered adjusted by a court of competent jurisdiction pursuant
to this paragraph, and failure to so pay such rent and other charges shall
constitute a default hereunder.
ARTICLE 25
ENVIRONMENTAL INDEMNITY
ENVIRONMENTAL INDEMNITY.
Tenant hereby unconditionally agrees to indemnify, defend, and hold
Landlord harmless against any loss, liability, damage, expense or claim
(including reasonable attorneys' fees) arising under any Hazardous Materials
Law, and any other loss, liability, damage, expense or claim (including
reasonable attorneys' fees), which may be incurred by or asserted against
Landlord directly or indirectly resulting from the presence of Hazardous
Materials on the Premises which are introduced on the Premises subsequent to
the date hereof, provided that any such loss, liability, damage, expense or
claim does not result from any act of Landlord or Landlord's agents.
Tenant shall pay all such amounts prior to the entry of any final
judgments or penalties against Buyer which have been indemnified under this
Agreement. In the event that such payment is not made, Buyer, at its sole
discretion, may proceed to file suit against Seller to compel such payment.
If Buyer retains counsel for advice or other representation in any
litigation, contest, dispute, suit or proceeding (whether instituted by
Buyer, Seller, or any other party, including any governmental agency charged
with enforcement of any Hazardous Material Law) in any way relating to this
Agreement and the Indemnities described herein, or to enforce the Indemnities
hereunder, then all of the reasonable attorneys' fees arising from such
services and all directly related expenses and court costs shall be payable
by Seller within 30 days of demand.
-28-
<PAGE>
For the purposes of this Agreement Hazardous Materials and Hazardous
Materials Loans are defined as follows:
(a) "Hazardous Materials" means and includes those substances
deemed hazardous under any Hazardous Material Law (as defined below),
including, without limitation, asbestos or any substance containing asbestos,
the group of organic compounds known as polychlorinated biphenyls, flammable
explosives, radioactive materials, chemicals known to cause cancer or
reproductive toxicity, pollutants, effluents, contaminants, emissions or
related materials and any items included in the definition of hazardous or
toxic waste materials or substances under any Hazardous Material Law; and
(b) "Hazardous Materials Laws" collectively means and includes any
present and future local, state and federal law relating to the environment
and environmental conditions, including, without limitation, the Resource
Conservation and Recovery Act of 1976 "RCRA"), 42 U.S.C. Section 6901 ET
SEQ., the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), 42 U.S.C. Sections 9601-9657, as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 6901, ET SEQ., the Federal
Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ., the Clean Air
Act 42 U.S.C. Section 741 ET SEQ., the Clean Water Act, 33 U.S.C. Section
7401 ET SEQ., the Toxic Substances Control Act, 15 U.S.C. Sections 2601-2629,
the Safe Drinking Water Act, 42 U.S.C. Sections 300f-300j, and all other
federal, state or local regulations, rules, orders, decrees, ordinances,
codes, authorizations, certificates, permits, licenses and any other legal
requirements now or hereafter promulgated or issued thereunder or separately.
ARTICLE 26
MISCELLANEOUS
SECTION 26.01 SETTLEMENT OF DISPUTES. Without hereby limiting the
effect or applicability of any specific provision of this lease of similar
import, whenever under any provision of this lease expressly providing or
requiring that an act, forbearance, quantity, amount, sum of money, value,
time limit or any other matter or thing shall be reasonable (or shall not be
unreasonable) a dispute or disagreement shall be settled by arbitration as
provided in ARTICLE 24.
-29-
<PAGE>
SECTION 26.02. CAPTIONS. The captions of this lease and the table of
contents preceding this lease are convenience and reference only and in no
way define, limit or describe the scope or intent of this lease.
SECTION 26.03. SECURITY DEPOSITS. Tenant agrees not to use any
security deposits of any sub-tenants of the Premises in violation of the law
of the state in which the Premises is located and agrees to hold and save
harmless Landlord with respect to claims by such sub-tenants regarding such
security deposits.
SECTION 26.04. LEASE CONSTRUCTION. This lease shall be construed and
enforced in accordance with the laws of the state in which the Premises are
located.
SECTION 26.05. BENEFITS AND BURDENS. The covenants and agreements
herein contained shall bind and inure to the benefit of Landlord, his heirs,
successors and assigns, and Tenant, its successors and assigns, except as
otherwise provided herein.
SECTION 26.06. BINDING EFFECT. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its heirs,
successors and assigns, and Tenant, its successors and assigns, except as
otherwise provided herein.
ARTICLE 27
RELATIONSHIP OF PARTIES
SECTION 27.01. NO PARTNERSHIP. Nothing in this lease shall in any way
be construed to constitute a co-partnership or joint venture between the
parties hereto. The sole relationship between the parties hereto is that of
Landlord and Tenant.
ARTICLE 28
LEASE NOT TO BE RECORDED
SECTION 28.01. NOTICE OF LEASE. Neither party will record this lease
but shall execute and deliver a notice or a short form of this lease in such
form as required by the applicable statute. If this lease is terminated before
the term expires, Landlord and Tenant shall execute, deliver and record an
instrument acknowledging such fact including the actual date of termination.
-30-
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
day and year first above written.
Witnessed by:
LANDLORD:
R & L PROPERTIES COMPANY
BY: /s/ Lyle Brundage
- ------------------------------ ---------------------------
Lyle Brundage
Its Partner
/s/ illegible
- ------------------------------
By: /s/ Robert H. Brundage
- ------------------------------ --------------------------
Robert Brundage
Its Partner
/s/ illegible
- -----------------------------
TENANT
PURO WATER GROUP, INC.
/s/ illegible By: /s/ Jack C. West
- ------------------------------ ---------------------------
Jack C. West
Its Co-President
/s/ illegible
- ------------------------------
-31-
<PAGE>
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
Personally appeared Lyle Brundage, a partner of R & L PROPERTIES COMPANY,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed, and the free act and deed of the corporation, before me.
---------------------------------------
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
Personally appeared Robert Brundage, a partner of R & L PROPERTIES COMPANY,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed, and the free act and deed of the corporation, before me.
---------------------------------------
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
Personally appeared Jack C. West, Co-President, of PURO WATER GROUP, INC.,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed, and the free act and deed of the corporation, before me.
---------------------------------------
Commissioner of the Superior Court
-32-
<PAGE>
EX-10.17
Lease Agreement
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 9th day of October 1995, between STABAL
REALTY CORP., as Agent for Gerald Finger, 141 Great Neck Road, Great neck, New
York, party of the first part, hereinafter referred to as OWNER, and PURO
CORPORATION OF AMERICA, 56-45 58th Street, Maspeth, New York, party of the
second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
West half of the building known as 76-78 Mall Drive, Commack, New York, for the
term of Five Years and Five (5) Months (or until such term shall sooner cease
and expire as hereinafter provided) to commence on the 1st day of November
nineteen hundred and ninety-five, and to end on the 31st day of March 2001 both
dates inclusive, at an annual rental rate as shown on Schedule A which Tenant
agrees to pay in lawful money of the United States which shall be legal tender
in payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance on the first day of each month during said
term, at the office of Owner or such other place as Owner may designate, without
any set off or deduction whatsoever, except that Tenant shall pay the first
_____________ monthly installment(s) on the execution hereof (unless the lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Occupancy: 1. Tenant shall pay the rent as above and as hereinafter provided.
Use: 2. Tenant shall use and occupy demised premises for offices,
warehousing, manufacturing, distribution and storage of water products provided
such use is in accordance with the Certificate of Occupancy for the building, if
any, and for no other purposes.
Alterations: 3. Tenant shall make no changes in or to the demised premises of
any nature without Owner's prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are nonstructural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved in each instance by Owner. Tenant shall,
at its expense, before making any alterations, additions, installations or
improvements obtain all permits, approval and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner. Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within sixty (60) days
thereafter, at Tenant's expense, by payment or filing the bond required by law
or otherwise. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner on Tenant's behalf, shall, upon installation, become the property of Owner
and shall remain upon and be surrendered with the demised premises unless Owner,
by notice to Tenant no later than twenty days prior to the date fixed as the
termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
demised premises by Tenant prior to the expiration of the lease, at Tenant's
expense. Nothing in this Article shall be construed to give Owner title to or to
prevent Tenant's removal of trade fixtures, moveable office furniture and
equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
<PAGE>
to such removal. All property permitted or required to be removed by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or removed from the premises by Owner, at Tenant's expense.
Repairs: 4. Owner shall maintain and repair the public portions of the
building. Tenant shall, throughout the term of this lease, take good care of the
demised premises including the bathrooms and lavatory facilities and the windows
and window frames and, the fixtures and appurtenances therein and at Tenant's
sole cost and expense promptly make all repairs thereto and to the building,
whether structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees, invitees, or licensees, and whether or not arising from
such Tenant conduct or omission, when required by other provisions of this
lease, including Article 6, Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If the demised premises be or become infested
with vermin, Tenant shall, at its expense, cause the same to be exterminated.
Tenant shall give Owner prompt notice of any defective condition in any
plumbing, heating system or electrical lines located in the demised premises and
following such notice, Owner shall remedy the condition with due diligence, but
at the expense of Tenant, if repairs are necessitated by damage or injury
attributable to Tenant, Tenant's servants, agents, employees, invitees or
licensees as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any set off or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of any action for damages for breach of contract. The
provisions of this Article 4 with respect to the making of repairs shall not
apply in the case of fire or other casualty with regard to which Article 9
hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or allow
any window in the demised premises to be cleaned from the outside in violation
of Section 202 of the New York State Labor Law or any other applicable law or of
the Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
Requirements of Law, Fire Insurance: 6. Prior to the commencement of the lease
term, if Tenant is then in possession, and at all times thereafter Tenant shall,
at Tenant's sole cost and expense, promptly comply with all present and future
laws, orders and regulations of all state, federal, municipal and local
governments, departments, commissions and boards and any direction of any public
officer pursuant to law, and all orders, rules and regulations of the New York
Board of Fire Underwriters, or the Insurance Services Office, or any similar
body which shall impose any violation, order or duty upon Owner or Tenant with
respect to the demised premises, whether or not arising out of Tenant's use or
manner of use thereof, or, with respect to the building, if arising out of
Tenant' use or manner or use of the demised premises of the building (including
the use permitted under the
<PAGE>
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violate
any such laws, ordinances, orders, rules, regulations or requirements with
respect thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall not keep anything in
the demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization and
other authority having jurisdiction, and then only in such manner and such
quantity as so not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. If by reason of failure to comply
with the foregoing the fire insurance rate shall, at the beginning of this lease
or at any time thereafter, be higher than it otherwise would be, then Tenant
shall reimburse Owner, as additional rent thereunder, for that portion of all
life insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make-up" or rate for the building or demised
premises issued by a body making fire insurance rates applicable to said
premises shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rates then applicable to said
premises. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient, in Owner's judgement, to adsorb and prevent vibration,
noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
Property-Loss, Damage, Reimbursement, Indemnity: 8. Owner or its agents shall
not be liable for any damage to property of Tenant or of others entrusted to
employees of the building, nor for loss of or damage to any property of Tenant
by theft or otherwise, nor for any injury or damage to persons or property
resulting from any cause of whatsoever nature, unless caused by or due to the
negligence of Owner, its agents, servants or employees; Owner or its agents
shall not be liable for any damage caused by other tenants or persons in, upon
or about said building or cause by operations in connection of any private,
public or quasi public work. If at any time any windows of the demised premises
are temporarily closed, darkened or bricked up (or permanently closed, darkened
or bricked up, if required by law) for any reason whatsoever including, but not
limited to Owner's own acts, Owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall be not entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorney's fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licenses, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licenses. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
Destruction, Fire and Other Casualty: 9. (a) If the demised premises or any part
thereof shall be damaged by fire or other casualty, Tenant shall give immediate
notice thereof to Owner and this lease shall continue in full force and effect
except as hereinafter set forth. (b) If the demised premises are partially
damaged or rendered partially unusable by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Owner and the rent and other
items of additional rent, until such repair shall be substantially completed,
shall be apportioned from the day following the casualty according to the part
of the premises which is usable. (c) If the demised premises are totally damaged
or rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thence forth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any such events, Owner may elect to
terminate this lease by written notice to Tenant, given within 90 days after
such fire or casualty, or 30 days after adjustment of the insurance claim for
such fire or casualty, whichever is sooner, specifying a date for the expiration
of the lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
herein, Owner shall make the repairs and restorations under the conditions of
(b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, including Owner's obligation to restore under
subparagraph (b) above, each party shall look first to any insurance in its
favor before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery with respect to
subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. The foregoing release and waiver shall be
in force only if both releasors, insurance policies contain a cause providing
that such a release or waiver shall not invalidate the insurance. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefiting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver or subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Owner will not be obligated to repair any damage thereto or
replace the same. (f) Tenant hereby waives the provisions of Section 227 of the
Real Property Law and agrees that the provisions of this article shall govern
and control in lieu thereof.
Eminent Domain: 10. If the whole of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of such lease. Tenant shall have the right to make
an independent claim to the condemning authority for the value of Tenant's
moving expenses and personal property, trade fixtures and equipment, provided
Tenant is entitled pursuant to the terms of the lease to remove such property,
trade fixtures and equipment at the end of the term and provided further such
claim does not reduce Owner's award.
Assignment, Mortgage, Etc. 11. Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant or the
majority partnership interest of a partnership Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but not such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current: (1) 12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times is use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
- ----------
(1) Rider to be added if necessary.
Access to Premises: 13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any emergency at any time,
and, at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building, or for the purpose of complying with
laws, regulations and other directions of governmental authorities. Tenant shall
permit Owner to use and maintain and replace pipes and conduits in and through
the demised premises and to erect new pipes and conduits therein provided,
wherever possible, they are within walls or otherwise concealed. Owner may,
during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of less or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants and may, during said six months period, place upon the demised premises
the usual notices "To Let" and "For Sale" which notices Tenant shall permit to
remain thereon without molestation. If Tenant is not present to open and permit
an entry into the demised premises, Owner or Owner's agents may enter the same
whenever such entry may be necessary or permissible by master key or forcibly
and provided reasonable care is exercised to safeguard Tenant's property, such
entry shall not render Owner or its agents liable therefor, nor any event shall
the obligations of the tenant hereunder be affected. If during the last month of
the term Tenant shall have removed all or substantially all of Tenant's property
therefrom. Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligation hereunder.
<PAGE>
Vault, Vault Space, Area: 14. No vaults, vault space or area, whether or not
enclosed or covered, not within the property line of the building is leased
hereunder anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record. If any governmental license or permit shall be required for the
proper and lawful conduct of tenant's business, tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as debtor; or (2) the making by Tenant of an
assignment or any other arrangement for the benefit of creditors under any state
statute. Neither Tenant nor any person claiming through or under tenant, or by
reason of any statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and surrender the
premise. If this lease shall be assigned in accordance with its terms, the
provisions of this Article 16 shall be applicable only to the party then owning
Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rental reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re-letting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payments of rent or additional rent; or
if the demised premises becomes vacant or deserted "or if this lease be rejected
under Section 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any
execution or attachment shall be issued against tenant or any Tenant's property
whereupon the demised premises shall be taken or occupied by someone other than
Tenant; or if Tenant shall make default with respect to any other lease between
Owner and Tenant; or if Tenant shall have failed, after five (5) days written
notice, to redeposit with Owner any portion of the security deposited hereunder
which Owner has applied to the payment of any rent and additional rent due and
payable hereunder or failed to move into or take possession of the premises
within thirty (30) days after the commencement of the terms of this lease; then
in any one or more of such events, upon Owner serving written thirty (30) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said thirty (30) days, if Tenant shall have failed to comply with or remedy
such default or if the said default or omission complained of shall be of a
nature that the same cannot be completely cured or remedied within said thirty
(30) day period, and if Tenant shall not have diligently commenced during such
default within such thirty (30) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written five (5) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said five (5) days this lease and
the term thereunder shall end and expires as fully and completely as if the
expiration of such five (5) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Tenant shall make default in the payment
of the rent reserved herein or any item of additional rent herein mentioned or
any part of either or in making any other payment herein required; then and in
any of such events Owner may without notice, re-enter the demised premises
pursuant to a court order either by force or otherwise, and dispossess Tenant by
summary proceedings or otherwise, and the legal representative of Tenant or
other occupant of demised premises and remove their effects and hold the
premises as if this lease had not been made, and Tenant hereby waives service of
notice of intention to re-enter or to institute legal proceedings to that end.
If Tenant shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this lease, Owner may cancel and
terminate such renewal or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption: 18. In case of any such default,
re-entry, expiration and/or dispossess by summary proceedings or otherwise, (a)
the rent, and additional rent, shall become due thereupon and be paid up to the
time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the
premises or any part or parts thereof, either in the name of Owner or otherwise,
for a term or terms, which may at Owner's option be less than or exceed the
period which would otherwise have constituted the balance of the term of this
lease and may grant concessions or free rent or charge a higher rental than that
in this lease, (c) Tenant or the legal representatives of Tenant shall also pay
Owner as liquidated damages for the failure of any deficiency between the rent
hereby reserved and or covenanted to be paid and the net amount, if any, of the
rents collected on account of the subsequent lease or leases of the demised
premises for each month of the period which would otherwise have constituted the
balance of the term of this lease. The failure of Owner to re-let the premises
or any part or parts thereof shall not release or affect Tenant's liability for
damages. In computing such liquidated damages there shall be added to the said
deficiency such expenses as Owner may incur in connection with re-letting, such
as legal expenses, reasonable attorneys' fees, brokerage, advertising and for
keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
sole judgment, considers advisable and necessary for the purpose or re-letting
the demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that he
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this lease, after
notice if required and upon expiration of any applicable grace period if any,
(except in an emergency), then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the payment
of money, including but not limited to reasonable attorney's fees, in
instituting, prosecuting or defending any action or proceedings, then Tenant
will reimburse Owner for such sums so paid or obligations incurred with interest
and costs. The foregoing expenses incurred by reason of Tenant's default shall
be deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within ten (10) days of rendition of any bill or statement to Tenant therefor.
If Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages.
Building Alterations and Management: 20. Owner shall have the right at any time
without the same constituting an eviction and without incurring liability to
Tenant therefor to change the arrangement and or location or public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets or other
public parts of the building and to change the name, number or designation by
which the building may be known. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or other
Tenant making any repairs in the building or any such alterations, additions and
improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of any controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem necessary
for the security of the building and its occupants.
No Representations by Owner: 21. Neither Owner nor Owner's agents have made any
representations or promises with respect to physical condition of the building,
the land upon which it is erected or the demised premises, the rents, leases,
expenses of operation or any other matter or thing affecting or related to the
demised premises or the building except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this lease. Tenant has
inspected the building and the demised premises and is thoroughly acquainted
with their condition and subject to Landlord's work set forth in paragraph 65 of
the rider, agrees to take the same "as is" on the date possession is tendered
and acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
<PAGE>
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End of Term: 22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property from the demised premises. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of this lease. If the last day of the term of this Lease or any
renewal thereof, falls on Sunday, this lease shall expire at noon on the
preceding Saturday unless it be a legal holiday in which case it shall expire at
noon on the preceding business day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 34 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession: 24. If Owner is unable to give possession of the
demised premises on the date of the commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or if Owner has not completed any work required
to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of
the lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extent the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete any work required) until after Owner
shall have given Tenant notice that Owner is able to deliver possession in the
condition required by this lease. If permission is given to Tenant to enter into
the possession of the demised premises or to occupy premises other than the
demised premises prior to the date specified as the commencement of the term of
this lease, Tenant covenants and agrees that such possession and/or occupancy
shall be deemed to be under all the terms, covenants, conditions and provisions
of this lease, except the obligation to pay the fixed annual rent set forth in
page one of this lease. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
233-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constitute a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
then the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment of Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
Waiver of Trial by Jury: 26. It is mutually agreed by and between Owner and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising our of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4
except for statutory mandatory counterclaims.
Inability to Perform: 27. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder or
part of Tenant to be performed shall in no wise be affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment, fixtures or other materials if Owner is prevented or delayed from
doing so by reason of strike or labor troubles or any cause whatsoever beyond
Owner's sole control including, but not limited to, government preemption or
restrictions or by reason of any rule, order or regulation of any department or
subdivision thereof of any government agency or by reason of the conditions
which have been or are affected, either directly or indirectly, by war or other
emergency.
Bills and Notices: 28. Except as otherwise in this lease provided, a bill
statement, notice or communication which Owner may desire or be required to give
to Tenant, shall be deemed sufficiently given or rendered if, in writing,
delivered to Tenant personally or sent by registered or certified mail addressed
to Tenant at the building of which the demised premises form a part or at the
last known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left at
the premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Water Charges: 29. If Tenant requires, uses or consumes water for any purpose in
addition to ordinary lavatory purposes (or which fact Tenant constitutes Owner
to be the sole judge) Owner may install a water meter and thereby measure
Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost
of the meter and the cost of the installation, thereof and throughout the
duration of Tenant's occupancy Tenant shall keep said meter and installation
equipment in good working order and repair at Tenant's own cost and expense in
default of which Owner may cause such meter and equipment to be replaced or
repaired and collect the cost thereof from Tenant, as additional rent. Tenant
agrees to pay for water consumed, as shown on said meter as and when bills are
rendered, and on default in making such payment Owner may pay such charges and
collect the same from Tenant, as additional rent. Tenant covenants and agrees to
pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or
charge which now or hereafter is assessed, imposed or a lien upon the demised
premises or the realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use, consumption, maintenance
or supply of water, water system or sewage or sewage connection or system. If
the building or the demised premises or any part thereof is supplied with water
through a meter through which water is also supplied to other premises Tenant
shall pay to Owner, as additional rent, its pro rata share, as and when billed,
of the total meter charges as Tenant's portion. Independently of and in addition
to any of the remedies reserved to Owner hereinabove or elsewhere in this lease,
Owner may sue for and collect any monies to be paid by Tenant or paid by Owner
for any of the reasons or purposes hereinabove set forth.
Sprinklers: 30. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters or the New York Fire
Insurance Exchange or any bureau, department or official of the federal, state
or city government recommend or require the installation of a sprinkler system
or that any changes, modifications, alterations, or additional sprinkler heads
or other equipment be made or supplied in an existing sprinkler system by reason
of Tenant's business, or the location of partitions, trade fixtures, or other
contents of the demised premises, or for any other reason, or if any such
sprinkler system installations, modifications, alterations, additional
sprinklers heads or other such equipment, become necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate set by any said Exchange or by any fire
insurance company, Tenant shall, at Tenant's expense, promptly make such
sprinkler system installations, changes, modifications, alterations, and supply
additional sprinkler heads or other equipment as required whether the work
involved shall be structural or non-structural in nature. Tenant shall pay to
Owner as additional rent its pro rata share, as and when billed, during the
terms of this lease, as Tenant's portion of the contract price for sprinkler
supervisory, alarm and maintenance service.
Elevators, Heat, Cleaning: 31. As long as Tenant is not in default under any of
the covenants of this lease Owner shall: (a) provided necessary passenger
elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from
8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be
provided only on regular business days Monday through Friday inclusive, and on
those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5
p.m.; (c) furnish heat water and other services supplied by Owner to the demised
premises, when and as required by law, on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public
portions of the building which are used in common by all tenants. Tenant shall,
at Tenant's expense, keep the demised premises, including the windows, clean and
in order, to the satisfaction of Owner, and for that purpose shall employ the
person or persons, or corporation approved by Owner. Tenant shall pay to Owner
the cost of removal of any of Tenant's refuse and rubbish from the building.
Bills for the same shall be rendered by Owner to Tenant at such time as Owner
may elect and shall be due and payable hereunder, and the amount of such bills
shall be deemed to be, and be paid as, additional rent, Tenant shall, however,
have the option of independently contracting for the removal of such rubbish and
refuse in the event that Tenant does not wish to have same done by employees of
Owner. Under such circumstances, however, the removal of such refuse and rubbish
by others shall be subject to such rules and regulations as, in the judgment of
Owner, are necessary for the proper operation of the building. Owner reserves
the right to stop service of the heating, elevator, plumbing and electric
systems, when necessary by reason of accident, or emergency, or for repairs,
alterations, replacements or improvements, in the judgment of Owner desirable or
necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed. If the building of which the
demised-premises are a part supplies manually operated elevator service. Owner
may proceed with alterations necessary to substitute automatic control elevator
service upon ten (10) days written notice to Tenant without in any way affecting
the obligations of Tenant hereunder, provided that the same shall be done with
the minimum amount of inconvenience to Tenant, and Owner pursues with due
diligence the completion of the alterations.
<PAGE>
Security: 32. Tenant has deposited with Owner the sum of $10,541.66 as security
for the faithful performance and observance by Tenant of the terms, provision
and conditions of this lease; It is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this lease, including but not limited to, any
damages of deficiency in the reletting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrances, attempted assignment or attempted
encumbrance.
Captions: 33. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
Definitions: 34. The term "Owner" as used in this lease means only the owner of
the fee or of the leasehold of the building, or the mortgagee in possession, for
the time being of the land and building (or the owner of a lease of the building
or of the land and building) of which the demised premises form a part, so that
in the event of any sale or sales of said land and building or of said lease, or
in the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums in which
shall be due to Owner from Tenant under this lease, in addition to the annual
rental rate. The term "business days" are used in this lease, shall exclude
Saturdays, Sundays, and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service. Whether it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
Adjacent Excavation-Shoring: 35. If an excavation shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall or the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
Rules and Regulations: 36. Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations annexed hereto and such other and further reasonable Rules
and Regulations as Owner or Owner's agents may from time to time adopt. Notice
of any additional rules or regulations shall be given in such manner as Owner
may elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within fifteen (15) days
after giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
Glass: 37. Tenant shall replace, at the expense of the Tenant, any and all plate
and other glass damaged or broken from any cause whatsoever in and about the
demised premises. Tenant shall insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of the
Owner.
Estoppel Certificate: 38. Tenant, at any time, and from time to time, upon at
least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to
Owner, and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified in full force and effect (or,
if there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by owner under this Lease, and, if so, specifying each such default and
stating such other matters as may reasonably be requested.
Directory Board Listing: 39. If, at the request of and as accommodation to
Tenant, Owner shall place upon the directory board in the lobby of the building,
one or more names of the persons other than Tenant, such directory board listing
shall not be construed as the consent by Owner to an assignment or subletting by
Tenant to such person or persons.
Successors and Assigns: 40. The covenants, conditions and agreements contained
in this lease shall bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
Rider of 162 pages containing paragraphs 41 through 79 and Schedule A
annexed hereto and made a part hereof.
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
OWNER/LANDLORD:
Witness for Owner: STABAL REALTY CORP. [CORP. SEAL]
________________________ By: /s/ Gerald Finger Pres. [L.S.]
-------------------------------------
Witness for Tenant: PURO CORPORATION OF AMERICA [CORP. SEAL]
________________________ By: /s/ Scott Levy Pres. [L.S.]
-------------------------------------
<PAGE>
ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this ___________ day of ___________, 19__, before me personally came to
me known, who being by me duly sworn, did depose and say that he resides in that
he is the ________________ of ____________________________________________ the
corporation described in and which executed the foregoing instrument, as TENANT;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
----------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK, ss.:
County of
On this __________ day of __________, 19__, before me personally came
___________ to be known and known to me to be the individual described in and
who, as TENANT, executed the foregoing instrument and acknowledged to me that
_________________________ he executed the same.
----------------------------------
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE IN
ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingrees or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except hose equipped with rubber tires and
sideguards. If said premises are situated on the ground floor of the building,
Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in
front of said premises clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors of halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odor, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish, or
birds be kept in or about the building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same with0out any liability and may change the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination if his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons who
do not present a pass to the building signed by Owner. Owner will furnish passes
to persons for whom any Tenant requests same in writing. Each Tenant shall be
responsible for all persons for whom he requests such pass and shall be liable
to Owner for all acts of such persons. Notwithstanding the foregoing, Owner
shall not be required to allow Tenant or any person to enter or remain in the
building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays
from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by
reason of Owner excluding from the building any person who does not present such
pass.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a loft building, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive, or hazardous
fluid, material, chemical or substance, or cause or permit any odors of cooking
or other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
<PAGE>
Address
Premises
================================================================================
TO
================================================================================
STANDARD FORM OF
(SEAL) LOFT LEASE (SEAL)
The Real Estate Board of New York, Inc.
(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited.
================================================================================
Dated 19
Rent Per Year
Rent Per Month
Term
From
To
Drawn by_____________________________________________________________________
Checked by___________________________________________________________________
Entered by___________________________________________________________________
Approved by__________________________________________________________________
================================================================================
<PAGE>
LEASE BETWEEN STABAL REALTY AS AGENT FOR GERALD FINGER,
AS LANDLORD OR OWNER,
AND PURO CORPORATION OF AMERICA,
AS TENANT,
DATED THE 9TH DAY OF OCTOBER, 1995.
- --------------------------------------------------------------------------------
41. REAL ESTATE TAXES. As and for additional rent hereunder, Tenant agrees to
pay to the Landlord fifty (50%) percent of all real estate taxes, sewer charges,
water charges and all other governmental assessments or impositions ("Taxes")
imposed on the building and tax lot of which the demised premises are a part in
excess of the Taxes for the year 1994/95. Said taxes shall be due and payable
upon Tenant's receipt of a bill therefor, which Landlord agrees to tender not
earlier than thirty (30) days prior to the date same must be paid to the
assessing authority. The said obligation to pay such Taxes for the first and
final lease year shall be pro-rated. In the event that such Taxes are not paid
by the Tenant to the Landlord within thirty (30) days after such Taxes are
billed, the Landlord, at its option, may add the amount thereof to the rent of
any month thereafter to become due and the same shall be collectible as
additional rent. Notwithstanding the foregoing, Tenant's liability for increased
taxes for the tax year 1995/96 shall not exceed the lesser of said increase or
$1,000.00.
Landlord may, at its option, collect from Tenant monthly together with the
payments of Basic Rent an amount reasonably estimated by Landlord to be
one-twelfth (1/12) of the Taxes to be due for the next succeeding tax payment
period.
If the method of real estate taxation now in force in the State of New York
shall be changed so that taxes are no longer levied in whole or in part against
the demised premises, but are transferred, in effect, to income of the Landlord
or to some other means assessable against the Landlord, then the Tenant agrees
to pay such substitute taxes as "additional rent" in the same manner as the real
estate taxes above mentioned. If such taxes are transferred to the income of the
Landlord, Tenant's share shall be computed and paid as if the property of which
the demised premises are a part were the sole property owned by the Landlord.
42. ADDITIONAL MAINTENANCE. Tenant shall maintain and repair the parking,
driveways, entries, exits, walks, loading facilities, curbs and lighting
("Common Areas") servicing that part of the property of which the demised
premises are a part including but not limited to maintenance of the paved and
parking areas, snow removal, sanding and parking field cleaning, maintenance of
the storm and sanitary systems, maintenance and use of domestic water supply and
fire sprinkler system. Tenant shall reimburse to Landlord fifty (50%) percent of
Landlord's insurance cost for building replacement from damage due to fire or
other casualty, Landlord's liability and loss of rent, sprinkler monitoring,
sprinkler supervisory charges, 2" valve tests, ISO inspection fees, periodic
environmental compliance audits as described in Article 69 hereof.
<PAGE>
Landlord will maintain lawns, shrubs and landscape sprinkler system for the
first lease year. Tenant will pay Landlord $750.00 simultaneously with the
execution of the lease for said service. Thereafter, Tenant shall be solely
responsible for such maintenance.
43. BROKER. A. Landlord and Tenant warrant and represent to each other that no
broker brought about the execution of this lease other than Buck Realty
("Broker") and Landlord agrees to pay the commission by separate agreement
between Landlord and said broker. Tenant agrees to indemnify and hold the
Landlord harmless against any and all claims of any nature whatsoever by any
other person, firm or corporation for any brokerage commissions or any other
compensation in connection with this lease transaction arising from any act on
the part of Tenant.
B. In the event the Tenant vacates the demised premises and ceases paying
the minimum rent and additional rent prior to the expiration of the term without
first obtaining the written consent of the Landlord or is evicted through
summary proceedings, the Tenant agrees to pay to the Landlord as additional rent
that part of the real estate brokerage commission, if any, previously incurred
or paid to the Broker, calculated on the unexpired term of the lease, and
further agrees to pay to the Landlord any brokerage commissions for re-renting
the demised premises for the unexpired term of this lease.
44. NOTICES. All notices required to be sent under this lease shall be in
writing, sent by certified mail or by overnight courier or by hand delivering
same to the addresses as follows:
To the Landlord: STABAL REALTY CORP.
c/o Gerald Finger
141 Great Neck Road
Great Neck, New York 11021
With a copy to: ROTHSTEIN & WEINSTEIN, LLP
445 Broad Hollow Road
Melville, New York 11747
Attn: Michael L. Weinstein, Esq.
To the Tenant: At the demised premises
With a copy to: PURO CORPORATION OF AMERICA
56-45 58th Street
Maspeth, New York 11378
Either party hereto may designate any other address to which notices shall be
sent, by notice sent in accordance with the provisions of this paragraph.
2
<PAGE>
The effective date of such notice shall be the second day after mailing or the
date of actual delivery, whichever first occurs.
45. PARKING AND COMMON AREA. Tenant shall have a nonexclusive right of use of
the west half of parking areas, streets, driveways, alleys, entrances and exits
("Parking") adjoining the demised premises insofar as permitted by law. Public
parking areas provided by Landlord in and about said premises are acknowledged
to be intended primarily for use by customers and visitors to said premises.
Tenant shall not and shall not permit its employees to use said parking areas,
the street, alleys, or vacant lands at said premises for the parking or storage
of any automobiles, trucks or vehicles owned or used by them except as may be
approved and designated in writing by Landlord, and Tenant shall furnish to
Landlord an up to date written statement of the names of all employees, agents
and representatives employed in or at the premises by Tenant and the license
registration number of all vehicles owned or used by Tenant or by such
employees, agents or representatives and any changes thereto as they occur.
The parking and all other common areas and facilities provided by the Landlord
for the general use, of Tenants, their employees and customers, shall at all
times be subject to the exclusive control and management of Landlord, and
Landlord shall have the right to establish, modify, change and enforce
reasonable, uniform and non-discriminatory rules and regulations with respect to
the Parking and any other common areas and facilities hereinabove mentioned, and
Tenant agrees at all times to abide by and conform to such rules and
regulations.
Landlord shall have the right to close any part of the Parking or other common
areas and facilities for such time as may be necessary to prevent a dedication
thereof or the accrual of any rights in any person or in order to discourage
non-customer parking or other unauthorized parking or to repair or replace the
same, and to make repairs to the Parking and other common areas and facilities
as Landlord in its sole discretion deems necessary.
46. OPTION TO RENEW. Provided Tenant has not been at any time during the initial
term hereof in default in observing and performing any of the terms and
conditions of this lease on its part to be observed and performed, Tenant may
extend this lease for an additional five (5) year period from April 1, 2001
through March 31, 2006, on all of the terms and conditions as are herein set
forth except that for such renewal the net minimum basic annual rent shall be as
set forth on Schedule A. To exercise the options herein granted Tenant must
notify Landlord in writing pursuant to the notice provisions of this lease by
notice received not later than nine (9) months nor more than twelve (12) months
prior to the expiration of the initial term of this Lease, time being expressly
of the essence with respect to such notice.
47. INDEMNIFICATION. Commencing with the earlier of the date of the commencement
of the term of this lease or the date Tenant takes possession of the demised
premises Tenant hereby
3
<PAGE>
covenants and agrees to hold the Landlord harmless from and against any and all
claims, suits, damages or causes of action for damages (and against any orders
or decrees or judgments which may be entered thereon) resulting from injury or
alleged injury to persons and/or property or loss of life sustained in or about
the demised premises during the demised term, or upon the Parking by any person
or persons whatever and caused or allegedly caused by the Tenant, its agents,
employees or invitees or the property or vehicles of Tenant and its employees,
agents and invitees; provided, however, that the foregoing provisions of this
Article shall not extend to the gross negligence, willful acts or defaults of
the Landlord or its agents, employees or independent contractors.
48. INSURANCE AND LANDLORD LIABILITY. A. The Tenant shall during the demised
term maintain general liability insurance policies providing personal injury
coverage in an amount of not less the $3,000,000.00 combined single limit
coverage in the event of injury or death to one or more persons and property
damage insuring both the Landlord and the Tenant. If at any time the Tenant
fails to pay the premium for the insurance required by this Article the Landlord
may, after ten (10) days prior written notice to Tenant, pay the premiums
therefor and any and all sums so paid by the Landlord shall be collectible from
the Tenant as additional rent under this lease due and payable immediately. Any
payment by Landlord or failure to assert any claim against Tenant by reason of
its failure to make such payment shall not be deemed to waive or release the
default in payment hereof by Tenant or any of the remedies of Landlord. Such
policy (s) shall contain a provision or endorsement to the effect that the same
shall not be cancelable except on thirty (30) days written notice to Landlord by
the insurance carrier. Copies of policies or renewals thereof shall be deposited
with Landlord at least thirty (30) days prior to the expiration of the policy it
is to replace or renew. Tenant shall have the right to maintain such insurance
under a blanket policy. The policy limit minimums may be increased by Landlord
from time to time to amounts not in excess of the amounts stated herein,
adjusted to reflect the increase (if any) in the United States Department of
Labor Bureau of Labor Statistics, Consumer Price Index for all goods and
services for Nassau and Suffolk Counties on the 1985-87=100 base from the date
hereof to the date of any such increase.
B. Tenant covenants and agrees that the Landlord shall not be liable for
any damage to the property of Tenant, its agents, employees or invitees, as a
result of any leak in the demised premises whether or not same results from a
cause or event which it is the Landlord's obligation to maintain or repair
pursuant to the terms hereof; and Tenant specifically agrees to look solely to
its own funds and to its insurance to compensate it for any damage thus
occurring. Tenant further agrees that any insurance policies carried by it
covering its personal property shall contain specific provisions whereby the
insurance carrier waives all rights subrogation against the Landlord. Nothing
herein shall be deemed to absolve the Landlord from liability from acts of gross
negligence or wilful misconduct.
49. REIMBURSEMENT TO LANDLORD. In the event that the Landlord shall pay or be
required to pay any sum of money, or do any act which shall require the
expenditure of any sums by reason of the failure of the Tenant to perform any of
the covenants, terms or conditions herein
<PAGE>
contained within fifteen (15) days after receipt of written notice to do so
(except that in the case of emergency no such notice shall be necessary), the
Tenant covenants to repay such sums immediately on demand to the Landlord as
additional rent, together with interest at the highest rate permitted by law.
Nothing contained herein shall be construed to waive the right of the Landlord
upon expending such sums to collect such sums with interest by plenary or
summary proceeding.
50. ACCEPTANCE BY TENANT OF PHYSICAL CONDITIONS. The Tenant acknowledges having
inspected the demised premises throughout and accepts same in their "as is"
condition without representation or warranty by the Landlord as to the condition
of the said demised premises and without any repair, replacement, alteration or
redecoration to be made by Landlord except that Landlord represents that the
plumbing, electrical and HVAC systems will be in working order at the
commencement date of this lease. Further, Landlord shall not be responsible for
any latent, hidden or other defects unless it has specific prior knowledge
thereof or unless otherwise provided. Tenant covenants that the rent hereunder
shall in no case be withheld or diminished on account of any defect or change in
the condition of the demised premises, or on account of any damage occurring
thereto during the term of this lease except as otherwise herein provided
51. SECURITY INTERESTS AND MECHANIC'S. If, without Landlord's prior consent, any
chattel mortgage, conditional bill of sale or other security agreement or any
mechanic's or other liens or order for the payment of money shall be filed
against the demised premises or any building or improvement thereon by reason of
or arising out of any equipment, fixture, labor or material furnished or alleged
to have been furnished or to be furnished to or for the Tenant at the demised
premises, the Tenant shall cause the same to be canceled and discharged of
record by payment, bond or otherwise, at the sole expense of the Tenant. Such
cancellation and discharge shall be effected by the Tenant within thirty (30)
days after notice of filing of such security interest or lien from the Landlord
or within thirty (30) days after Tenant has actual notice of such filing from
any other source. Landlord shall defend, at the Tenant's sole cost and expense,
any action, suit or proceeding which may be brought thereon or for the
enforcement of such lien, liens or orders and the Tenant shall pay any damages
and discharge any judgment entered therein and save harmless the Landlord from
any claim or damage resulting therefrom. Tenant shall reimburse Landlord the
cost of such defense as additional rent immediately upon demand therefor.
52. OBLIGATION AS TO CLEANING, RUBBISH REMOVAL, HEAT AND UTILITIES. It is
understood that the Tenant shall be responsible for and furnish to the demised
premises all heat, hot water, water, gas, electric and other utilities. Tenant
shall be responsible for the cost of all repairs and restoration caused by
Tenant's failure to maintain sufficient heat. Tenant shall be responsible for
the cleaning and repair of any septic tank or cesspool appurtenant to the
demised premises and the hook-up to any municipal sewer system which may be
utilized by the demised premises. In the event of such hook-up Tenant's share of
the cost thereof shall be the same as its share of real estate taxes as set
forth in paragraph 41 hereof. Tenant shall at Tenant's expense, keep the demised
premises and the area surrounding same clean and in order to the reasonable
satisfaction of Landlord. Tenant shall remove all of Tenant's refuse and rubbish
from the building at least
5
<PAGE>
weekly and more frequently as Landlord may reasonably request. The removal of
such refuse and rubbish by Tenant shall be subject to such reasonable rules and
regulations as are, in the judgment of Landlord, necessary for the proper
operation of the building. Landlord reserves the right to interrupt services of
plumbing and electric systems, when necessary, by reason of accident or
emergency, or for repairs, alterations, replacements or improvements which are,
in the reasonable judgment of Landlord, desirable or necessary to be made, until
said repairs, alterations, replacements or improvements shall have been
completed. Landlord shall have no responsibility or liability for interruption
of plumbing and electric service nor shall rent abate, during any such period or
when interruption is caused by strikes, accidents or by any cause beyond
Landlord's control, or by laws, orders or regulations of any Federal, State or
Municipal Authority, or inability to obtain gas, oil or other suitable fuel
supply. Nothing herein shall impose any obligation on Landlord to supply any
such services or utilities.
53. NON-ASSERTION OF COUNTERCLAIM, ETC. It is hereby expressly understood and
agreed by and between the parties hereto, that the Tenant shall not be entitled
to any abatement of rent diminution of rent in any summary proceedings between
the parties hereto for the non-payment of rent or any item of additional rent or
in any other actions or proceedings by reason of any breach by the Landlord or
any covenants contained in this lease on its part to be performed; and in any
such summary proceedings or other actions or proceedings, the Tenant shall not
have the right of set-off by way of damages, recoupment or counterclaim for any
damages which the Tenant may have sustained by reason of the Landlord's failure
to perform any of the terms, covenants and conditions contained in this lease on
its part to be performed, or for any other cause but the said Tenant shall be
relegated to an independent action for damages and such independent action shall
not at any time be tried jointly or consolidated with any summary proceeding
instituted by the Landlord.
54. ENTIRE AGREEMENT, MODIFICATIONS IN WRITING. There are no representations,
warranties or other terms of agreement between the parties except as set forth
in this lease. This Lease shall not be modified in any manner whatsoever, except
by an instrument in writing signed by the Landlord and Tenant and the holder of
any current or future mortgage (if so required). This lease evidences the entire
agreement of the parties hereto.
55. COVENANTS, RESTRICTIONS AND EASEMENTS. The demised premises are leased to
the Tenant subject to covenants, restrictions, easements and agreements of
record, now in force and effect affecting said premises and to any public
utility easements hereafter created, provided that the same do not prohibit the
maintenance of the building of which the demised premises are a part and the use
for which the demised premises have been let under the terms of this lease.
56. NON-RECORDING OF LEASE. Tenant expressly warrants and represents that it
will not record this lease.
6
<PAGE>
57. SIGNS. Anything to the contrary herein notwithstanding, Tenant, at its own
cost and expense, is given permission to erect signs on the exterior of the
demised premises provided:
(a) said sign shall comply with all rules and regulations of any governing
authorities having jurisdiction thereover; (b) said signs shall not interfere
with the signs of any other tenants of Landlord adjacent to or in close
proximity to the demised premises; (c) said signs shall be installed without
damage to the building of which the demised premises are a part and are to be
removed at Tenant's expense at the expiration of the term of this lease; (d)
said signs shall be erected only in such places and manner as shall be approved,
in advance by the Landlord; and (e) the size, appearance and contents of any
proposed sign shall be approved, in advance, by Landlord and shall be in
character with the building of which the demised premises are a part.
58. RETURN OF PREMISES. At the end or other termination of this Lease, Tenant
shall return the demised premises to Landlord vacant and broom clean and free of
oil, grease, dirt and any other material causing stains, with all penetrations
in walls, ceilings and floors properly repaired, with all mechanical, electrical
and plumbing in the same order and repair as they were at the commencement of
this Lease. No wall paper or glued flooring material shall remain in the
premises except as same exists as of the commencement date of this lease. No
debris shall be left on or about the demised premises. The premises shall be
free of any odor or smell caused by the Tenant's occupancy.
59. NON-INTERFERENCE ON EARLIER POSSESSION. (Continuation of paragraph 24) If
the Tenant enters into possession prior to the date of the commencement of the
term of this lease, the Tenant, its agents, servants, employees and contractors
shall not interfere with any work which the Landlord is required to perform
hereunder prior to the date of the commencement of the term of this lease. All
of the terms of this Lease shall govern any such earlier possession.
60. ESTOPPEL CERTIFICATE. Tenant agrees at any time upon not less than ten (10)
days prior notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying (A) that this lease is unmodified and in full
force and effect (or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), (B) whether or not
there are then existing any offsets or defenses against the enforcement of any
of the terms, covenants or conditions hereof upon the part of Tenant to be
performed (and if so, specifying the same), and (C) the dates to which the basic
rent and items of additional rent and other charges have been paid and any
advance payments, if any, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser or
mortgagee of the fee of the demised premises or any assignee of any such
mortgagee.
61. LABOR AND MATERIALS. The Tenant agrees that any alterations or installations
that it may make or cause to be made in the demised premises pursuant to
paragraph 3 hereof, shall be
7
<PAGE>
accomplished by licensed contractors using UL Listed Class A non-combustible
materials or materials which are consistent with the ISO fire classification of
the building and that all required governmental permits and approvals will be
obtained prior to the commencement of any such work. Any such work shall be
accomplished so as not to interfere with the use of the building of which the
demised premises are a part by other tenants.
62. ASSIGNMENT AND SUBLETTING. In the event the Tenant desires to assign this
lease or sublet all but not a part of the demised premises, the Landlord will
not unreasonably withhold its consent provided the proposed assignee or
undertenant is financially responsible, of good reputation and provided such
underletting shall be at an annual rental of not less than the annual rental
rates then being charged under leases being entered into by the Landlord or any
of its affiliates for comparable space and provided further that the proposed
assignee or undertenant is not then a tenant of Landlord nor an occupant of any
part of the building. Tenant shall submit to the Landlord the name of the
proposed assignee or sub-tenant and such information as to its financial
responsibility and reputation as Landlord may reasonably require. Upon receipt
of such request and upon the furnishing of such information by the Tenant,
Landlord shall have the option to cancel and terminate this lease.
If the Landlord desires to exercise its option to cancel, it shall do so by
notice in writing, within thirty (30) days from receipt of Tenant's request and
the furnishing of the information set forth above. Such notice shall set forth
the date of cancellation, which date shall be no less than sixty (60) days nor
more than ninety (90) days from the date of the service of the notice. Upon such
date the lease for the entire premises shall cease and terminate with the same
force and effect as though the date set forth in the notice of cancellation was
the date set forth in the Lease as the expiration of the term and the Tenant
shall surrender possession of the premises in accordance with the provisions of
the lease relating to surrender of the demised premises at the expiration of the
term.
If the Landlord does not exercise its option to cancel as aforementioned and the
Tenant has supplied the name and other information set forth above of the
proposed assignee or subtenant as required above and the Landlord has consented
in writing to the proposed assignment or sub-lease, the Tenant may assign or
sublease provided:
A. The Tenant is not then in default in the performance of any of the
terms, covenants or conditions of this Lease on its part to be performed; and
B. A photostatic copy or duplicate original of the assignment or sublease
and any amendments or modification thereof shall be delivered to the Landlord
within five (5) days from the date of execution thereof; and
C. Any assignment shall include an assignment of the security deposited
hereunder and an acknowledged assumption in recordable form by the assignee of
all of the Tenant's obligations hereunder assuming all of the terms and
conditions of the lease including but not limited to the
8
<PAGE>
payment of rent and additional rent as described therein, and the assignee or
subtenant deposits with the Landlord an additional three (3) months' security
under the lease.
The provisions above apply to each such proposed assignment or subletting and no
such proposed assignment, sublease, amendment or modification thereof shall be
effective unless and until all of the foregoing have been complied with. It is
further agreed that no such assignment or sub-letting shall relieve the Tenant
form its obligations under this Lease and the provisions of this paragraph apply
to each and every proposed assignment, sublease, amendment and modification. No
further assignment or subletting shall be made except upon full compliance with
all of the terms and conditions of this paragraph. It is expressly understood
and agreed that there is no right to assign or sublet less than the entire
demised premises.
63. STRUCTURAL AND ROOF REPAIRS. Notwithstanding and in addition to the
provisions of Paragraph "4" hereof, it is understood and agreed that the
Landlord, at its expense, will make no structural repairs except foundations,
roof, exterior walls (other than floors and windows therein) and bearing
partitions. Tenant shall make all other structural and non-structural repairs.
64. EXTRAS AND ADDITIONAL RENT. Tenant's obligation to pay for any work or
materials and any other items of expense for which the Tenant is liable
hereunder in addition to the basic rental shall be deemed to be additional rent
and may be added by the Landlord to any installment of basic rent thereafter
payable. Any such sum may be collected by Landlord as if originally reserved as
rent hereunder.
65. RENT TO BE PAID ON 1ST OF THE MONTH AT LANDLORD'S OPTION IF LEASE COMMENCES
ON A DATE OTHER THAN THE FIRST. If the term of this lease commences on a date
other than the first of a month then Landlord at any time thereafter upon notice
to the Tenant, may elect to have the monthly rent payable on the first day of
the month following the giving of such notice and on the first day of each month
thereafter the Tenant shall pay to the Landlord the monthly basic rent except
that on the first day of the month following the giving of such notice the
Tenant shall receive a pro-rata credit for any prepaid rental in such month and
that in the final month of this lease the Tenant shall pay to the Landlord on
the first day of said month pro-rata rent from the first day of that month until
the date of termination of this lease.
66. LATE CHARGES AND BAD CHECKS. If any rent or additional rent is not paid
within ten (10) days of its due date Tenant agrees to pay Landlord over and
above the rental payment, a late charge of the greater of four (4%) percent of
the amount of any rent or additional rent not paid. A Fifty ($50.00) Dollar
charge will be assessed for all checks returned marked "insufficient funds".
Said charges shall be deemed to be due and collectible as additional rent.
9
<PAGE>
67. PRIOR TENANCIES. Tenant acknowledges that the demised premises are presently
occupied. This lease is expressly subject to and conditioned upon the present
lease being cancelled or otherwise terminated and the existing tenant vacating
the premises.
68. ATTORNEYS FEES. In the event a summary proceeding is commenced by Landlord
for non-payment of rent or any items of additional rent hereunder, the
prevailing party shall be entitled to reasonable attorneys fees and
disbursements. Such attorneys fees and disbursements may be added to the amount
demanded in any such summary proceeding by Landlord.
69. ENVIRONMENTAL HAZARDS.
A. Definitions.
1. As used herein, the term "Hazardous Material" or "Hazardous
Substance" means any hazardous or toxic substance, material, waste, pollutant or
contaminant which is or becomes regulated by any state or local governmental
authority or the United States government and includes but is not limited to
those substances so designated in or by the Federal Resource Conservation and
Recovery Act, (42 U.S.C., Section 6901 et seq.), of the Comprehensive
Environmental Response, Compensation and Liability Act, (42 U.S.C. Section 9601
et seq.) ("CERCLA"), the Hazardous Materials Transportation Act, (48 U.S.C.
Section 1801 et seq.), the regulations promulgated pursuant to said laws; the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto), the Environmental Protection Agency (40 CFR Part 302 and amendments
thereto); the Atomic Energy Act of 1954, as amended (42 U.S.C. Section 3011, et
seq., as amended), Superfund Amendments and Reauthorization Act ("SARA"),
Reserve Conservation & Recovery Act "RCRA", the Clean Air Act, (42 U.S.C.
Section 7401 et seq.), the Environmental Conservation Law of the State of New
York and the regulations thereunder, and any other local, state and/or federal
laws or regulations, whether currently in existence or hereafter enacted
("Applicable Laws"), that govern (i) the existence, cleanup and/or remediation
of contamination on property; (ii) the protection of the environment from
spilled, migrated, deposited or otherwise emplaced contamination; (iii) the
control of hazardous substances, materials and/or wastes; or (iv) the use,
generation, transport, treatment, removal or recovery of Hazardous Substances or
Hazardous Materials, including building materials.
B. Tenant's Covenants: Use of Hazardous Substances/Periodic Notice
1. Acceptance of Premises and Covenant to Surrender. No spill,
deposit, emission, leakage or other release of Hazardous Substance in the soils,
groundwaters, waters shall be deemed to be normal "wear and tear" as said term
is used elsewhere in this lease. Tenant shall be responsible to promptly and
completely clean up any such release as shall occur on the leased premises
during the term of the lease and shall surrender the premises free of any
contamination or other damage caused by such occurrences during the term of the
lease.
10
<PAGE>
During the term of this lease, Tenant shall be solely responsible to protect
against intentional or negligent acts or omissions of third parties which might
result directly or indirectly in the discharge, release, disposal or other
emplacement or Hazardous Substances on or in the premises.
2. Maintenance of Premises. Tenant shall, at its sole cost, keep and
maintain the premises in good and sanitary order, condition and repair. Tenant
shall promptly respond to and/or clean up any release or threatened release of
any Hazardous Substance in the drainage systems, soils, groundwater, waters or
atmosphere, in a safe manner, in accordance with Applicable Laws, and as
authorized or approved by governmental agencies having authority to regulate the
permitting, handling and clean up of hazardous substances.
3. Use of Hazardous Substances. Tenant shall not use, store, generate,
treat, transport or dispose of any Hazardous Substance on the premises without
first obtaining Landlord's written approval, which approval may be reasonably
withheld. Tenant shall notify Landlord and obtain such approval in writing at
least fifteen (15) days prior to bringing any Hazardous Substance onto the
premises. Landlord may withdraw approval of any such substance at any time, for
reasonable cause related to the threat of site contamination or damage or injury
to persons, property or resources on or near the site. Receipt of notice that
Landlord has withheld its approval for any substance or Landlord's failure to
approve the use of a Hazardous Substance under this paragraph shall not limit or
affect Tenant's obligations under this lease, including Tenant's duty to remedy
or remove releases or threatened releases; to comply with Applicable Law
relating to the use, storage, generation, treatment, transportation and/or
disposal of such substances and to indemnify Landlord against any harms or
damages caused by such substances.
4. Reports to Landlord. For any month in which any Hazardous
Substances have been used, generated, treated, stored, transported or otherwise
been present on or in the premises, Tenant shall provide Landlord with a written
report listing (i) the Hazardous Substances which were present on or in the
premises; (ii) all releases of Hazardous Substances that occurred or were
discovered on the premises; (iii) all Hazardous Substance related compliance
activities, including all contacts with administrative agencies in any way
concerning Hazardous Substances; (iv) all requests from third parties for
cleanup or compliance occurring or received; and (v) all manifests, business
plans, consent agreements or other contracts relating to Hazardous Substances
executed or requested during that time period. The report shall include copies
of all documents and correspondence related to such activities and written
reports of verbal contacts.
C. Responsibility on Discovery of Contamination of the Premises
The provisions of clauses 1,2,3,4 and 5 of this paragraph apply
whenever any Hazardous Substances are discovered on or in the premises whether
discovered by the Tenant or by any person or government entity at any time
during or after the term of this lease, except if such Hazardous Substances or
Hazardous Materials were originally deposited, discharged or emplaced solely by
Landlord or prior to the commencement of this Lease.
11
<PAGE>
1. Notification by Tenant. The Tenant shall immediately notify the
Landlord in writing of any actual or threatened release of any Hazardous
Substance or Hazardous Material on the demised premises. Tenant shall similarly
provide immediate written notification to the Landlord if Tenant receives any
notification from any local, state or federal official or agency which pertains
to Hazardous Substances or Hazardous Materials, including, but not limited to,
notices of violation, requests for inspection or information.
2. Notification by Landlord. If Landlord determines through any means
(whether or not mandated or permitted by this lease) that any release,
discharge, spill or deposit of any Hazardous Substance has occurred or is
occurring which in any way affects or threatens to affect the premises or the
people, structures, equipment or other property thereon, Landlord shall notify
Tenant immediately.
3. Response and Remedial Actions. Tenant shall initiate all activities
necessary to respond to, remedy or remove Hazardous Substances located on or in
the premises, within ten (10) days after discovery thereof or after being
notified by the Landlord or by any local, state or federal agency of the
existence of such substances on site except in such instances where the presence
of Hazardous Substances has been demonstrably caused by Landlord, in which case
Landlord shall be responsible for said response, remedy and removal. Tenant
shall be solely and completely responsible for responding to and complying with
any administrative notice, order, request or demand or any third party claim or
demand relating to potential or actual contamination on the premises. The
responsibility conferred under this paragraph includes, but is not limited to,
responding to such orders on behalf of Landlord and defending against any
assertion of Landlord's financial responsibility or individual duty to perform
under such orders. Tenant shall assume, pursuant to paragraph D-1 (i) above, any
liabilities or responsibilities which are assessed against Landlord in any
action described under this paragraph C-3.
The Tenant shall be fully responsible for the conduct of such response
and remedial activities, which shall be accomplished as quickly as reasonably
possible. All such work shall be performed in accordance with Applicable Law.
Tenant shall directly contract for or perform all such actions in his own name
and shall dispose of any Hazardous Substances removed from the premises in
accordance with Applicable Law. Without waiving its rights hereunder, Landlord
may, at its option, perform such remedial or removal work as described above and
thereafter seek reimbursement for the costs thereof. Tenant shall permit
Landlord access to the site to perform such remedial activities. Whenever
Landlord has incurred costs described in this section, the Tenant shall within
ten (10) days of receipt of notice thereof, reimburse Landlord for all such
expenses together with interest from the date of expenditure at the prime rate
plus two (2%) percent.
Copies of all reports, notices, correspondence or other documents
received from or submitted to governmental authorities, and of all technical
data, test results, expert opinions and other materials generated in connection
with the contamination or other response or remedial activities, shall be
provided to all parties to this lease.
12
<PAGE>
4. Rental Abatement. Except in an instance where the contamination is
caused by Tenant or Tenant's employees or agents, if it is reasonably determined
that the contamination or the clean-up therefor will prevent or limit Tenant's
use of the premises or will unreasonably interfere with access thereto, Tenant's
rental obligation will be equitably abated.
5. Agency and Third Party Action. Without limiting Tenant's
obligations under any other paragraph of this agreement, Tenant shall be
responsible for responding to and complying with any administrative notice,
order, request or demand, or any third party claim or demand relating to
potential or actual contamination on the premises.
D. Indemnity and Release
1. Indemnity. Tenant shall indemnify, defend and save harmless
Landlord from and against any suits, actions, legal or administrative
proceedings, demands, claims, liabilities, fines, penalties, losses, injuries,
damages, expenses or costs, including interest and attorneys' fees, in any way
connected with any way connected with any injury to person or damage to any
property of or any loss to Landlord occasioned in any way by Hazardous
Substances or Hazardous Materials on the property or by the negligent or
intentional activities of Tenant before, during or after Tenant's occupancy of
the property.
2. Release. Tenant hereby waives, releases and discharges forever
Landlord from all present and future claims, demands, suits, legal and
administrative proceedings and from all liability for damages, losses, costs
liabilities, fees and expenses, present and future, arising out of or in any way
connected with Landlord's use, maintenance, ownership or operation of the
property, any condition of environmental contamination on the property or the
existence of hazardous substances or hazardous materials in any state on the
property, however, they came to be emplaced there.
F. Landlord's Right to Conduct an Environmental Audit
1. Landlord and the Landlord's designated agent shall have the right
to enter and inspect the building of which the demised premises are a part and
the demised premises periodically to determine the Tenant's compliance with the
provisions of this Article 69. The Landlord shall also have the right to conduct
an environmental audit of the leased premises for the purposes of establishing
the Tenant's compliance with the provisions of this lease which involve
Hazardous Substances or Materials. The cost of any general environmental audit
shall be borne by the Tenant as set forth in paragraph 42 I and, if any such
audit reveals specific non-compliance with Applicable Laws, by the Tenant.
13
<PAGE>
2. If Tenant generates hazardous and/or toxic wastes Tenant shall
reimburse Landlord for the periodic testing of sanitary and storm drains and
drainage systems and for the cost to clean same if any contamination is found.
Such reimbursement shall be collectible as Additional Rent.
G. If during the term of this lease or Tenant's occupancy of the demised
premises Landlord or any predecessor in title to the premises of which the
demised premises are a part is required to undertake the removal, clean-up,
neutralization or any other affirmative act with respect to the presence or
suspected presence of any Hazardous Substance or Hazardous Material, whether of
the Landlord's own choice or as the result of a directive or order from any
governmental authority or court having jurisdiction, the Tenant specifically
acknowledges and agrees that any such action shall not be a breach of the
covenant of quiet enjoyment of the premises and further, the Tenant shall be
entitled to an abatement of rent, pro rata, as to any area of the demised
premises (but not the parking area or other common areas) Tenant vacates to
permit clean-up. Tenant further agrees to cooperate fully with the Landlord in
connection with any such actions, including removal from the premises, or any
such portion thereof to permit such action as may be required of Landlord. It is
specifically understood and agreed that nothing herein contained shall relieve
the Tenant from any liability to the Landlord or any governmental authority as a
result of any actions of the Tenant, its employees, or agents or invitees with
respect to the causation of any such Hazardous Substance or Hazardous Material
at the premises.
H. Failure of the Tenant to comply with the terms of this paragraph 69 and
to maintain the demised premises free of Hazardous Materials or Hazardous
Substances shall be deemed a material breach of this lease entitling Landlord to
immediately terminate same.
70. BUSINESS METHODS. Tenant agrees that Landlord shall have the right to
prohibit the continued use by Tenant of any method of business operation,
advertising or interior display, if, in Landlord's opinion, the continued use
thereof would impair the reputation of the Landlord's premises or is otherwise
out of the harmony with the general character thereof, and upon notice from
Landlord, Tenant shall forthwith refrain from or discontinue such activities.
71. EXHAUST. If required by law or the nature of Tenant's operations Tenant
shall provide all necessary hoods, exhaust fans and ventilating devices with
grease eliminatory filters and grease gutters which shall, at Tenant's own cost
and expense, be kept in a safe manner and cleaned at reasonable intervals. All
soil lines shall, at Tenant's own cost and expense be protected by grease
interceptors and these must be cleaned, maintained and emptied at reasonable
intervals by Tenant.
72. EARLY VACATING. In the event Tenant vacates the premises prior to the
termination date of this lease the corporation officers or shareholders or the
general partners executing this lease on behalf of Tenant or such other
guarantors who execute the guarantee at the end of this Rider
14
<PAGE>
personally guarantee the payment of all rent and additional rent that has
accrued to the date the premises are vacated together with the costs of
restoring the premises in accordance with the provisions of this lease and
Tenant's obligations under paragraph 69 hereof.
73. LESSOR'S EXCULPATORY. Notwithstanding any provisions of this lease to the
contrary, in the event of a breach or default by Landlord, its successors or
assigns, or any of its obligations hereunder of any kind or nature whatsoever,
or of any provisions of this lease, Tenant shall look solely to the equity of
the Landlord, its successors or assigns in the demised premises or the building
of which they are a part for the satisfaction of Tenant's remedies and no
personal judgment shall be sought against the Landlord, its successors or
assigns. It is expressly understood and agreed that the liability of the
Landlord, its successors or assigns under the terms, covenants, conditions,
warranties and obligations of this lease shall in no event exceed the loss of
its equity in the demised premises or the building of which they are a part.
74. MULTIPLE DEFAULTS. Notwithstanding any provisions in the lease permitting
Tenant to cure any default within a specified period of time, if Tenant shall
default (i) in the timely payment of rent or additional rent, and such default
shall continue or be repeated for two consecutive months or for a total of four
months in any period of twelve months or (ii) in the performance of any
particular term, condition or covenant of this lease more than two times in any
period of six months then, notwithstanding that such defaults shall have each
been cured within the period after notice, if any, as provided in this lease,
any further similar default shall be deemed to be deliberate and Landlord
thereafter may cancel or terminate this lease as provided herein without
affording to Tenant an opportunity to cure such further default.
75. TRANSMITTAL OF LEASE. This lease transmitted for examination and this lease
shall become effective only upon execution thereof by the parties thereto.
76. CONFLICTS. Wherever there is a conflict between the rider and the printed
part of this lease, the terms of the rider shall prevail.
77. Simultaneously with each rent increase date Tenant will deposit with the
Landlord such additional security as is required to bring the minimum to two (2)
months of the then current minimum monthly rent. Should Tenant fail to make any
such additional security deposit Landlord may collect same as additional rent
due hereunder.
78. Landlord, at its sole cost and expense, will complete the following work at
the demised premises within sixty (60) days after Tenant takes possession of the
demised premises.
15
<PAGE>
A. Enlarge one drive-in bay to 12 feet wide by 13.5 feet high (minimum
dimension);
B. Alter one of the existing three tail gate loading platforms to a
drive-in loading dock with the dimensions of 12 feet wide by 13.5 feet
high (minimum dimension);
C. Repair fence at the rear of the demised premises; All fences in good
working order; [ILLEGIBLE]
D. Raise the depressed drain in parking area and repair driveway on west
side of building. In addition, all driveway areas where necessary to
be fixed [ILLEGIBLE]
E. Seal opening in wall dividing building.
79. In the event Tenant holds over at the end of the demised term same shall be
deemed a month to month tenancy only at monthly rent of one hundred fifty (150%)
percent of the rent due for the last month of this lease.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above written.
STABAL REALTY CORP.
Landlord
BY: /s/ Gerald Finger
---------------------------------
PURO CORPORATION OF AMERICA
Tenant
BY: /s/ Scott Levy
---------------------------------
The provisions of paragraphs 43 and 73 are
hereby personally accepted and the Tenant's
performance and payments thereof personally
guaranteed.
/s/ Scott Levy
------------------------------------
PURO CORP OF AMERICA
------------------------------------
16
<PAGE>
STABAL REALTY CORP. PURO CORP. OF AMERICA
141 GREAT NECK ROAD 56-45 58TH STREET
GREAT NECK, NY 11021 MASPETH, NY 11378
LEASE MODIFICATION, by and between, Stabal Realty Corp., as Landlord
and Puro Corp. of America as Tenant, dated February 15, 1996.
The lease and riders between us dated October 9, 1995 (the "Original Lease") is
modified as follows:
1. Premises: The new premises will be the entire building known as 76-78 Mall
Drive, Comack, New York, consisting of the west portion leased pursuant to
the Original Lease and the easterly portion leased pursuant to this Lease
Modification.
2. Rent: The new rental payments (Schedule A) is attached to this Lease
Modification.
3. Acceptance by Tenant of Physical Conditions: Par. 50, page 5 of the
Original Lease is amended as follows for Unit 76 Mall Drive (easterly
portion of building). Landlord Work: Landlord agrees to repair the existing
blacktop and fencing in driveway and rear yard, and deliver the premises
vacant and broom clean. Condition of Premises: Tenant acknowledges having
inspected the demised premises throughout and accepts same in their "as is"
condition without representation or warranty by the Landlord as to the
condition of the said demised premises and without any repair, replacement,
alteration or redecoration to be made by Landlord.
4. Tenants Occupancy of the Entire Building: As of the Commencement Date of
this Lease Modification, Tenant shall occupy 100% of the building and
therefore all references in the Original Lease that refer to the original
50% payment to the Landlord shall now be amended to 100%. This shall
include, but not be limited to, Par. 41 Real Estate Taxes, Par. 42
Additional Maintenance and Insurance and any other costs or payments to
Landlord by Tenant.
5. Broker: Par. 43 of rider Page 2 of the Original Lease is amended as
follows: For Unit 76 Mall Drive (easterly portion of the building),
Landlord and Tenant warrant and represent to each other that no broker
brought about the execution of this Lease Modification. Tenant agrees to
indemnify and hold the Landlord harmless against any and all claims of any
nature whatsoever by any other person, firm or corporation for any
brokerage commissions or any other compensation in connection with this
Lease Modification arising from any act on the part of Tenant.
<PAGE>
6. Security: Par. 32 of the Original Lease is amended as follows: Tenant will
deposit with the Landlord upon signing this Lease Modification $l0,000 as
additional security, which will escalate pursuant to rider #77 page 15 in
the rider of the original Lease.
7. Environmental Hazards: Par. 67 of rider, page 10 of the Original Lease,
shall properly be numbered par. 69.
8. Commencement Date: This Lease Modification shall commence on March 1, 1996,
however, in the event the Landlord is unable to deliver the easterly
portion of the building (76 Mall Drive) by March 1, 1996 (the Commencement
Date), due to the current holdover tenant's failure to vacate on such date,
the Commencement Date of this Lease Modification shall be the date on which
the Landlord delivers the subject premises to the Tenant vacant and broom
clean, but no later than March 31, 1996 or contract will be voided.
9. All other terms and conditions of the Original Lease and riders dated
October 9, 1995 remain in effect and unchanged.
10. The captions of provisions of the Original Lease and in this Lease
Modification are inserted only as a matter of convenience and for reference
and they will no way define, limit or describe the scope of the Original
Lease or this Lease Modification or the intent of any provision thereof.
11. If any term, covenant or condition of the Original Lease or this Lease
Modification shall be held to be invalid, illegal or unenforceable in any
respect, the Original Lease and this Lease Modification shall be construed
without such provision.
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
PURO CORP. OF AMERICA STABAL REALTY CORP.
By: /s/ Scott Levy By: Gerald Finger
------------------------ ----------------------------
Scott Levy Gerald Finger
Witness for Tenant: Witness for Landlord:
/s/ LaDonna Reinhart /s/ LaDonna Reinhart
- ---------------------------- --------------------------------
<PAGE>
STABAL REALTY CORP. - Landlord
PURO CORP. OF AMERICA - Tenant
LEASE MODIFICATION DATED Feb 15, 1996
SCHEDULE A
1. From March 1, 1996 through October 31, 1997 the annual rent shall be
$123,250.00 payable in equal monthly installments of $10,270.83;
2. From November 1, 1997 through February 28, 1998 the annual rent shall be
$126,412.50 payable in equal monthly installments of $10,534.37;
3. From March 1, 1996 through October 31, 1996 the annual rent shall be
$129,412.50 payable in equal monthly installments of $10,784.37;
4. From November 1, 1998 through February 29, 1999 the annual rent shall be
$132,733.13 payable in equal monthly installments at $11,061.09;
5. From March 1, 1999 through October 31,1999 the annual rent shall be
$135,883.13 payable in equal monthly installments of $11,323.59;
6. From November 1, 1999 through February 25, 2000 the annual rent shall be
$139,369.78 payable in equal monthly installments of $11,614.14;
7. From March 1, 2000 through March 31, 2001 the annual rent shall be
$142,677.26 payable in equal monthly installments of $11,889.77;
Option Period:
1. From April 1, 2001 through March 31, 2002 the annual rent shall be
$149,811.14 payable in equal monthly installments of $12,484.26;
2. From April 1, 2002 through March 31, 2003 the annual rent shall be
$157,301.69 payable in equal monthly installments of $13,108.47;
3. From April 1, 2003 through March 31, 2004 the annual rent shall be
$165,166.77 payable in equal monthly installments of $13,763.89;
4. From April 1, 2004 through March 31, 2005 the annual rent shall be
$173,425.10 payable in equal monthly installments at $14,452.09;
5. From April 1, 2005 through March 31, 2006 the annual rent shall be
$182,096.36 payable in equal monthly installments of $15,174.69;
<PAGE>
Year Mo
3-1-96 - 2-28-96 60,000.- 5,000.-
3-1-98 - 2-28-99 63,000.- 5,250.-
3-1-99 - 2-28-2000 66,150.- 5,512.50
3-1-00 - 3-31-2001 69,457.50 5,788.12
Option 1
4-1-01 - 3-31-02 72,930.37 6,077.53
4-1-02 - 3-31-03 76,576.88 6,381.40
4-1-03 - 3-31-04 80,405.72 6,700.47
4-1-04 - 3-31-05 84,426.- 7,035.50
4-1-05 - 3-31-06 88,647.30 7,387.27
<PAGE>
SCHEDULE A
1. From November 1, 1995 through October 31, 1997 the annual rent shall be
$63,250.00 payable in equal monthly installments of $5,270.83;
2. From November 1, 1997 through October 31, 1998 the annual rent shall be
$66,412.50 payable in equal monthly installments of $5,534.38;
3. From November 1, 1998 through October 31, 1999 the annual rent shall be
$69,733.13 payable in equal monthly installments of $5.811.09;
4. From November 1, 1999 through March 31, 2001 the annual rent shall be
$73,219.78 payable in equal monthly installments of $6,101.65;
Option Period:
1. From April 1, 2001 through March 3l, 2O02 the annual rent shall be $76,880.77
payable in equal monthly installments of $6,406.73;
2. From April 1, 2002 through March 31, 2003 the annual rent shall be $80,724.81
payable in equal monthly installments of $6,727.06;
3. From April 1, 2003 through March 31, 2004 the annual rent shall be $84,761.05
payable in equal monthly installments of $7,063.42;
4. From April 1, 2004 through March 31, 2005 the annual rent shall be $88,999.10
payable in equal monthly installments of $7,416.59;
5. From April 1, 2OO5 through March 3l, 2006 the annual rent shall be $93,449.06
payable in equal monthly installments of $7,787.42;
<PAGE>
EX-10.18
Indenture
BALLOON MORTGAGE
THIS MORTGAGE made the twenty fourth day of MAY nineteen hundred and eighty
eight
BETWEEN
PURO CORPORATION OF AMERICA, a domestic corporation, having its principal place
of business at 56-45 58th Street, Maspeth, New York
designated as the BORROWER (Mortgagor), and
MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION
organized AND EXISTING UNDER THE LAWS OF THE United States of America located at
69th Street and Grand Avenue, Maspeth, New York, designated as the LENDER
(Mortgagee).
IT IS AGREED, that to secure the payment of the indebtedness of ONE HUNDRED
NINETY THOUSAND FOUR HUNDRED SIXTY & 15/100--------- ($190,460.15) U.S. Dollars
with interest as stated in the bond or note dazed this day, the BORROWER hereby
mortgages to the LENDER, its successors and assigns forever:
ALL THAT certain plot, piece or parcel of land, situate, lying and being in the
Borough and County of Queens, City and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the northerly side of 56th
Drive (Perry Avenue) with the easterly side of 58th Street (Betts Avenue);
RUNNING THENCE easterly along the northerly side of 56th Drive, 232 feet 6
inches;
THENCE northerly parallel with 58th Street 129 feet;
THENCE westerly parallel with 56th Drive and part of the distance through a
party wall, 232 feet 6 inches to the easterly side of 58th Street;
THENCE southerly along the easterly side of 58th Street 129 feet to the corner
at the point or place of BEGINNING.
SAID PREMISES being known as and by the street number 56-45 58th Street,
Maspeth, New York.
The real property is not principally improved or to be improved by one or more
structures containing in the aggregate more than six residential dwelling units,
each dwelling unit having its own separate cooking facilities.
TOGETHER with all the right, title and interest of the BORROWER of, in and to
strips and gores of land under water, adjacent to or adjoining said premises and
to the land lying in the bed of any street, road, avenue, lane or right-of-way
as they now exist or formerly existed, included in, in front of, or adjoining
the premises. TOGETHER with the fixtures easements, riparian rights and
appurtenances and all the estate and rights of the BORROWER in and to the
premises and all replacements thereof and additions thereto, all of which shall
be deemed to be and remain and form a part of the realty and are covered by the
lien of this mortgage. TOGETHER also with any and all award and awards
previously made and in the future to be made by County, Municipal or State
authorities to the present and all subsequent owners of the premises described
in this mortgage, including any award or awards for any change or changes of
grade of streets affecting said premises, which said award and awards are hereby
assigned to the said LENDER, to be applied toward the payment of the amount
owing on account of this mortgage and its accompanying bond, even though the
amount owing on account of this mortgage and said bond may not be then due and
payable.
<PAGE>
THE BORROWER PROMISES AS FOLLOWS:
1. PAYMENT OF THE MORTGAGE
That the BORROWER will pay to the LENDER, when due, principal and interest
under the bond; late charges and prepayment charges, as stated in the bond,
having the same date as this mortgage.
2. FIRE AND HAZARD INSURANCE
(A) That the borrower will keep the buildings on the premises insured
against loss by fire for the benefit of the LENDER; that he will assign and
deliver the policies to the LENDER; and that he will reimburse the LENDER for
any premiums paid for insurance made by the LENDER because of BORROWER'S failure
to insure the buildings or to assign and deliver the policies.
(B) The BORROWER further agrees to keep the buildings insured against loss
by fire and other hazards, casualties and contingencies, including extended
coverage, for the benefit of the LENDER, in such amounts and for such periods as
the LENDER may require, and the rights of the LENDER on failure of the BORROWER
to supply any such insurance shall be the same as provided in the Real Property
Law ss. 254(4).
3. MONTHLY PAYMENTS FOR TAXES AND INSURANCE
That in addition to the regular minimum monthly payment of principal and
interest, as required to be paid under the bond secured by this mortgage, the
BORROWER will also make monthly payments, as required by the bond for taxes,
water rates, sewer rental tax charge and fire insurance with extended coverage,
as these monthly payments will be estimated and required by the LENDER. The
LENDER may at any time waive any or all of the tax, water, sewer rental tax or
insurance payments to it and require the BORROWER to make these payments.
4. LENDER'S RIGHTS IF BORROWER FAILS TO KEEP PROMISES
That the whole of said principal sum and interest shall become due at the
option of the LENDER, after default in the payment of any monthly installment of
principal and interest and tax reserve for FIFTEEN (15) days, or after default
in the payment of any tax, water rate or assessment for FIFTEEN (15) days after
notice and demand; or after default after notice and demand either in assigning
and delivering the policies insuring the buildings against loss by fire or in
reimbursing the LENDER for premiums paid on such insurance, as stated in
paragraphs 2(A)(B) and 3; or after default upon request in furnishing a
statement on the amount due on the mortgage and whether any offsets or defenses
exist against the mortgage debt, as stated in paragraph 16(C).
5. APPOINTMENT OF RECEIVER
That the holder of this mortgage in any action to foreclose it, shall be
entitled to the appointment of a Receiver, without regard to the adequacy of any
security for the debt, WITHOUT notice to the BORROWER.
6. LENDER'S RIGHT TO PROTECT PROPERTY
(A) That the BORROWER will pay all taxes, water rates, assessments,
insurance premiums and/or similar charges affecting the mortgaged premises, and
if BORROWER fails to pay these, the LENDER may pay the same, and add the amount
so paid to the unpaid balance of the mortgage debt. (B) That if the mortgaged
premises shall be abandoned by the BORROWER or any successors in title, the
LENDER shall be entitled to enter upon and take possession of the mortgaged
premises to protect and conserve its security.
7. LENDER'S RIGHT TO RENTAL PAYMENTS
That in the event of a default in the payment of any monthly installment
under this mortgage, or in the bond secured by this mortgage, the LENDER shall
have the right to receive and collect any and all rents derived from the
property subject to this mortgage, and to apply such rents in the same manner as
provided in the bond bearing the same date as this mortgage, for the application
of such monthly installments. The BORROWER assigns the rents to the LENDER and
designates the LENDER, BORROWER'S agent, to effect the collection of rents. The
BORROWER ratifies and affirms any and all acts of the LENDER in undertaking to
effect the collection of rents.
8. ADDITIONAL RIGHTS OF LENDER UPON DEFAULT
That in the event of any default (in addition to any other rights and
remedies) the LENDER shall have the right IMMEDIATELY upon demand, to enter upon
and take possession of the mortgaged premises and to receive and collect any and
all rents derived from the mortgaged property and to apply the rents in the same
manner as in this mortgage for the application of monthly installments or
carrying charges. If the BORROWER or any subsequent owner is occupying said
premises or any part of the premises, it is agreed that a reasonable
occupational rental for the premises so occupied shall be paid monthly in
advance by the occupant to the LENDER. And the BORROWER consents to the above
entry and possession and assigns said rents and rental to the LENDER, and
designates the LENDER, BORROWER'S agent, to effect the collection of such rents
and rental. The BORROWER ratifies and affirms any and all acts of the LENDER in
making entry and taking possession of the premises and in undertaking to effect
the collection of rents.
9. DEFENSE OF MORTGAGE LIEN
That if any action or proceeding be commenced by any person other than the
LENDER, to which action or proceeding the LENDER is made a party, or in which it
becomes necessary to defend or uphold the lien of this mortgage, all sums paid
by the LENDER for the expenses of any such litigation to prosecute or defend the
rights and lien created by this mortgage (including reasonable counsel fees)
shall be paid by the BORROWER, together with interest thereon, at the rate of
SIX PERCENT (6%) per year, and any such sum and interest shall be a lien on the
premises described in this mortgage, prior to any right, title or interest in or
claim upon the premises attaching or accruing subsequent to the lien of this
mortgage, and shall be added to the principal amount intended to be secured by
this mortgage and the accompanying bond.
10. LENDER'S RIGHT TO INSPECT PROPERTY
That the LENDER and any persons authorized by the LENDER shall have the
right to enter and inspect the premises at all reasonable times.
11. UPKEEP OF THE PROPERTY
(A) That no buildings, fixtures or personal property covered by this
mortgage shall be removed or demolished without the written consent of the
LENDER. (B) That the BORROWER agrees to maintain the buildings on the premises
covered by the mortgage in reasonably good repair and not to permit the premises
to substantially depreciate in value because of neglect or otherwise, and
further agrees to comply with the requirements of any public authority within
THREE MONTHS after an order making such requirement has been issued by any
Municipal, State, Federal or other public authority. That the principal sum
remaining unpaid shall become due at the option of the LENDER upon BORROWER'S
failure to comply with any of the agreements contained in this paragraph.
12. MODIFICATION OF MORTGAGE
The terms of payment of this mortgage and of the bond accompanying this
mortgage may be mutually modified by the parties to this mortgage or their
successors in interest and any and every other mortgage or lien now or in the
future placed on the premises covered by this mortgage shall be subject and
subordinate at all times to the lien of this mortgage as so modified.
<PAGE>
13. TITLE TO THE PROPERTY
That the BORROWER warrants the title to the mortgaged premises. This means
that BORROWER will be fully responsible for any losses which LENDER suffers
because someone other than BORROWER has some of the rights in the property which
BORROWER promises to have.
14. SALE OF THE PREMISES
In the event of a transfer of title of the premises described in this
mortgage from the BORROWER or any subsequent owner to any other party, the
LENDER or its assigns shall have the option to declare the entire unpaid
principal sum and accrued interest due and payable.
15. OBLIGATION OF BORROWER AND BORROWER'S SUCCESSORS
That upon any transfer of the title to the premises described in this
mortgage, the successor in title of the BORROWER shall, by accepting such
transfer IMMEDIATELY become a member of the LENDER (Association) and be bound by
the terms and provisions of its charter and by-laws. And should any subsequent
owner refuse on demand to subscribe to the Association's charter and by-laws,
the LENDER may at its option, IMMEDIATELY declare the full balance of the
principal sum secured by this mortgage to be due in like manner, as provided in
paragraph 4, for default in the payment of the monthly installments.
16. NOTICES AND ANNUAL STATEMENT
(A) That any notice, demand or request, provided for in this mortgage, may
be made in writing and may be served in person or by mail. (B) The BORROWER will
furnish annually to the LENDER within TEN (10) days after written demand, a
statement in writing verified by the BORROWER or officer of the BORROWER if
requested setting forth in detail all income received from the mortgaged
premises as well as all expenses and expenditures in connection therewith,
together with a certified rent roll showing all rents of the mortgaged premises
as of the date of the statement, such instruments to be prepared in accordance
with the usual accounting practices for real estate in the City of New York, and
in such form as may be required by the LENDER. (C) That the BORROWER within FIVE
(5) DAYS upon request in person or within TEN (10) DAYS upon request by mail
will furnish a written statement duly acknowledged of the amount due on this
mortgage and whether any offsets or defenses exist against the mortgage debt.
17. PARTIES
(A) That if more than one party joins in the execution of this instrument,
the covenants and agreements contained in this mortgage shall be their joint and
several obligations and the relative words contained in this mortgage shall read
as if written in the plural. (B) That, if the BORROWER is a corporation, the
execution of this mortgage has been duly authorized by a resolution adopted by
the board of directors of said corporation; and/or has been consented to and
authorized by its stockholders.
18. CONTINUITY OF AGREEMENTS
This agreement shall bind and apply to the parties to this mortgage and
their respective heirs, executors, administrators, successors and assigns.
19. LIEN LAW AGREEMENTS
The BORROWER will receive all amounts lent by LENDER subject to the trust
fund provisions of Section 13 of the New York Lien Law. This means that if, on
the date this mortgage is recorded in the proper official records, construction
or other work on any building or other improvement located on the property has
not been completed for at least FOUR (4) months, the BORROWER will: (a) hold all
amounts which BORROWER receives and which BORROWER has a right to receive from
LENDER under the bond, as a "trust fund"; and (b) use those amounts to pay for
that construction or work before BORROWER uses them for any other purpose. The
fact that BORROWER is holding those amounts as a "trust fund" means that
BORROWER has a special responsibility under the law to use the amounts in the
manner described in this paragraph 19.
20. APPLICATION OF RPL ss. 254 TO MORTGAGE
Nothing contained in this mortgage shall be construed as depriving the
LENDER of any right or advantage available under Section 254 of the Real
Property Law of the State of New York; but all agreements contained in this
mortgage differing from Section 254 of the Real Property Law shall be construed
as conferring additional and not substitute rights and advantages.
21. SERVICEMEN'S READJUSTMENT ACT
That, if the indebtedness secured hereby to be guaranteed or insured under
the Servicemen's Readjustment Act, as amended, such Act and Regulations issued
thereunder and in effect on the date hereof shall govern the rights, duties and
liabilities of the parties hereto, and any provisions of this or other
instruments executed in connection with said indebtedness which are inconsistent
with said Act or Regulations are hereby amended to conform thereto.
22. RULES AND REGULATIONS
The Maspeth Federal Savings and Loan Association exists under the laws of
the United States and the rules and regulations of the Federal Home Loan Bank
Board and under charter and by-laws approved by said Federal Home Loan Bank
Board and it is expressly agreed that these regulations, rules, charter and
by-laws as they now are and as they may hereafter be amended are a part of this
agreement and that the BORROWER agrees to abide by them and hereby subscribed
thereto.
23. TYPE OF MORTGAGE
This is not a Purchase Money Mortgage.
24. INTERPRETATION OF TERMS
Wherever the word BOND is used herein, the same shall also mean NOTE in the
event that this mortgage secures a NOTE.
25. CAPTIONS
The captions and titles of this mortgage are for convenience only. They may
not be used to interpret or to define the terms of this mortgage.
By signing this mortgage I agree to all of the above.
In presence of: PURO CORPORATION OF AMERICA
By: /s/ Robert Lee Bachrach
-------------------------------------
President
-------------------------------------
-------------------------------------
<PAGE>
STATE OF NEW YORK
COUNTY OF QUEENS }ss:
On the __________________ day of ____________ 19__, before me came
____________________ to me known to be the individual described in, and who
executed the foregoing instrument, and acknowledged that he executed the same.
STATE OF NEW YORK
COUNTY OF QUEENS }ss:
On the __________________ day of ____________ 19__, before me came
____________________ to me known to be the individual described in, and who
executed the foregoing instrument, and acknowledged that he executed the same.
STATE OF NEW YORK
COUNTY OF QUEENS }ss:
On this 24th day of May nineteen hundred eighty-eight before me personally came
ROBERT LEE BACHRACH to me known, who, being by me duly sworn, did depose and say
that he resides at 190 East 72nd Street, New York, NY that he is the President
of PURO CORPORATION OF AMERICA the corporation described in, and which executed,
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
Loan No. 100447
MORTGAGE
================================
PURO CORPORATION OF AMERICA
TO
MASPETH
FEDERAL SAVINGS
AND LOAN ASSOCIATION
================================
DATED, May 24, 1988
---------------------------------
Amount, $190,460.15
=================================
Block 2664, Lot 1
Tax Map of the County of Queens
----------------------------------
Record and Return to:
----------------------------------
MASONE & WHITE
Attorneys
69-34 Grand Avenue
Maspeth, New York 11378
----------------------------------
<PAGE>
BOND
1. BORROWER'S PROMISE TO PAY
That, PURO CORPORATION OF AMERICA, a domestic corporation, having its
principal place of business at 56-45 58th Street, Maspeth, New York
member(s) of the association and designated as the BORROWER(S)
acknowledge(s) to be indebted to the
MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION
a savings and loan association, organized and existing under the laws of
the United States of America, having its office at 69th Street and Grand
Avenue, Maspeth, Queens County, New York and designated as the LENDER, in
the sum of ONE HUNDRED NINETY THOUSAND FOUR HUNDRED SIXTY & 15/100
($190,460.15) Dollars which sum with interest on unpaid balance of
principal, at the rate of ELEVEN & ONE-HALF (11 1/2%) percent per year from
the date of this bond, the BORROWER does promise to pay to the LENDER, its
successors or assigns.
2. PAYMENTS ON DEMAND
3. ADDITIONAL MONTHLY CHARGES
(A) That in addition to the minimum monthly payment of principal and
interest, the LENDER may at its option, have the BORROWER pay to the LENDER, at
the time of the monthly payments of principal and interest, one-twelfth (1/12)
of the total annual taxes, water rates, sewer rental tax and fire insurance
premiums including the charge for extended coverage, as estimated and required
by the LENDER.
(B) If LENDER fails to exercise this option, and LENDER pays any of the
above mentioned taxes, rates or premiums, such payments or advances shall be
added to and become part of the unpaid balance.
(C) If at any time the monthly payment is found insufficient in the opinion
of the LENDER, to fully pay the taxes, water charges, sewer rental tax, fire
insurance premiums including the extended coverage charge or tax reserve, the
BORROWER agrees to pay such deficiency IMMEDIATELY upon demand. If BORROWER does
NOT pay within FIFTEEN (15) days after demand, the whole of the principal sum
remaining due and unpaid with accrued interest, shall, at the option of the
LENDER IMMEDIATELY become due and payable. Any other future real estate tax or
additional real estate tax that may become a lien on the property, described in
the mortgage securing this bond, may be paid and apportioned in monthly payments
by the LENDER in the same manner as provided for above.
(D) That the LENDER may, at any time, waive the monthly payment to it for
taxes and/or water rates, sewer rental tax and/or fire insurance premiums
including extended coverage or either of them and in the event of such waiver,
such charge shall be paid by the BORROWERS and proof that these payments have
been made shall be furnished to the LENDER.
4. PREPAYMENT
That the BORROWER has the right to prepay the entire amount due on this
obligation, or any part thereof, provided, however, that when the amount prepaid
in any one (1) year exceeds TWENTY PERCENT (20%) of the original amount of this
mortgage loan, then the BORROWER shall pay in addition to such balance, a sum
equivalent to NINETY (90) days interest on the amount prepaid over TWENTY
PERCENT (20%).
5. DEFAULT
That the whole of the principal sum and interest remaining unpaid shall
become due IMMEDIATELY, at the option of the LENDER, its successors or assigns,
after default in the payment of any monthly installment described above for
FIFTEEN (15) days, or after default in the payment of any taxes, water rates,
assessments, insurance premiums and/or similar charges affecting the mortgaged
premises for FIFTEEN (15) days, or upon the happening of any event by which,
under the terms of the mortgage having the same date as this bond, the said
principal sum may or shall become due and payable.
6. MORTGAGE
That ALL the covenants and agreements made by the BORROWER in the mortgage
having the same date as this bond and covering the described premises are made
part of this bond.
7. NOTICE
That the BORROWER will give IMMEDIATE written notice to the LENDER of any
damage, from whatever cause, to the mortgaged premises, or of any conveyance,
transfer, or change of ownership thereof.
<PAGE>
8. MASPETH FEDERAL CHARTER AND BY-LAWS
(A) That the BORROWER hereby becomes a member of the LENDER (Association)
and the BORROWER hereby agrees to abide by the terms and provisions of LENDER'S
charter and by-laws as they are now and as they may be hereafter revised,
altered or amended.
(B) The Association exists under the laws of the United States and the
rules and regulations of the Federal Home Loan Bank Board and under charter and
by-laws approved by said Federal Home Loan Bank Board and it is expressly agreed
that these regulations, rules, charter and by-laws as they now are and as they
may hereafter be amended are a part of this agreement and that the BORROWER
agrees to abide by them and hereby subscribes thereto.
9. VA LOAN
If this bond and the mortgage collateral thereto are executed by a Veteran
as defined by the Servicemen's Readjustment Act of 1944 and provided the payment
of the within obligation is guaranteed or insured under the provisions of said
Servicemen's Readjustment Act, to the LENDER, then and in that event any of the
foregoing provisions of this bond and said mortgage to the contrary
notwithstanding, the maximum rate of interest to be paid by said Veteran at all
times and in every event shall not exceed ( %) percent per year, and said
Veteran shall have the privilege of paying off this obligation at any time with
interest to date of payment and without any prepayment penalty; furthermore, if
any of the provisions of this bond and said mortgage conflict with or differ
from the provisions of Title III of said Act and any amendments thereto or any
Regulation or Rule promulgated thereunder, then and in that event it is mutually
agreed that the provisions of such Act, Rule or Regulation shall prevail, and
any provisions in this bond and said mortgage in conflict therewith shall be
deemed amended to conform to the provisions of said Act, Rule or Regulation.
10. LATE CHARGES
The BORROWER further agrees that in the event any monthly payment of
interest, principal, taxes, assessments, insurance, water rates, or any of the,
due to be paid to the LENDER on the first day of any month, is not paid to it
during the first FIFTEEN (15) days of each month, the BORROWER will, at the
option of the LENDER, pay to it a "late charge" of SIX PERCENT (6%) of the
overdue payment, to cover the expense involved in handling delinquent payments,
and that such "late charge" may be collected by the LENDER out of any future
payment or any moneys held in the mortgage escrow account.
11. HANDLING CHARGE
In addition to the payments described above, the BORROWER shall pay the
LENDER, annually, the sum of $10.00 to defray part of the expense incidental to
handling the payment of taxes covering the mortgaged premises including yearly
report of the tax status.
12. RETURNED CHECKS
That in the event any of the BORROWER'S checks for payments of this
mortgage are returned due to insufficient funds, the LENDER shall have the right
to impose a $5.00 charge to cover the cost of the additional bookkeeping and
other work involved in processing the payment. This charge may be collected by
the LENDER out of any future payment or any moneys held in the mortgage escrow
account.
13. RESPONSIBILITY OF PARTIES UNDER THIS BOND
(A) That the BORROWER will give IMMEDIATE written notice to the LENDER of
any damage, from whatever cause, to the mortgaged premises, or of any
conveyance, transfer or change of ownership thereof.
(B) That if more than one party joins the execution of this instrument, the
covenants and agreements contained in this bond shall be their joint and several
obligations, and the relative words contained in the bond shall read as if
written in the plural.
SIGNED AND SEALED this twenty fourth day of May nineteen hundred and
eighty-eight
In presence of: PURO CORPORATION OF AMERICAN
By: /s/ Robert Lee Bachrach
----------------------------------------
President
----------------------------------------
----------------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF QUEENS )
On the [illegible] day of __________ 19__, before me came
________________________________ to me known to be the individual described in,
and who executed the foregoing instrument, and acknowledged that he executed the
same.
STATE OF NEW YORK )
) ss.:
COUNTY OF QUEENS )
On the ______________ day of __________ 19__, before me came
________________________________ to me known to be the individual described in,
and who executed the foregoing instrument, and acknowledged that he executed the
same.
SATE OF NEW YORK
COUNTY OF QUEENS
On this 24th day of May nineteen hundred eighty-eight before me personally
came ROBERT LEE BACHRACH to me known, who, being by me duly sworn, did depose
and say that he resides at 190 East 72nd Street, New York, NY that he is the
President of PURO CORPORATION OF AMERICA the corporation described in, and which
executed, the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
<PAGE>
Loan No. 10047
BOND
================================
PURO CORPORATION OF AMERICA
TO
MASPETH
FEDERAL SAVINGS
AND LOAN ASSOCIATION
================================
Dated, May 24, 1988
--------------------------------
Amount, $190,460.15
================================
----------------------------------
Record and Return To:
----------------------------------
Masone & White
Attorneys
69-34 Grand Avenue
Maspeth, New York 11378
----------------------------------
<PAGE>
BALLOON CONSOLIDATION AND EXTENSION AGREEMENT
AGREEMENT made the 24th day of May nineteen hundred and eighty-eight BETWEEN
MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION, a savings and loan association
organized and existing under the laws of the UNITED STATES OF AMERICA, having
its principal office at 56-18 69th Street, Maspeth, Queens County, New York,
hereinafter designated as the party of the first part, and
PURO CORPORATION OF AMERICA, a domestic corporation, having its principal place
of business at 56-45 58th Street, Maspeth, New York
hereinafter designated as the party of the second part, WITNESSETH: whereas, the
party of the first part is the holder of the following mortgages and of the
bonds or notes secured thereby:
MORTGAGE dated the 9th day of July 1985 made by PURO CORPORATION OF AMERICA
to MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION in the principal sum of
$800,000.00 and recorded in the office of the Register of the County of Queens
on Reel 1892 Page 121;
MORTGAGE dated the 19th day of March 1987 made by PURO CORPORATION OF
AMERICA to MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION in the principal sum of
$115,006.85 and recorded in the office of the Register of the County of Queens
in Reel 2333, page 917;
WHICH TWO MORTGAGES were consolidated by Agreement dated March 19, 1987 and
recorded on Reel 2333 page 921 to form one single lien of $900,000.00, upon
which there is due and owing the sum of $884,539.85.
MORTGAGE dated the 24th day of May 1988 made by PURO CORPORATION OF AMERICA
to MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION in the principal sum of
$190,460.15 and intended to be recorded in the Office of the Register of the
County of Queens simultaneously herewith.
WHEREAS, the party of the first part, the holder of said bonds or notes and
mortgages and the party of the second part, the owner in fee simple of the
property hereinafter described, have mutually agreed to consolidate said bonds
or notes and to consolidate and co-ordinate the liens of said mortgages and to
modify the terms thereof in the manner hereinafter appearing.
Now, THEREFORE, in pursuance of said agreement and in consideration of the
sum of One Dollar and other valuable consideration each to each other in hand
paid, receipt whereof is hereby acknowledged, the parties hereto mutually
covenant and agree as follows:
That the lien of the three mortgages hereinabove mentioned hereby are
consolidated and co-ordinated so that together they shall hereafter constitute
in law but one first mortgage, a single lien, securing the principal sum of ONE
MILLION SEVENTY-FIVE THOUSAND AND NO/100 ($1,075,000.00) Dollars and the said
bonds or notes and mortgages as so consolidated and co-ordinated shall be deemed
to be one bond or note and one and the said bonds or notes and mortgages as so
consolidated and co-ordinated shall be deemed to be one bond or note and one
mortgage with the same effect as if the party of the first part was the holder
of a single bond or note and a single mortgage.
And the parties hereto agree that the principal indebtedness secured by
said consolidated bond or note and mortgage is herewith extended and modified:
PROVIDED the party of the second part shall pay to the party of the first
part the balance due on said bond or note and mortgage to wit; ONE MILLION
SEVENTY-FIVE THOUSAND AND NO/100 ($1,075,000.00) Dollars by the payment of not
less than ELEVEN THOUSAND FOUR HUNDRED SIXTY-FIVE & NO/100 ($11,465.00) Dollars
on the first day of the ensuing month from the date hereof, and on the first day
of each and every month thereafter, until May 1, 1998 when the entire unpaid
balance of principal with accrued interest at the rate of ELEVEN & ONE-HALF
(11 1/2%) per cent per annum computed on a monthly basis shall be due and
payable, and further
PROVIDED that said monthly payments of ELEVEN THOUSAND FOUR HUNDRED
SIXTY-FIVE & NO/100 ($11,465.00) Dollars may be applied by the party of the
first part, FIRST, to the payment of interest, and SECOND, towards the payment
of the principal sum remaining unpaid. Interest for each month shall be added to
the unpaid balance on the first day of each month at the rate of one-twelfth
(1/12) of the annual interest and shall be calculated upon the unpaid balance
due as of the last day of the preceding month.
IT IS AGREED AND UNDERSTOOD that all fixtures and articles of personal
property, including but not limited to steam and hot water boilers, pipes,
radiators, bathtubs, water closets, refrigerators, gas and electric fixtures and
heating plants, ranges, plumbing and bathroom fixtures, air conditioning and
sprinkler systems, wash tubs, sinks, stoves, awnings, screens, storm windows and
storm door, elevators, motors, dynamos, kitchen, cabinets, incinerators and all
other equipment and machinery, appliances, fittings and fixtures of every kind
together with any and all replacements thereof and additions thereto, and all
other furnishings, if any are in the building erected upon the premises now or
hereafter attached to, or used in connection with the premises, all of which
shall be deemed to be and remain and form a part of the realty and are covered
by the lien of this mortgage.
TOGETHER also with any and all award and awards hereto made and hereinafter
to be made by County, Municipal or State authorities to the present and all
subsequent owners of the premises herein described including any award or awards
for any change or changes of grade of streets affecting said premises, which
said award and awards are hereby assigned to the said party of the first part,
to be applied toward the payment of the amount owning on account of said
mortgage and its accompanying bond or note notwithstanding the fact that the
amount owing on account of said mortgage and said bond or note may not be then
due and payable.
AND the party of the second part, in consideration of the above extension
and of one dollar paid by said party of the first part, and other valuable
consideration, the receipt whereof is hereby acknowledged, does hereby covenant
to pay said principal sum and interest as above set forth and to comply with the
other terms of said bond or note and mortgage; and the party of the second part
covenants that the principal and the interest hereby agrees to be paid, shall be
a lien on the mortgaged premises and be secured by said bond or note and
mortgage, and that when the terms of the mortgages described above and bonds or
notes secured thereby, in any conflict with the terms of this agreement, the
terms and provisions of this agreement shall prevail.
<PAGE>
AND THE PARTY OF THE SECOND PART COVENANTS WITH THE PARTY OF THE FIRST PART AS
FOLLOWS:
1. PROMISE TO PAY
The party of the second part will pay the indebtedness as hereinbefore
provided.
2. ESCROW
In addition to the minimum monthly payment of principal and interest,
payable as hereinbefore provided, the party of the second part will pay to the
party of the first part, at the time of said monthly payments of principal and
interest, one-twelfth of the total annual taxes, water rates, sewer rental tax
and fire insurance premiums with extended coverage upon the mortgaged premises
as estimated and required by the party of the first part. If at any time the
aforesaid monthly sum is found insufficient to fully pay said taxes, water
charges, sewer rental tax and fire insurance premiums and extended coverage
charge or tax reserve in the opinion of the party of the first part is
insufficient, the party of the second part agrees to pay such deficiency
immediately upon demand, in default whereof for fifteen days after demand the
whole of the principal sum remaining due and unpaid with accrued interest shall,
at the option of the party of the first part, immediately become due and
payable. The party of the first part may, at any time, waive the monthly payment
to it for taxes and/or water and/or fire insurance premiums or either of them;
and in the event of such waiver, such charges shall be paid by the party of the
second part and proof of payment thereof shall be furnished to the party of the
first part.
3. PREPAYMENT
The party of the second part shall have the right to prepay the
consolidated debt, or any part thereof, provided however, that when the amount
prepaid in any one year exceeds 20% of the original amount of the loan, then the
party of the second part shall pay in addition to such balance, a sum equivalent
to ninety days' interest on the amount prepaid over said 20%.
4. PROMISE TO KEEP INSURANCE
The party of the second part will keep the buildings on the premises
insured against loss by fire for the benefit of the party of the first part;
that he will assign and deliver the policies to the party of the first part; and
that he will reimburse the party of the first part for any premiums paid for
insurance made by the party of the first part on the default of the party of the
second part in so insuring the buildings or in so assigning and delivering the
policies. The party of the second part further agrees to keep the buildings
insured against loss by fire and other hazards, casualties and contingencies,
including extended coverage, for the benefit of the party of the first part, in
such amounts and for such periods as the party of the first part may require,
and the rights of the party of the first part on failure of the party of the
second part to supply any such insurance shall be the same as provided in the
Real Property Law in reference to fire insurance.
5. PRESERVATION OF PROPERTY
No buildings, fixtures or personal property covered by said mortgage shall
be removed or demolished without the written consent of the party of the first
part.
6. DEFAULT
The whole of said principal sum and interest shall become due at the option
of the part of the first party, after default in the payment of any monthly
installment of principal and interest and tax reserve for fifteen days, or after
deault in the payment of any tax, water rate or assessment for fifteen days
after notice and demand; or after default after notice and demand either in
assigning and delivering the policies insuring the building against loss by fire
or in reimbursing the party of the first part for premiums paid on such
insurance, as hereinbefore provided; or after default upon request in furnishing
a statement of the amount due on the mortgage and whether any offsets or
defenses exist against the mortgage debts, as hereinafter provided.
7. RECEIVER
The holder of said mortgage in any action to foreclose it, shall be
entitled to the appointment of a Receiver, without regard to the adequacy of any
security for the debt, and without notice to the party of the second part herein
or the then owner of the property.
8. PAYMENT OF CHARGES
The party of the second part will pay all taxes, water rates, assessments,
insurance premiums and/or similar charges affecting the mortgaged premises, and
in default thereof the party of the first part may, at its option, pay such
taxes, assessments, insurance premiums and/or similar charges and all such
payments or advances, if paid by the party of the first part, shall be added to
and become a part of the unpaid balance of the indebtedness aforesaid as of the
first day of the month in which such payments are made or advanced and shall be
deemed to be secured in like manner.
9. MORTGAGE DEBT
The party of the second part within five days upon request in person or
within ten days upon request by mail will furnish a written statement duly
acknowledged of the amount due on said mortgage and whether any offsets or
defenses exist against the mortgage debt.
10. NOTICE
Any notice, demand or request, herein provided for, may be made in writing,
and may be served in person or by mail.
11. TITLE
The party of the second part warrants the title to the mortgaged premises.
12. ASSIGNMENT OF RENTS
In the event of a default in the payment of any monthly installment under
said mortgage, or in the bond or note secured thereby, the party of the first
part shall have the right to receive and collect any and all rents derived from
said property and to apply such rents in the same manner as provided in said
bond or note for the application of such monthly installments. And the party of
the second part hereby assigns said rents to the party of the first part and
designates the party of the first part, agent of the party of the second part,
to effect the collection of rents hereby ratifying and affirming any and all
acts of the party of the first part in undertaking to effect such collection.
13. POSSESSION OF PROPERTY
If the mortgaged premises shall be abandoned or vacated by the party of the
second part or any successors in title, the party of the first part shall be
entitled to enter upon and take possession of the same to protect and conserve
its security.
14. MAINTENANCE OF PROPERTY
The party of the second part covenants to maintain the buildings on said
premises in reasonably good repair and not to permit the same to substantially
depreciate in value by reason of neglect or otherwise, and further covenants to
comply with the requirements of any public authority within three months after
an order making such requirements has been issued by any Muncipal, State,
Federal and other public authority. The principal sum remaining unpaid shall
become due at the option of the party of the first part on default in any of
said covenants.
15. TRUST FUND
The party of the second part will receive the advances secured by said
mortgage and will hold the right to receive such advances as a trust fund to be
applied, first, [illegible] he purpose of paying the cost of
improvement [illegible] nd that the party of the second part will [illegible]
<PAGE>
are amortized over 20 years, the entire unpaid principal balance [illigible]
accrued interest, if any, shall be due and payable on May 1, 1998.
17. MEMBERSHIP
That upon any transfer of the title to the premises described herein, the
successor in title of the party of the second part shall, by accepting such
transfer immediately become a member of the party of the first party, MASPETH
FEDERAL SAVINGS AND LOAN ASSOCATION, and be bound by the terms and provisions of
its charters and by-laws. And should any such subsequent owner refuse on demand
to subscribe to such charter and by-laws, the party of the first part may, at
its option, immediately declare the full balance of the principal sum hereby
secured, to be due in like manner, as hereinbefore provided, for default in the
payment of the monthly installments.
18. DEFENSE OF LIEN
If any action or proceedings by commenced by any other person than the
party of the first part, to which action or proceedings the party of the first
part is made a party, or in which it becomes necessary to defend or uphold the
lien of said mortgage, all sums paid by the party of the first part for the
expenses of any such litigation to prosecute or defend the rights and lien
created by said mortgage (including reasonable counsel fees) shall be paid by
the party of the second part, together with interest thereon, at the maximum
legal rate of interest, and such sum and interest shall be a lien on said
premises, prior to any right, title or interest in or claim upon the premises
attaching or accruing subsequent to the lien of said mortgage, and shall be
added to the principal amount intended to be secured by said mortgage and the
accompany bond.
19. TRANSFER OF TITLE
In the event of a transfer of title of the premises described herein from
the part of the second party or any subsequent owner to any other party, the
party of the first part or its assigns shall have the option to declare the
entire unpaid principal sum and accrued unpaid interest, due, and payable.
20. POSSESSION AND ASSIGNMENT OF RENTS
In the event of any default, (in addition to any other rights and remedies)
the party of the first part shall have the right forthwith on demand to enter
upon and take possession of the mortgaged premises and to receive and collect
any and all rents derived from said property and to apply the rents in the same
manner as is herein provided for the application of monthly installments or
carrying charges. If the party of the second part or any subsequent owner is
occupying said premises or any part thereof, it is hereby agreed that a
reasonable occupational rental for the premises so occupied shall be paid
monthly in advance by the occupant to the party of the first part. And the party
of the second part hereby consents to the entry and possession and hereby
assigns said rents and rental to the party of the first part, and designates the
party of the first part, agent of the party of the second part, to effect the
collection of such rents and rental, hereby ratifying and affirming any and all
acts of the party of the first part in making entry and taking possession and in
undertaking to effect such collection.
21. NO DEFENSES
The party of the second part is now the owner of the premises upon which
the aforesaid consolidated mortgage is a valid first lien for the principal sum
of $1,075,000.00 with interest thereon payable as above set forth, and that
there are no defenses or offsets to the aforesaid mortgages or to the bonds or
notes which it secures.
22. PARTIES
If more than one party joins in the execution of this instrument, the
covenants and agreements hereof shall be their joint and several obligations,
and if any be of other than the masculine sex, the relative words herein shall
be read as if written in the plural and/or in such other gender, accordingly, as
the case may be.
23. MEMBERSHIP
The party of the second part hereby becomes a member of the party of the
first part, and the party of the second part hereby agrees to abide by the terms
and provisions of the charter and by-laws of the party of the first part, as
they are now and as they may hereafter be revised, altered or amended.
24. LATE CHARGES, HANDLING CHARGE AND RETURNED CHECKS
The party of the second part further agrees that in the event that any
monthly payment of interest, principal, taxes, assessments, insurance, water
rates, or any of them, due to be paid to the party of the first part on the
first day of any month, is not paid to it during the first fifteen days of each
month, the party of the second part will, at the option of the party of the
first part pay to it a "late charge" of Six (6)% of such overdue payment, to
cover the extra expense involved in handling delinquent payments, and that such
charge may be collected by the party of the first part out of any payment
thereafter made or any moneys held in the mortgage escrow account. In addition
to the payments herein provided, the party of the second part shall pay to the
party of the first part annually the sum of $10.00 to defray part of the expense
incidental to handling the payment of taxes covering the mortgaged premises
including annual report of the tax status. In the event any of checks for
payments of this mortgage are returned due to insufficient funds, the party of
the first part shall have the right to impose a $5.00 charge to cover the cost
of the additional bookkeeping and other work involved in processing the payment.
This charge may be collected by the party of the first part out of any future
payments or any moneys held in the mortgage escrow account.
25. INCOME
The party of the second part will furnish annually to the party of the
first part within ten days after written demand, a statement in writing verified
by the party of the second part or an officer of the party of the second part if
requested, setting forth in detail all income received from the mortgaged
premises as well as all expenses and expenditures in connection therewith,
together with a certified rent roll showing all rents of the mortgaged premises
as of the date of the statement, such instruments to be prepared in accordance
with the usual accounting practices for real estate in the City of New York, and
in such form as may be required by the party of the first part.
26. DESCRIPTION
The premises affected by this agreement are described as follows:
ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough and County of Queens, City and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the northerly side of 56th
Drive (Perry Avenue) with the easterly side of 58th Street (Betts Avenue);
RUNNING THENCE easterly along the northerly side of 56th Drive, 232 feet 6
inches;
THENCE northerly parallel with 58th Street 129 feet;
THENCE westerly parallel with 56th Drive and part of the distance through a
party wall, 232 feet 6 inches to the easterly side of 58th Street;
THENCE southerly along the easterly side of 58th Street 129 feet to the corner
at the point or place of BEGINNING.
SAID PREMISES being known as and by the street number 56-45 58th Street,
Maspeth, New York.
The real property is not principally improved or to be improved by one or more
structures containing in the aggregate more than six residential dwelling units,
each dwelling unit having its own separate cooking facilities.
<PAGE>
The covenants, agreements and options herein contained shall bind and
inure to the benefit of the distributees, executors, administrators, successors,
and assigns of the parties hereto.
IN WITNESS WHEREOF, this agreement has been duly executed by the
parties hereto.
IN PRESENCE OF: MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION
By /s/ May Stickney
-------------------------------------
Assistant Vice President
PURO CORPORATION OF AMERICA
By /s/ Robert Lee Bachrach, Pres.
-------------------------------------
President
<PAGE>
STATE OF NEW YORK, COUNTY OF QUEENS, ss.:
On the _______________ day of ________________ 19__, before me personally
came ________________________________________ to me known to be the individual
______________ described in and who executed the foregoing instrument, and
acknowledged that ___________________ executed the same.
STATE OF NEW YORK, COUNTY OF QUEENS, ss.:
On the 24th day of May 1988, before me personally came MARY STICKNEY to me
known, who, being by me duly sworn, did depose and say that she resides at No.
61-27 Maspeth Ave., Maspeth, NY; that she is the Asst. Vice President of MASPETH
FEDERAL SAVINGS AND LOAN ASSOCIATION, the corporation described in and which
executed the foregoing instrument; that she knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that she
signed her name thereto by like order.
/s/[illigible]
LEONARD MASONE
Notary Public, State of New York
No. 2573615
Qualified in Nassau County
Commission Expires November 30, 1989
STATE OF NEW YORK, COUNTY OF QUEENS, ss.:
On the _______________ day of ________________ 19__, before me personally
came ________________________________________ to me known to be the individual
______________ described in and who executed the foregoing instrument, and
acknowledged that ___________________ executed the same.
STATE OF NEW YORK, COUNTY OF QUEENS, ss.:
On the 24th day of May 1988, before me personally came ROBERT LEE BACHRACH
to me known, who, being by me duly sworn, did depose and say that he resides at
No. 190 East 72nd Street, New York, NY that he is the President of PURO
CORPORATION OF AMERICA, the corporation described in and which executed the
foregoing instrument: that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.
Record and return to:
Masone and White
69-34 Grand Avenue
Maspeth, New York 11378
Loan No. 10047
================================
MASPETH FEDERAL SAVINGS
AND
LOAN ASSOCIATION
with
PURO CORPORATION OF AMERICA
================================
BALLOON CONSOLIDATION AND
EXTENSION AGREEMENT
================================
Dated May 24, 1988
The land affected by
the within instrument lies
Block 2664, Lot 1, Queens County Tax Map
================================
<PAGE>
EX-10.19
Supply Agreement
SUPPLY AGREEMENT
THIS AGREEMENT, is made, entered into and effective as of the 27th day
of June, 1996, by and between MOUNTAINWOOD SPRING WATER Co., INC., a New Jersey
Corporation, with its administrative office at l8-22 Bank Street, Summit, New
Jersey (the "Seller") and PURO WATER GROUP, INC., a Delaware Corporation, with
an office at 110 N. Park Street, East Orange, New Jersey ("Buyer").
WHEREAS, the Seller has under lease a certain premises located at
Mallard Pond Road in the Township of Hardwick, County of Warren and State of New
Jersey known as Mountainwood Spring (the "Spring"); and
WHEREAS, the Seller is willing to supply from the Spring and sell to
the Buyer, and the Buyer desires to purchase from the Seller natural spring
water from the Spring (the "Water"), upon the terms and conditions hereinafter
set forth; and
WHEREAS, the Seller shall deliver the Water to the Buyer in tanker
loads of at least 6,000 gallons (a "Tanker Load").
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements hereinafter contained, the
parties hereto do hereby mutually agree as follows:
1
<PAGE>
SECTION 1. Definitions
1.01 "Three Year Period" shall mean the thirty-six (36) calendar month
period commencing on July 1, 1995, and each successive thirty-six (36) month
period thereafter.
1.02 "Commencement Date" shall mean July 1, 1996.
SECTION 2. Purchase(s) and Sale.
2.01 Minimum Purchases -- The Seller shall sell and deliver to the
Buyer, and the Buyer shall purchase and accept from the Seller commencing July
1, 1996, and during the remainder of this Agreement, a minimum of forty (40)
Tanker Loads of Water (the "Minimum Order") delivered to its 101 North Park
Street, East Orange, New Jersey facility each month.
2.02 Purchase Order -- Execution and delivery of this Agreement shall
constitute a purchase order from the Buyer to the Seller to purchase a minimum
of forty (40) Tanker Loads of Water per month. When and in the event this
Agreement is outstanding and the actual purchases by the Buyer are less than
forty (40) Tanker Loads of Water per month, then, in that event, as additional
consideration for this Agreement, the Seller shall invoice the Buyer for an
amount equal to the difference between the forty (40) Tanker Loads and the
actual number of Tanker Loads purchased by the Buyer that month as follows;
$350.00 per Tanker Load for the first twenty-five (25) Tanker Loads and $105.00
per Tanker Load for the next fifteen (15 Tanker Loads.
<PAGE>
2.03 Priority Purchase Order -- The Buyer acknowledges that Seller
sells Water from the Spring to other consumers of the Water. If Seller is
presented by any contingency beyond its control from supplying the full
quantities of the Water ordered by the Buyer and its other customers, Seller
agrees that it shall not prorate the Minimum Order from the Buyer until it has
prorated its other customers to zero, if necessary, to meet the Minimum Order.
SECTION 3. Price; Adjustment; Payment Terms; Delivery and Risk of Loss
3.01 Price -- The price for each Tanker Load of Water shall be $350.00
for the first forty (40) Tanker Loads per month and $320 per Tanker Load in
excess of forty (40) Tanker Loads per month. The purchase price reflects an
actual price for the water of $105.00 per Tanker Load.
3.02 Price Adjustment -- On or after May 1, 1999 and June 1, 1999, the
Seller may notify the Buyer that the Seller has adjusted the sales price for the
Water and such adjusted sales price shall be effective per gallon of Water sold
to the Buyer during the next Three Year Period.
3.03 Payment -- The Seller shall invoice the Buyer monthly in arrears
for all amounts due from the prior month for all orders of the Water shipped by
the Seller to the Buyer pursuant to
3
<PAGE>
the terms of this Agreement or for any deficiency in the Minimum Order. Payment
of all invoices shall be net thirty (30) days.
3.04 Delivery -- The terms of delivery of the Water shall be F.O.B.
101 North Park Street, East Orange, New Jersey. Title to and risk of loss of the
Water shall pass to the Buyer upon Seller delivering to the Buyer the Water, as
provided for herein.
SECTION 4. Specifications; Limitation of Warranties; Claims
4.01 Specifications -- The Seller represents and warrants that the
Water is natural spring water pumped in accordance with all applicable state and
federal regulations as well as applicable NSF and IBWA bulk spring water
standards.
Except as herein expressly stated, the Seller does not warrant the
goods covered by this Agreement in any manner whatsoever, and no warranty,
express, implied or statutory, is made by the Seller as herein set forth. The
Buyer agrees that it has not relied upon the Seller's skill or judgment to
select or furnish goods for any particular purpose, and this sale is made
without any warranty by the Seller that goods are suitable for any particular
purpose. The remedies provided in this contract for breach thereof by the Buyer
or the Seller shall constitute the exclusive remedies available to the aggrieved
party and all other remedies which might otherwise be available under the law of
any jurisdiction are hereby waived by both the Seller and the Buyer.
4
<PAGE>
4.02 Good Title -- The Seller further warrants the Water shall be
delivered free from any lawful security interest lien or other encumbrance, and
the Seller shall convey good title thereto.
4.03 Disclaimer -- THE SELLER MAKES NO INDEMNITY, REPRESENTATION OR
WARRANTY, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO THE WATER, EXCEPT FOR THE
WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS SECTION 4, AND IN NO
EVENT SHALL THE SELLER BE LIABLE TO BUYER FOR SPECIAL OR CONSEQUENTIAL DAMAGES
BEYOND THOSE DAMAGES EXPRESSLY PROVIDED HEREIN.
SECTION 5. Term - Termination
5.01 Term -- The term of this Agreement shall be for forty-three (43)
years commencing July 1, 1996 and ending June 30, 2039, unless this Agreement is
earlier terminated in accordance with its Section 5.02.
5.02 Termination -- This Agreement may be terminated:
(i) BY EITHER PARTY HERETO:
A. In the event of the breach or default by the other party of the
terms and conditions hereof; provided however, that the terminating party shall
first give to the defaulting party prompt written notice of the proposed
termination of this Agreement, specifying the grounds therefor, and the
defaulting party has failed to cure such default within sixty (60) days after
receiving such written notice; or
5
<PAGE>
B. Upon at least ninety (90) days' prior written notice if the
defaulting party is unable to fully perform its obligations under this Agreement
for any consecutive sixty (60) day period as a result of any contingency, delay,
failure or cause set forth in Section 8.01; or
C. The failure by the parties to reach mutually agreeable price
adjustment(s) for each succeeding Three Year period of this Agreement by the
expiration of the immediately preceding Three Year Period.
Termination of this Agreement pursuant to this Section 5 shall not
affect any other rights or remedies the terminating party may have under law or
equity.
(ii) BY THE BUYER:
When and in the event Thomas E. Durkin, III no longer owns and
controls at least fifty-one percent (51%) of the outstanding voting common
shares of the capital Seller stock of the Seller.
SECTION 6. Access to the Spring
On reasonable notice (at least three (3) working days), the Buyer may
reasonably inspect the operations of the Spring and may visit the Spring with
others for any valid business purpose of the Buyer (e.g. customers, investors,
advisors, etc.). The Buyer may use photos of the Spring in any advertising.
6
<PAGE>
SECTION 7. Reports Furnished by Seller
The Seller shall furnish the Buyer with a copy of all reports,
licenses, analysis, permits, inspections, etc., of the Spring conducted by any
State, Federal or local agency or the NSF or IBWA, at least annually.
SECTION 8. Force Majeur
8.01 Causes -- No party shall be held liable or responsible for
failure or delay in fulfilling any obligation of this Agreement which is due, in
whole or in part, directly or indirectly, to any contingency, delay, failure or
cause of any nature beyond the reasonable control of such party, including
without in any way limiting the generality of the foregoing, fire; explosion;
earthquake, storm, flood or other adverse weather conditions; unavailability of
necessary utilities or fuel, damage to or accident involving a breakdown of
machinery or facilities; strike, lockout; activities of a combination of workmen
or labor difficulties (from whatever cause arising, and whether or not the
demands of the employees are reasonable or within such party's power to grant);
insurrection; riot; act of God or the public enemy; law; act; war; proclamation;
decree; regulations; ordinance or insurrection of government or other public
authorities; judgment or decree of a court of competent jurisdiction; delay or
failure of carriers or contractors; labor shortages; the inability to obtain
7
<PAGE>
transportation, equipment, operating materials, plant equipment or materials
required for maintenance or repairs; or the inability to procure necessary raw
materials; or the inability to obtain or loss or suspension of, necessary
licenses or permits; or any other condition beyond the reasonable control of the
affected party.
8.02 Notice -- Each party shall give to the other party prompt written
notice of the occurrence of any such contingency, delay, failure or cause
described in this Section 8, the nature thereof, and the extent to which the
affected party shall be unable to fully perform its obligations hereunder. Each
party shall use all reasonable efforts to correct the contingency, delay,
failure or cause as quickly as possible, and to give the other party hereto
prompt written notice when it is again fully able to perform in accordance with
this Agreement.
8.03 Replacement Orders -- All quantities of the Water not shipped by
the Seller hereunder due to any contingency, delay, failure or cause described
in this Section 5 shall be confirmed, in writing, by the parties immediately
after such contingency, delay, failure or cause has been corrected. During the
continuance of such contingency, delay, failure or cause, the Buyer shall be
free to purchase elsewhere the quantities of the Water the Buyer has ordered and
which the Seller is unable to deliver.
8
<PAGE>
SECTION 9. Independent Contractors
Each party shall be deemed to be an independent contractor and not the
agent, employee, partner, joint venture of the like of the other party, and
neither party shall have the authority, either express or implied, to make any
statement, representation or commitment of any kind or take any action which
shall bind the other party, except as specifically provided herein or authorized
in writing by a designated representative of the party to be bound.
SECTION 10. Insurance
The Seller agrees to maintain general and comprehensive liability
insurance in an amount not less than One Million Dollars ($1,000,000) and to
name, where appropriate, the Buyer as an additional named insured. Seller shall
additionally require any trucker or transporter engaged to deliver the Water to
maintain general and comprehensive liability and motor vehicle transporter
insurance (all risk) in an amount not less than One Million Dollars ($1,000,000)
and to name Buyer and seller, where appropriate, as additional named insureds.
SECTION 11. Assignment
Neither party hereto shall assign this Agreement without the written
consent of the other party.
9
<PAGE>
SECTION 12. Continuing Obligations
Termination or expiration of this Agreement shall not relieve either
party from full performance of any obligations incurred prior thereto.
SECTION 13. Waiver
The terms of this Agreement may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
to require performance of any provisions hereof shall, in no manner, affect the
right at a later date to enforce the same. No waiver by any party of any
condition, or breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise in any one
or more instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
SECTION 14. Severability
If any provision of this Agreement shall be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby and
shall remain valid and enforceable to the greatest extend permitted by law.
10
<PAGE>
SECTION 15. Captions
The Captions in this Agreement are for convenience only and shall not
affect the construction or interpretation of any term or provision hereof.
SECTION 16. Notices
All notices required to be given under the terms of this Agreement or
which any of the parties desires to give hereunder shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
return receipt requested, or sent by telegram, telex, telecopies or similar
electronic media (confirmed by registered or certified mail) to the addresses
set forth in the introduction of this Agreement or to such other address and to
the attention of such other person as the party to whom such notice is to be
given may have theretofore designated by notice to the other party hereto. Any
notice given in accordance with the foregoing shall be deemed to have been given
when delivered in person or received by telegram, telex, telecopier or similar
electronic media or, if mailed, on the fifth (5th) business day following the
postmark date which it bears.
SECTION 17. Completeness of Agreement
This Agreement and any Exhibits hereto represent the entire contract
between the parties with respect to the subject
11
<PAGE>
matter hereof superseding all prior agreements with respect thereto, and the
same shall not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with the
negotiation of the terms hereof. The terms and conditions contained in any
documents utilized by either party in connection with ordering, acknowledging an
order, shipment or receipt of any product, including, without limitation, any
acknowledgment or acceptance of purchase order or shipping instruction forms at
variance with or in addition to those set forth herein, shall be of no force and
effect with respect to the transactions contemplated under this Agreement.
SECTION 18. Amendment
This Agreement shall not be amended or modified except by an
instrument in writing signed by each of the parties hereto.
SECTION 19. Governing Law
The validity, interpretation and performance of this Agreement shall
be governed and construed in accordance with the laws of the state of New
Jersey.
12
<PAGE>
SECTION 20. Binding Effect
This Agreement shall be binding upon and shall inure to the benefit of
the Seller and the Buyer and their respective successors, assigns, grantees and
legal representatives.
SECTION 21. Counterparts
This Agreement may be executed in two or more counterparts, each of
which need not contain the signatures of more than one party, but such
counterparts taken together shall constitute one and the same Agreement.
In WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be executed by their respective, duly authorized representatives, as of the
day and year first above written.
ATTEST: MOUNTAINWOOD SPRING WATER
CO., INC
/s/ [ILLEGIBLE] By: /s/ T. E. Durkin, III
- -------------------------- ------------------------------------
a duly authorized officer
ATTEST: PURO WATER GROUP, INC.
/s/ [ILLEGIBLE] By: /s/ Jack C. West
- -------------------------- ------------------------------------
a duly authorized officer
13
<PAGE>
EX-10.20
Nature's Best, Division of Puro Water Group, Inc.
56-45 58th Street, Maspeth, New York 11378-0010 718 326-7000, fax 718 894-8357
June 13, 1996
Messrs. Joseph and Mark Spadola
Shawangunk Bulk Spring Water Corp.
271 Indian Springs Camp Lane
Pine Bush, NY 12566
Gentlemen:
This will confirm our arrangement regarding the long term supply of bulk spring
water from your Indian Springs source to our operations. The terms of our
agreement are as follows:
1. The Indian Springs source shall be Puro's primary spring source for
its Long Island facility and secondary for its E. Orange, NJ,
facility.
2. The water shall continue to meet all applicable governmental, NSF, and
IBWA bulk spring water standards.
3. Puro shall be granted "most favored customer" status with respect to
product pricing whereby the price charged Puro shall be no
greater than that charged by the seller to any customer of equal
or lesser volume, and Puro shall have first priority drawing and
delivery rights to the Indian Springs source in the event of
rationing or prorating of the spring output; this understanding
shall remain in force for renewable three year periods from this
date subject to mutual renewal agreement by both parties.
4. This agreement is for fifteen three-year periods expiring in the year
2041 and is cancellable only upon the failure of either party to
renew at the end of any three year period or the failure of
either party to meet any of its obligations above.
5. This agreement shall be binding upon and inure to the benefit of both
parties and their respective successors, assigns, grantees and
legal representatives.
As agreed and accepted by:
/s/ Joe Spadola
/s/ Peter M. Nicholas /s/ Mark Spadola
- ----------------------------------- -----------------------------------
Peter M. Nicholas, President Shawangunk Bulk Spring Water Corp.
Nature's Best Division, Puro Water
Group Inc.
/s/ Jack C. West
- ------------------------------------
Jack C. West, President, Puro Water
Group Inc.
<PAGE>
EX-10.21
STOCK PURCHASE AGREEMENT
This Agreement is made as of the 24th day of December 1995, by and between
Thomas Limited Partnership, a limited partnership with an address of 272
Undermountain Road, Salisbury, Connecticut 06068 ("Buyer") and THE PURO
CORPORATION OF AMERICA, a Delaware corporation, with an address of 56-45
58th Street, Maspeth, New York 11378 (hereinafter referred to as the
"Seller" or the "Company").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to acquire from the Company, and the Company
desires to sell to the Buyer, one hundred twenty five thousand (125,000)
shares of the Seller's common voting stock, .01 par value (the "Common
Stock").
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, and subject to the terms and conditions set forth
herein, the Buyer and the Company agree as follows:
I. PURCHASE OF SHARES, CONSIDERATION AND PAYMENT
1.01 PURCHASE AND SALE OF SHARES. Upon the execution hereof, the Buyer
will purchase from the Company, and the Company will, upon the terms and
conditions set forth in this Agreement, sell, transfer and deliver to the
Buyer, a certificate evidencing Buyer's ownership of one hundred twenty five
thousand (125,000) shares of the Common Stock. Said transfer and delivery of
Stock will hereinafter be referred to as the Closing.
1.02 CONSIDERATION. As consideration for the purchase and sale
of the Shares, the Buyer shall pay to the Seller the sum of One
Million Dollars and 00/100 ($1,000,000.00) in cash or immediately available
funds.
1.03 RENDERING OF CONSIDERATION; DOCUMENTARY STAMPS; TAXES. The
consideration for the Stock shall be deemed rendered upon the
completion of the Closing. No additional funds or consideration shall be
required to be provided or paid at said Closing or thereafter. The
certificates to be delivered to Buyer shall have all necessary documentary
stamps affixed thereto and Seller shall be liable for, and shall pay in full,
all transfer taxes due in connection with the sale of the Stock to the Buyer.
II. REPRESENTATIONS OF SELLER
2.01 AUTHORIZATION; ISSUANCE, ETC. The Company represents that the Stock
to be sold hereunder is duly authorized, validly issued, fully paid and
non-assessable.
2
<PAGE>
2.02 LIENS, ENCUMBRANCES. The Company represents that the
Stock to be sold hereunder is free and clear of all liens and encumbrances
and that the Company's issuance of said Stock to Buyer will not violate any
agreement, contract, judgment or law to which the Company may be a part or which
may otherwise affect the Company.
III. ANTI-DILUTION PROTECTION AND PREEMPTIVE RIGHTS
3.01 ANTI-DILUTION OF SHARES AVAILABLE HEREUNDER.
(1) PERCENTAGE OF OUTSTANDING SHARES. Subject to the provisions of
Paragraphs 3.02 hereinbelow and of that certain Registration Rights
Agreement by and between the Company and Buyer of even date, in the event
that the Company issues to any person or entity additional shares of Common
Stock for no consideration or for less than fair value (as determined by and
in the sole discretion of the Board of Directors of the Company), Buyer shall be
entitled to receive that number of shares of Common Stock necessary to maintain
an ownership equal to Eight (8%) Percent of the issued and outstanding shares of
Common Stock of the Company; PROVIDED, HOWEVER, that to the extent consideration
is paid or contributed for such additional shares of Common Stock;
3
<PAGE>
the provisions of this Paragraph 3.01(1) shall apply only to the difference
between the value of said shares and the consideration paid or contributed
therefor (as determined by and in the sole discretion of the Board of
Directors of the Company); PROVIDED, FURTHER, HOWEVER, that the Buyer shall have
preemptive rights, as described in Paragraph 3.02 hereinbelow, to the extent of
the consideration paid or contributed for such additional shares of Common
Stock. By way of example, in the event that the Company issues one hundred
thousand (100,000) shares of Common Stock (valued by the Board of Directors at
two hundred fifty thousand dollars ($250,000)) for services rendered and valued
by the Board of Directors at One Hundred Fifty Thousand Dollars ($150,000), the
anti-dilution protection described in this Paragraph 3.01(1) would entitle Buyer
to a grant of additional shares related to the One Hundred Thousand Dollars
($100,000) "no consideration" stock (ie. $250,000 value - $150,000 consideration
= $100,000 of "no consideration" stock) sufficient to maintain an ownership
equal to Eight (8%) Percent of the issued and outstanding shares of Common Stock
of the Company, and preemptive rights, described in Paragraph 3.02 hereinbelow,
to purchase additional shares related to the one hundred fifty thousand dollar
($150,000) "for consideration" stock.
4
<PAGE>
(2) DETERMINATION OF OUTSTANDING SHARES. For the purpose of
determining the number of shares available to the Buyer in the event that the
Company issues to any person or entity shares of Common Stock, the number of
issued and outstanding shares of Common Stock of the Company shall be that
number of shares of Common Stock issued and outstanding on the date hereof plus
the total maximum number of shares of Common Stock issued or issuable (i) to the
Buyer and (ii) to any other person or entity pursuant to any then currently
outstanding grant, distribution or dividend by the Company of any rights to
subscribe for or to purchase, or any then currently outstanding option or
warrant for the purchase of, Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock.
3.02 PREEMPTIVE RIGHTS. Subject to the provisions of Paragraph 3.01
hereinabove, the Buyer shall be entitled to the preemptive right to purchase
or subscribe for any unissued Common Stock or additional Shares of Common
Stock to be issued by reason of the increase of the authorized Common Stock
of the Company or other securities convertible into Common Stock or carrying any
rights to purchase any Common Market Stock, whether said unissued Common Stock
5
<PAGE>
shall be issued for cash, property or other consideration and without
limitation of the foregoing, shall have such preemptive right with respect to
Shares or other securities offered for sale if they are (a) issued or optioned
by the Board of Directors of the Company to effect a merger or consolidation or
for a consideration other than cash; or (b) shares or other securities
reacquired by the Company after having been duly issued and not restored to the
status of authorized but unissued shares; or (c) part of the Shares or other
securities of the Company originally authorized in its articles of incorporation
in excess of the first one million two hundred fifty thousand (1,250,000) shares
which are issued.
3.03 TERMINATION OF ANTI-DILUTION PROTECTION AND PREEMPTIVE RIGHTS.
Buyer's anti-dilution protection and preemptive rights, as described in
Paragraphs 3.01 and 3.02 hereinabove, shall terminate in the event that the
Company files a registration Statement (defined herein to include a Notification
under Regulation A under the Securities Act of 1933, as amended (the "Act"),
under the Act and the offering circular included therein) which relates to a
current offering of securities of the Company (except in connection with an
offering solely to employees).
IV. MISCELLANEOUS
4.01 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their legal representatives, heirs,
executors, administrators, successors and assigns.
4.02 ENTIRE AGREEMENT. This Agreement and the documents delivered
concurrently herewith or pursuant hereto contain all of the terms of the
agreement among the parties with respect to the transactions contemplated
hereby and thereby and the subject matter hereof and thereof.
4.03 HEADINGS. The headings of the paragraphs of this Agreement are
for convenience and reference only and do not form a part hereof or in any
way modify, interpret, or construe the meaning of the provisions hereof.
4.04 NOTICES. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this Agreement shall be
in writing and shall be considered as properly given or made if sent and
actually received by courier service, overnight delivery service or first
class mail, postage prepaid or if transmitted (and actually received) by any
6
<PAGE>
telecommunication device (e.g. telex or telecopier) and addressed or sent to
the respective parties' addresses specified below. Any party may change its
address by giving notice in writing to the other parties of its new address.
To Buyer: Mr. Wilmer Thomas
Thomas Limited Partnership
272 Undermountain Road
Salisbury, Connecticut 06068
With a copy to: Greenberger & Forman
1370 Avenue of the Americas
New York, New York 10019
Attention: Joseph Greenberger, Esq.
To the Company: Puro Corporation of America
56-45 58th Street
New York, NY 11378
Attention: Mr. Jack C. West
President
With a copy to: Lev & Berlin, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Duane L. Berlin, Esq.
4.05 AMENDMENTS. This Agreement may be changed, modified or amended
only by an instrument in writing duly executed by the parties hereto.
4.06 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
7
<PAGE>
4.07 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PURO CORPORATION OF AMERICA
- -------------------------------- By: /s/ JACK C. WEST
-----------------------------
Jack C. West,
Its Co-President
- ------------------------------- Hereunto Duly Authorized
- ------------------------------- By: /s/ SCOTT LEVY
-----------------------------
Scott Levy,
Its Co-President
- ------------------------------- Hereunto Duly Authorized
BUYER:
THOMAS LIMITED PARTNERSHIP
By: /s/ Wilmer J. Thomas, Jr
-----------------------------
Wilmer Thomas
8
<PAGE>
EX-10.22
STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of May, 1996, by and between
Edberg Associates Limited Partnership, a Connecticut limited partnership with
an address of 356 Woodland Lane, Orange, Connecticut 06477 ("Buyer") and PURO
WATER GROUP, INC., a Delaware corporation with and address of 56-45 58th
Street, Maspeth, New York 11378 (hereinafter referred to as the "Seller" or
the "Company").
W I T N E S S E T H:
WHEREAS, the buyer wishes to acquire from the Company, and the Company
desires to sell to the Buyer, Two Hundred Thousand (200,000) shares of the
Seller's common voting stock, .01 par value (the "Common Stock"); and
WHEREAS, prior to the consummation of the transactions contemplated
hereby, the shareholders of the Company and their respective holdings are as
follows:
SHAREHOLDERS NUMBER OF SHARES
Peter T. Dixon Trust 968,000
W. Palmer Dixon Trust 808,000
Peter T. Dixon, Individually 160,000
Scott & Beth Levy 864,000
Jack C. West 800,000
<PAGE>
Thomas Limited Partnership 400,000
---------------
Total Issued Shares 4,000,000
---------------
---------------
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, and subject to the terms and conditions set forth
herein, the Buyer and the Company agree as follows:
I. PURCHASE OF SHARES, CONSIDERATION AND PAYMENT
1.01 PURCHASE AND SALE OF SHARES. Upon the execution hereof, the
Buyer will purchase from the Company, and the Company will, upon he the terms
and conditions set forth in this Agreement, sell, transfer and deliver to the
Buyer, a certificate evidencing Buyer's ownership of Two Hundred Thousand
(200,000) shares of the Common Stock. Said transfer and delivery of Stock
will hereinafter be referred to as the Closing.
1.02 CONSIDERATION. As consideration for the purchase and sale of the
Shares, the Buyer shall pay to the Seller the sum of Five Hundred Thousand
Dollars and 00/100 ($500,000) in cash or immediately available funds.
1.03 RENDERING OF CONSIDERATION; DOCUMENTARY STAMPS; TAXES. The
consideration for the Stock shall be deemed rendered upon the completion of
the Closing. No additional funds or consideration shall be required to be
provided or paid at said Closing or
2
<PAGE>
thereafter. The certificates to be delivered to buyer shall have all
necessary documentary stamps affixed thereto and Seller shall be liable for,
and shall pay in full, all transfer taxes due in connection with the sale of
the Stock to the Buyer.
II. REPRESENTATIONS OF SELLER
2.01 AUTHORIZATION; ISSUANCE, ETC. The Company represents that the
Stock to be sold hereunder is duly authorized, validly issued, fully paid
and non-assessable.
2.02 LIENS, ENCUMBRANCES. The Company represents that the Stock to be
sold hereunder is free and clear of all liens and encumbrances and that the
Company's issuance of said Stock to Buyer will not violate any agreement,
contract, judgment or law to which the Company may be a part or which may
otherwise affect the Company.
III. MISCELLANEOUS
3.01 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their legal representatives, heirs,
executors, administrators, successors and assigns.
3.02 ENTIRE AGREEMENT. This Agreement and the documents delivered
concurrently herewith or pursuant hereto contain all of the terms of the
agreement among the parties with respect to the
3
<PAGE>
transactions contemplated hereby and thereby and the subject matter hereof
and thereof.
3.03 HEADINGS. The headings of the paragraphs of this Agreement are for
convenience and reference only and do not form a part hereof or in any way
modify, interpret, or construe the meaning of the provisions hereof.
3.04 NOTICES. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this Agreement shall be
in writing and shall be considered as properly given or made if sent and
actually received by courier service, overnight delivery service or first
class mail, postage prepaid or if transmitted (and actually received) by any
telecommunication device (e.g. telex or facsimile) and addressed or sent to
the respective parties' addresses specified below. Any party may change its
address by giving notice in writing to the other parties of its new address.
To Buyer: Edberg Associates, L.P.
356 Woodland Lane
Orange, Connecticut 06477
Attention: Dr. Stephen C. Edberg
To the Company: Puro Water Group, Inc.
56-45 58th Street
New York, NY 11378
Attention: Mr. Jack C. West and
Mr. Scott Levy, Co-Presidents
4
<PAGE>
With a copy to: Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Duane L. Berlin, Esq.
3.05 AMENDMENTS. This Agreement may be changed, modified or amended
only by an instrument in writing duly executed by the parties hereto.
3.06 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
5
<PAGE>
3.07 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PURO WATER GROUP, INC.
By:/s/Jack C. West
- ----------------------- ---------------------------
Jack C. West
Its Co-President
Hereunto Duly Authorized
- -----------------------
By:/s/Scott Levy
- ----------------------- ---------------------------
Scott Levy
Its Co-President
Hereunto Duly Authorized
- -----------------------
EDBERG ASSOCIATES LIMITED
PARTNERSHIP
By:/s/Stephen Charles Edberg
- ------------------------ ---------------------------
Stephen C. Edberg
Hereunto Duly Authorized
- ------------------------
6
<PAGE>
EX-10.23
STOCK PURCHASE AGREEMENT
This Agreement is made as of the 16 day of October 1995, by and between
THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR THE BENEFIT OF
PALMER DIXON c/o Peter T. Dixon of East 79th Street, New York, New York
10021-0202 ("Palmer Trust"), THE TRUST UNDER ARTICLE 16 OF THE WILL OF W.
PALMER DIXON, FOR THE BENEFIT OF PETER T. DIXON, c/o Peter T. Dixon of 79
East 79th Street, New York, New York 10021-0202 ("Peter Trust") and PETER T.
DIXON, 79 East 79th Street, New York, New York 10021-0202 (Peter Dixon,
together with the Palmer Trust and the Peter Trust, "Buyer") and THE PURO
CORPORATION OF AMERICA, a Delaware corporation, with an address of 56-45 58th
Street, Maspeth, New York 11378 (hereinafter referred to as the "Seller" or
the "Company").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to acquire form the Company, and the Company
desires to sell to the Buyer, one hundred twenty five thousand (125,000)
shares of the Seller's common voting stock, .01 par value ( the "Common
Stock") as follows: the Palmer Trust - twelve thousand five hundred (12,500)
shares; the Peter Trust - sixty two thousand five hundred (62,500) shares;
and Peter Dixon - fifty thousand (50,000) shares.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter set forth, and subject to the terms and
<PAGE>
conditions set forth herein, the Buyer and the Company agree as follows:
I. PURCHASE OF SHARES, CONSIDERATION AND PAYMENT
1.01 PURCHASE AND SALE OF SHARES. Upon the execution hereof, the Buyer
will purchase from the Company, and the Company will, upon the terms and
conditions set forth in this Agreement, sell, transfer and deliver to the
Buyer, certificates evidencing Buyer's ownership of one hundred twenty five
thousand (125,000) shares of the Common Stock allocated among the Buyer as
set forth above (the "Stock"). Said transfer and delivery of Stock will
hereinafter be referred to as the Closing.
1.02 CONSIDERATION. As consideration for the purchase and sale of the
Shares, the Buyer shall pay to the Seller the sum of One Million Dollars and
00/100 ($1,000,000.00) in cash or immediately available funds as follows: the
Palmer Trust - one hundred thousand ($100,000) dollars; the Peter Trust - five
hundred thousand ($500,000) dollars; and Peter Dixon - four hundred thousand
($400,000) dollars.
1.03 RENDERING OF CONSIDERATION; DOCUMENTARY STAMPS; TAXES. The
consideration for the Stock shall be deemed rendered upon the completion of
the Closing. No additional funds or consideration shall be required to be
provided or paid at said Closing or thereafter. The certificates to be
delivered to Buyer shall have all necessary documentary stamps affixed
thereto and Seller shall be liable for, and shall pay in full, all transfer
taxes due in connection with the sale of the Stock to the Buyer.
2
<PAGE>
II. REPRESENTATIONS OF SELLER
2.01 AUTHORIZATION; ISSUANCE, ETC. The Company represents that the
Stock to be sold hereunder is duly authorized, validly issued, fully paid and
non-assessable.
2.02 LIENS, ENCUMBRANCES. The Company represents that the Stock to be
sold hereunder is free and clear of all liens and encumbrances and that the
Company's issuance of said Stock to Buyer will not violate any agreement,
contract, judgment or law to which the Company may be a part or which may
otherwise affect the Company.
III. MISCELLANEOUS
3.01 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their legal representatives, heirs,
executors, admistrators, successors and assigns.
3.02 ENTIRE AGREEMENT. This Agreement and the documents delivered
concurrently herewith or pursuant hereto contain all of the terms of the
agreement among the parties with respect to the transactions contemplated
hereby and thereby and the subject matter hereof and thereof.
3.03 HEADINGS. The headings of the paragraphs of this Agreement are
for convenience and reference only and do not form a part hereof or in any
way modify, interpret, or construe the meaning of the provisions hereof.
3.04 NOTICES. All notices, elections, demands or other communications
required or permitted to be made or given pursuant
3
<PAGE>
to this Agreement shall be in writing and shall be considered as properly
given or made if sent and actually received by courier service,overnight
delivery service or first class mail, postage prepaid or if transmitted (and
actually received) by any telecommunication device (e.g. telex or
telecopier) and addressed or sent to the respective parties' addresses
specified below. Any party may change its address by giving notice in
writing to the other parties of its new address.
To any Buyer: c/o Peter T. Dixon
79 East 79th Street
New York, NY 10021-0202
To the Company: Puro Corporation of America
56-45 58th Street
New York, NY 11378
Attention: Mr. Jack C. West,
President
With a copy to: Lev & Berlin, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Duane L. Berlin, Esq.
3.05 AMENDMENTS. This Agreement may be changed, modified or amended
only by an instrument in writing duly executed by the parties hereto.
3.06 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
4
<PAGE>
3.07 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first above written.
PURO CORPORATION OF AMERICA
By:/s/Jack C. West
- ------------------------ -------------------------------
Jack C. West,
Its Co-President
- ------------------------ Hereunto Duly Authorized
By:/s/Scott Levy
- ------------------------ -------------------------------
Scott Levy,
Its Co-President
- ------------------------ Hereunto Duly Authorized
The Trust Under Article 16 of
the Will of W. Palmer Dixon,
for the Benefit of Palmer
Dixon and The Trust Under
Article 16 of the Will of W.
Palmer Dixon, for the Benefit
of Peter T. Dixon
By:/s/ Peter T. Dixon
- ------------------------ -------------------------------
Peter T. Dixon,
Hereunto Duly Authorized
- ------------------------
/s/ Peter T. Dixon
- ------------------------ -------------------------------
Peter T. Dixon, Individually
- ------------------------
5
<PAGE>
EX-10.24
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
29 day of December 1995 by and among THE PURO CORPORATION OF AMERICA, a Delaware
corporation, with its principal offices at 56-45 58th Street, Maspeth, New
York 11378 (the "Company") and THOMAS LIMITED PARTNERSHIP, a limited partnership
with an address of 272 Undermountain Road, Salisbury, Connecticut 06068
("Purchaser" or "Investor").
W I T N E S S E T H:
WHEREAS, this date, the Investor has been issued one hundred twenty five
thousand (125,000) shares (the "Shares") of the Company's Common Voting
Stock, $.01 par value (the "Common Stock"); and
WHEREAS, the Investor and the Company desire to provide certain rights to
the Investor in the event that any or all of the Common Stock becomes the
subject of a registration statement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed as follows:
<PAGE>
SECTION I
REGISTRATION OF SHARES
1.1 The Shares have not been registered under the Securities Act of
1933, as amended (the "Act"). Prior to any registration of the Shares, or in
the absence of an exemption from registration, the Purchaser shall make no
offer, sale or other disposition of any of the Shares except under
circumstances which, in the opinion of counsel to the Company, will be in
compliance with the Act. Each certificate for the Shares shall bear upon the
face thereof the following legend:
The shares represented by this certificate have been issued pursuant to
an exemption from registration under the Securities Act of 1933. These
shares may not be sold, transferred, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act or the rules
and regulations thereunder.
1.2 REGISTRATION UNDER THE SECURITIES LAWS.
(a) CONTEMPORANEOUS REGISTRATION. In the event that the Company
files a registration statement (defined herein to include a Notification
under Regulation A under the Act and the offering circular included therein)
under the Act which relates to a current offering of securities of the
Company (except in connection with an offering solely to employees), such
registration statement and the prospectus included therein shall also, at the
written request to the Company by the Purchaser, include and relate to, and
meet the requirement of the Act with respect to the public offering of the
Shares so as to permit the public sale thereof in compliance with the Act,
provided,
2
<PAGE>
however, the underwriter consents to including said Shares in the
contemplated public offering and the Purchaser agrees to pay to the
underwriter the underwriter's discounts or commissions attributable to said
Shares. In the event of such consent, the Company shall give written notice
to the Purchaser of its intention to file a registration statement under the
Act relating to a current offering of the aforesaid securities of the Company
sixty (60) or more days prior to the filing of such registration statement,
and the written request provided for in the first sentence of this subsection
shall be made by the Purchaser thirty (30) or more days prior to the date
specified in the notice as the date on which it is intended to file such
registration statement. Neither the delivery of such notice by the Company
nor of such request by the Purchaser shall in any way obligate the Company to
file such registration statement and notwithstanding the filing of such
registration statement, the Company may, at any time prior to the effective
date thereof, determine not to offer the securities to which such
registration statement relates, without liability to the Purchaser, except
that the Company shall pay such expenses, costs and the like as are
contemplated to be paid by it under subsection (c) of this Section.
Furthermore, if the Purchaser exercises registration rights under this
Section 1.2(a) with respect to an offering made by the Company, the Purchaser
shall bear any additional expenses, costs and the like, including but not
limited to all reasonable
3
<PAGE>
legal, accounting and travel expenses, which are caused by the inclusion of the
Purchaser's Shares in such registration.
(b) TERMS OF UNDERWRITING. In connection with any offering
involving an underwriting of shares issued by the Company, and in addition to
the underwriter's consent, the Company shall not be required to include any
of the Purchaser's Shares in such underwriting unless the Purchaser accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in
the written opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of Shares that the Purchaser
requests to be included in such offering exceeds the amount of shares that
the underwriters reasonably believe compatible with the success of the
offering, the Company shall only be required to include in the offering that
number of the Shares of the Purchaser (pro rata with the other offered shares
of the Company) which the underwriters believe will not jeopardize the
success of the offering provided that no such reduction shall be made as a
consequence of the filing of a registration statement with respect to
treasury securities offered by the Company for its own account or any
securities offered by selling shareholders.
(c) DEMAND REGISTRATION RIGHTS; EXISTING REGISTRATION. In addition
to the aforementioned registration rights if, at any time after the date
hereof, any Shares acquired hereunder have not been included in the
registration statement referred to in
4
<PAGE>
Section 1.2(a) either because the Purchaser did not desire to sell or was not
permitted to sell pursuant thereto, or if said registration statement
included some but not all of the Shares owned by the Purchaser, then upon
written notification to the Company from the Purchaser that the Purchaser
contemplates a sale under such circumstances that constitute a public
offering within the meaning of the Act, the Company shall as expeditiously as
reasonably possible prepare and file a registration statement with the
Securities and Exchange Commission for such Shares and use its best efforts
to cause such registration statement to become and remain effective;
provided, however, that (a) common Shares of the Company are then publicly
traded pursuant to an effective registration statement, and (b) in connection
with any proposed registration intended to permit an offering of any
securities from time to time (i.e., a so-called "shelf registration") the
Company shall in no event be obligated to cause any such registration to
remain effective for more than one hundred twenty (120) days. The expense of
this registration statement including, without limitation, all legal and
accounting fees, travel and all other expenses, shall be borne by the Company.
(d) DEMAND REGISTRATION RIGHTS; INITIAL REGISTRATION.
(i) In addition to the aforementioned registration rights, at
any time after February 1, 1997, if the Company has not filed a registration
statement as referred to in Section 1.2(a), then upon written notification to
the Company by
5
<PAGE>
the Purchaser that it wishes to cause a public offering of some or all of the
Shares, within the meaning of the Act, the Company shall then as
expeditiously as reasonably possible prepare and file a registration
statement with the Securities and Exchange Commission for such Shares and use
its best efforts to cause such registration statement to become and remain
effective; provided, however, that the Company be permitted to include an
offering of any other securities of the Company in such registration
statement and further provided that in connection with any proposed
registration intended to permit an offering of any of the Shares from time to
time (i.e., a so-called "shelf registration") the Company shall in no event
be obligated to cause any such registration to remain effective for more than
one hundred twenty (120) days. The expense of this registration statement,
including but not limited to all legal and accounting fees, travel and all
other expenses, shall be borne by the Company.
(ii) In connection with this demand registration right, the
Purchaser shall have the right to compel the Company to adjust the number of
its Shares outstanding in order to cause the availability of that number of
Shares for sale to the public which shall be deemed by the Purchaser to be in
the Purchaser's best interests in effecting the registration of the Shares
and ultimate disposition of the same.
(e) In each instance in which pursuant to this Section the Company
shall take any action to permit a public offering or
6
<PAGE>
sale or other distribution of any of the Shares, the Company shall:
(i) Supply to the Purchaser if it intends to make a public
distribution four (4) executed copies of each registration statement or
Notification and four (4) executed copies of the preliminary, final and other
prospectus or offering circular in conformity with the requirements of the
Act and the rules and regulations promulgated thereunder.
(ii) Cooperate in taking such action as may be necessary to
register or qualify the Shares under such other securities acts or blue sky
laws of such jurisdictions as the Purchaser shall reasonably request and to
do any and all other acts and things which may be necessary or advisable to
enable the Purchaser to consummate such proposed sale or other disposition of
its Shares in any such jurisdiction; PROVIDED, HOWEVER, that in no event
shall the Company be obligated to qualify to do business or to file a general
consent to service of process in any jurisdiction where it shall not then be
qualified.
(iii) Keep effective for a period of not less than one hundred
eighty (180) days after the initial effectiveness thereof all such
registration statements or Notifications under the Act and cooperate in
taking such action as may be necessary to keep effective such other
registrations and qualifications, and do any and all other acts and things
for such period - not to exceed twelve (12) months - as may be necessary to
permit the public sale or other disposition of such Shares by the Purchaser.
7
<PAGE>
(iv) Indemnify and hold harmless the Purchaser and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Purchaser, any Shares, from and against any and all losses, claims,
damages, and liabilities (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending or
settling any claim) arising from (a) any untrue statement of a material fact
contained in any prospectus, registration statement or Notification furnished
pursuant to clause (i) of this subsection, or any prospectus or offering
circular included therein, or (b) any omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading (unless such untrue statement or omission was based
upon information furnished or required to be furnished in writing to the
Company by the Purchaser or any such underwriter expressly for use therein),
which indemnification shall include each person, if any, who controls the
Purchaser or any such underwriter within the meaning of the Act; provided,
however, that the Company shall not be so obligated to indemnify the
Purchaser or any such underwriter or controlling person unless the Purchaser
and underwriter shall at the same time indemnify the Company, its directors,
each officer signing any registration statement or Notification or any
amendment to any registration statements or Notifications and each person, if
any, who controls the Company within the meaning of the Act, from and against
any and all losses, claims, damages and liabilities (including, but
8
<PAGE>
not limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim) arising from (a)
any untrue statement of a material fact contained in any registration
statement or Notification or any amendment to any registration statement or
offering circular furnished pursuant to Clause (i) of this subsection, or (b)
any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but the indemnity
of the Purchaser, or any such underwriter or controlling person shall be
limited to liability based upon information furnished, or required to be
furnished, in writing to the Company by the Purchaser or any such underwriter
or controlling person expressly for use therein. The indemnity agreement of
the Company therein shall not inure to the benefit of any such underwriter
(or to the benefit of any person who controls such underwriter) on account of
any losses, claims, damages, liabilities (or actions or proceedings in
respect thereof) arising from the sale of any of such Shares by such
underwriter to any person if such underwriter failed to send or give a copy
of the prospectus or offering circular furnished pursuant to Clause (i) of
this subsection, as the same may then be supplemented or amended.
The Company's obligation under said subsection 1.2(d) shall be
conditioned as to such public offering, upon a timely receipt by the Company
in writing of:
9
<PAGE>
(A) Information as to the terms of such public offering furnished by
or on behalf of the Purchaser, if it intends to make a public distribution of
its Shares; and
(B) Such other information as the Company may reasonably require
from the Purchaser, or any underwriter for any of them, for inclusion in such
registration statement, Notification or post-effective amendment.
SECTION II
GENERAL PROVISIONS
2.1 Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in writing
by the parties hereto.
2.2 Without limiting any other indemnification set forth herein, each
party agrees to indemnify and hold harmless the others against any fee, loss
or expense arising out of claims by brokers or finders employed or alleged to
have been employed by the indemnifying party in connection with this
agreement.
2.3 All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this agreement shall be in writing
and shall be considered as properly given or made if sent and actually
received by courier service, overnight delivery service or first class mail,
postage prepaid or if transmitted (and receipt confirmed) by any
telecommunication device (e.g. telex or telecopier) and addressed or sent to
the respective parties' addresses specified below.
10
<PAGE>
Any party may change its address by giving notice in writing to the other
parties of its new address.
To the Company: The Puro Corporation of America,
56-45 58th Street
Maspeth, NY 11378
Attention: Messrs. Scott Levy
and Jack C. West, Co-Presidents
With a copy to: Lev & Berlin, P.C.
535 Connecticut Avenue
Norwalk, CT 06854
Attention: Duane L. Berlin, Esq.
To Investor: Thomas Limited Partnership
272 Undermountain Road
Salisbury, Connecticut 06068
Attention: Mr. Wilmer Thomas
With a copy to: Greenberger & Forman
1370 Avenue of the Americas
New York, New York 10019
Attn: Joseph Greenberger, Esq.
2.4 This agreement and any agreements related hereto constitute the
entire agreement between the parties and supersede and cancel any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated herein or the
subject matter hereof.
2.5 The Company and the Investor hereby consent to submit themselves to
the jurisdiction of the United States District Court for the Southern
District of New York and the Courts of the State of New York in connection
with any disputes which may arise hereunder. The Company hereby consents to
service of process in the State of New York by naming the Secretary of State
of the State of New York as agent for service of process. Such submission to
jurisdiction and consent to service of process is
11
<PAGE>
nonexclusive of any other jurisdiction or manner of service in which or by
which personal jurisdiction over the Company or the Investor may be obtained.
2.6 This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
2.7 This agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their successors and assigns; provided, however, that
any assignment by any party of its rights under this agreement without the
prior written consent of the other parties shall be void.
2.8 This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective
the day and year first above written.
PURO CORPORATION OF AMERICA
By: /s/ Jack C. West
--------------------------
Jack C. West,
Its Co-President
Hereunto Duly Authorized
By: /s/ Scott Levy
--------------------------
Scott Levy,
Its Co-President
Hereunto Duly Authorized
INVESTOR:
THOMAS LIMITED PARTNERSHIP
By: /s/ Wilmer Thomas
--------------------------
Wilmer Thomas
12
<PAGE>
EX-10.25
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made as of the
1st day of May, 1996 by and among PURO WATER GROUP, INC., a Delaware
corporation with its principal offices at 56-45 58th Street, Maspeth, New
York 11378 (the "Company") and EDBERG ASSOCIATES LIMITED PARTNERSHIP, a
Connecticut limited partnership, with an address of 356 Woodland Lane,
Orange, Connecticut 06477 ("Purchaser" or "Investor").
WITNESSETH:
WHEREAS, this date, the Investor has been issued Two Hundred Thousand
(200,000) shares (the "Shares") of the Company's Common Voting Stock, $.01
par value (the "Common Stock"); and
WHEREAS, the Investor and the Company desire to provide certain rights
to the Investor.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed as follows:
<PAGE>
SECTION I
REGISTRATION OF SHARES
----------------------
1.1 The Shares have not been registered under the Securities Act of
1933, as amended (the "Act"). Prior to any registration of the Shares, the
Purchaser shall make no offer, sale or other disposition of any of the Shares
except under circumstances which, in the opinion of counsel to the
Company, will be in compliance with the Act. Each certificate for the Shares
shall bear upon the face thereof the following legend:
The shares represented by this certificate have been issued pursuant
to an exemption from registration under the Securities Act of 1933. These
shares may not be sold, transferred, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act or the rules
and regulations thereunder.
1.2 REGISTRATION UNDER THE SECURITIES LAWS.
---------------------------------------
(a) CONTEMPORANEOUS REGISTRATION. In the event that the Company
files a registration statement (defined herein to include a Notification
under Regulation A under the Act and the offering circular included therein)
under the Act which relates to a current offering of securities of the
Company (except in connection with an offering solely to employees), such
registration statement and the prospectus included therein shall also, at the
written request to the Company by the Purchaser,
2
<PAGE>
include and relate to, and meet the requirement of the Act with respect to
the public offering of the Shares so as to permit the public sale thereof in
compliance with the Act, provided, however, the underwriter consents to
including said Shares in the contemplated public offering and the Purchaser
agrees to pay to the underwriter the underwriter's discounts or commissions
attributable to said Shares. The Company shall give written notice to the
Purchaser of its intention to file a registration statement under the Act
relating to a current offering of the aforesaid securities of the Company
sixty (60) or more days prior to the filing of such registration statement,
and the written request provided for in the first sentence of this subsection
shall be made by the Purchaser thirty (30) or more days prior to the date
specified in the notice as the date on which it is intended to file such
registration statement. Neither the delivery of such notice by the Company
nor of such request by the Purchaser shall in any way obligate the Company to
file such registration statement and notwithstanding the filing of such
registration statement, the Company may, at any time prior to the effective
date thereof, determine not to offer the securities to which such
registration statement relates, without liability to the Purchaser, except
that the Company shall pay such expenses,
3
<PAGE>
costs and the like as are contemplated to be paid by it under subsection (c)
of this Section.
(b) TERMS OF UNDERWRITING. In connection with any offering
involving an underwriting of shares issued by the Company, and in addition to
the underwriter's consent, the Company shall not be required to include any of
the Purchaser's Shares in such underwriting unless the Purchaser accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in
the written opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of Shares that the Purchaser
requests to be included in such offering exceeds the amount of shares that
the underwriters reasonably believe to be compatible with the success of the
offering, the Company shall only be required to include in the offering that
number of the Shares of the Purchaser (pro rata with the other offered shares
of the Company) which the underwriters believe will not jeopardize the
success of the offering provided that no such reduction shall be made as a
consequence of the filing of a registration statement with respect to
treasury securities offered by the Company for its own account. If there is
an excess amount of Shares of selling
4
<PAGE>
shareholders, each such shareholder may sell that number of shares permitted
by the underwriter to be sold that is in the same proportion as the aggregate
number of shareholders' Shares that the underwriter will sell is to the
number of Shares of selling shareholders offered by said shareholders to be
sold.
(c) DEMAND REGISTRATION RIGHTS: EXISTING REGISTRATION. In addition
to the aforementioned registration rights if, at any time after the date
hereof, any Shares acquired hereunder have not been included in the
registration statement referred to in Section 1.2 (a) either because the
Purchaser did not desire to sell or was not permitted to sell pursuant
thereto, or if said registration statement included some but not all of the
Shares owned by the Purchaser, then upon written notification to the Company
from the Purchaser that the Purchaser contemplates a sale under such
circumstances that constitute a public offering within the meaning of the
Act, the Company shall as expeditiously as reasonably possible prepare and
file a registration statement with the Securities and Exchange Commission for
such Shares and use its best efforts to cause such registration statement to
become and remain effective; provided, however, that (a) common Shares of the
Company are then publicly traded pursuant to an effective registration
statement, and (b) in connection with any
5
<PAGE>
proposed registration intended to permit an offering of any securities from
time to time (i.e., a so-called "shelf registration") the Company shall in no
event be obligated to cause any such registration to remain effective for
more than one hundred twenty (120) days. The expense of this registration
statement including, without limitation, all legal and accounting fees,
travel and all other expenses, shall be borne by the Company.
(d) DEMAND REGISTRATION RIGHTS: INITIAL REGISTRATION;
-------------------------------------------------
(i) In addition to the aforementioned registration rights, at
any time after February 1, 1997, if the Company has not filed a registration
statement as referred to in Section 1.2(a), then upon written notification to
the Company by the Purchaser that it wishes to cause a public offering of
some or all of the Shares, within the meaning of the Act, the Company shall
then as expeditiously as reasonably possible prepare and file a registration
statement with the Securities and Exchange Commission for such Shares and use
its best efforts to cause such registration statement to become and remain
effective; provided, however, that the Company be permitted to include an
offering of any other securities of the Company in such registration
statement and further provided that in connection with any
6
<PAGE>
proposed registration intended to permit an offering of any of the Shares
from time to time (i.e., a so-called "shelf registration") the Company shall
in no event be obligated to cause any such registration to remain effective
for more than one hundred twenty (120) days. The expense of this registration
statement, including but not limited to all legal and accounting fees, travel
and all other expenses, shall be borne by the Company.
(ii) In connection with this demand registration right, the
Purchaser shall have the right to compel the Company to adjust the number of
its Shares outstanding in order to cause the availability of that number of
Shares for sale to the public which shall be deemed by the Purchaser to be in
the Purchaser's best interests in effecting the registration of the Shares and
ultimate disposition of the same.
(e) In each instance in which pursuant to this Section the Company
shall take any action to permit a public offering or sale or other
distribution of any of the Shares, the Company shall:
(i) Supply to the Purchaser if it intends to make a public
distribution four (4) executed copies of each registration statement or
Notification and four (4) executed
7
<PAGE>
copies of the preliminary, final and other prospectus or offering circular in
conformity with the requirements of the Act and the rules and regulations
promulgated thereunder.
(ii) Cooperate in taking such action as may be necessary to
register or qualify the Shares under such other securities acts or blue sky
laws of such jurisdictions as the Purchaser shall reasonably request and to
do any and all other acts and things which may be necessary or advisable to
enable the Purchaser to consummate such proposed sale or other disposition of
its Shares in any such jurisdiction; PROVIDED, HOWEVER, that in no event
shall the Company be obligated to qualify to do business or to file a general
consent to service of process in any jurisdiction where it shall not then be
qualified.
(iii) Keep effective for a period of not less than one hundred
eighty (180) days after the initial effectiveness thereof all such
registration statements or Notifications under the Act and cooperate in
taking such action as may be necessary to keep effective such other
registrations and qualifications, and do any and all other acts and things for
such period - not to exceed twelve (12) months - as may be necessary to
permit the public sale or other disposition of such Shares by the Purchaser.
8
<PAGE>
(iv) Indemnify and hold harmless the Purchaser and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Purchaser, any Shares, from and against any and all losses, claims,
damages, and liabilities (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending or
settling any claim) arising from (a) any untrue statement of a material fact
contained in any prospectus, registration statement or Notification furnished
pursuant to clause (i) of this subsection, or any prospectus or offering
circular included therein, or (b) any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (unless such untrue statement or omission was based upon
information furnished in writing to the Company by the Purchaser or any such
underwriter expressly for use therein), which indemnification shall include
each person, if any, who controls the Purchaser or any such underwriter
within the meaning of the Act; provided, however, that the Company shall not
be so obligated to indemnify the Purchaser or any such underwriter or
controlling person unless the Purchaser and underwriter shall at the same
time indemnify the Company, its directors, each officer signing any
registration statement or Notification or any
9
<PAGE>
amendment to any registration statements or Notifications and each person, if
any, who controls the Company within the meaning of the Act, from and against
any and all losses, claims, damages and liabilities (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim) arising from (a)
any untrue statement of a material fact contained in any registration
statement or Notification or any amendment to any registration statement or
offering circular furnished pursuant to Clause (i) of this subsection, or
(b) any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but the indemnity
of the Purchaser, or any such underwriter or controlling person shall be
limited to liability based upon information furnished in writing to the
Company by the Purchaser or any such underwriter or controlling person
expressly for use therein. The indemnity agreement of the Company therein shall
not inure to the benefit of any such underwriter (or to the benefit of any
person who controls such underwriter) on account of any losses, claims,
damages, liabilities (or actions or proceedings in respect thereof) arising
from the sale of any of such Shares by such underwriter to any person if such
underwriter failed to send or
10
<PAGE>
give a copy of the prospectus or offering circular furnished pursuant to
Clause (i) of this subsection, as the same may then be supplemented or
amended.
The Company's obligation under said subsection 1.2(d) shall be
conditioned as to such public offering, upon a timely receipt by the Company
in writing of:
(A) Information as to the terms of such public offering furnished
by or on behalf of the Purchaser, if it intends to make a public distribution
of its Shares; and
(B) Such other information as the Company may reasonably require
from the Purchaser, or any underwriter for any of them, for inclusion in
such registration statement, Notification or post-effective amendment.
(v) Notwithstanding the foregoing, the Company shall make a
just and equitable contribution in the event that (i) an indemnified party
makes a claim for indemnification pursuant to subparagraph (iv) above but it
is found in a final judicial determination, not subject to further appeal,
that such determination may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act of 1934, as amended, or
11
<PAGE>
otherwise, then the Company and each other party shall contribute to the
losses, liabilities, claims, damages, and expenses ("Losses") whatsoever to
which any of them may be subject, so that each is responsible for that
portion of the Losses equal to the relative fault of each of the parties in
connection with the facts which resulted in such Losses.
SECTION II
GENERAL PROVISIONS
------------------
2.1 Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in writing
by the parties hereto.
2.2 Without limiting any other indemnification set forth herein, each
party agrees to indemnify and hold harmless the others against any fee, loss
or expense arising out of claims by brokers or finders employed or alleged
to have been employed by the indemnifying party in connection with this
agreement.
2.3 All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this agreement shall be in writing
and shall be considered as properly given or made if sent and actually
received by courier service, overnight delivery service or first class mail,
postage prepaid
12
<PAGE>
or if transmitted (and receipt confirmed) by any telecommunication device
(e.g. telex or facsimile) and addressed or sent to the respective parties'
addresses specified below. Any party may change its address by giving notice
in writing to the other parties of its new address.
To the Company: Puro Water Group, Inc.
56-45 58th Street
Maspeth, NY 11378
Attention : Messrs. Scott Levy
and Jack C. West,
Co-Presidents
With a copy to: Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, CT 06854
Attention: Duane L. Berlin, Esq.
To Investor: Edberg Associates Limited Partnership
356 Woodlane Lane
Orange, CT 06477
Attn: Dr. Stephen C. Edberg
With a copy to: Karp & Langerman, P.C.
Milford Place Corporate Center
185 Plains Road
Milford, CT 06460
Attn: Joel C. Karp, Esq.
2.4 This agreement and any agreements related hereto constitute the
entire agreement between the parties and supersede and cancel any other
agreement, representation, or communication, whether oral or written,
between the parties hereto relating to
13
<PAGE>
the transactions contemplated herein or the subject matter hereof.
2.5 The Company and the Investor hereby consent to submit themselves to
the jurisdiction of the United States District Court for the Southern
District of New York and the Courts of the State of New York in connection
with any disputes which may arise hereunder. The Company hereby consents to
service of process in the State of New York by naming the Secretary of State
of the State of New York as agent for service of process. Such submission to
jurisdiction and consent to service of process is nonexclusive of any other
jurisdiction or manner of service in which or by which personal jurisdiction
over the Company or the Investor may be obtained.
2.6 This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
2.7 This agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their successors and assigns; provided, however, that
any assignment by any party of its rights under this agreement without the
prior written consent of the other parties shall be void.
14
<PAGE>
2.8 This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective the
day and year first above written.
PURO WATER GROUP, INC.
By: /s/ Jack C. West
----------------
Jack C. West,
Its Co-President
Hereunto Duly Authorized
By: /s/ Scott Levy
----------------
Scott Levy,
Its Co-President
Hereunto Duly Authorized
INVESTOR:
EDBERG ASSOCIATES LIMITED
PARTNERSHIP
By: /s/ Stephen Charles Edberg
--------------------------
Stephen C. Edberg
Hereunto Duly Authorized
------------------------
15
<PAGE>
EX-10.26
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
16th day of October 1995 by and among THE PURO CORPORATION OF AMERICA, a
Delaware corporation, with its principal offices at 56 45 58th Street,
Maspeth, New York 11378(the "Company") and THE TRUST UNDER ARTICLE 16 OF
THE WILL OF W.PALMER DIXON, FOR THE BENEFIT OF PALMER DIXON c/o Peter T.
Dixonof East 79th Street, New York, New York 10021 0202 ("Palmer Trust"),
THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR THE BENEFIT OF
PETER T. DIXON, c/o Peter T. Dixon of79 East 79th Street, New York, New York
10021-0202 ("Peter Trust") and PETER T. DIXON, 79 East 79th Street, New
York, NewYork 10021-0202 (Peter Dixon, together with the Palmer Trust and the
Peter Trust, "Purchaser" or "Investor").
W I T N E S S E T H:
WHEREAS, this date, the Investor has been issued one hundred twenty five
thousand (125,000) shares (the "Shares") of the Company's Common Voting
Stock, $.01 par value (the "Common Stock"); and
WHEREAS, the Investor and the Company desire to provide certain rights to
the Investor in the event that any or all of
<PAGE>
the Common Stock becomes the subject of a registration statement(as
hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed as follows:
SECTION I
REGISTRATION OF SHARES
1.1 The Shares have not been registered under the Securities Act of 1933,
as amended (the "Act"). Prior to any registration of the Shares, or in the
absence of an exemption from registration, the Purchaser shall make no offer,
sale or other disposition of any of the Shares except under circumstances
which, in the opinion of counsel to the Company, will be in compliance with
the Act. Each certificate for the Shares shall bear upon the face thereof the
following legend:
The shares represented by this certificate have been issued pursuant
to an exemption from registration under the Securities Act of 1933. These
shares may not be sold,transferred, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act or the rules
and regulations thereunder.
1.2 REGISTRATION UNDER THE SECURITIES LAWS
(a) CONTEMPORANEOUS REGISTRATION. In the event that the Company
files a registration statement (defined herein to include a Notification under
Regulation A under the Act and the offering circular included therein) under
the Act which relatesto a current offering of securities of the Company
(except in
2
<PAGE>
connection with an offering solely to employees), such registration statement
and the prospectus included therein shall also, at the written request to the
Company by the Purchaser,include and relate to, and meet the requirement of
the Act with respect to the public offering of the Shares so as to permit the
public sale thereof in compliance with the Act, provided, however, the
underwriter consents to including said Shares in the contemplated public
offering and the Purchaser agrees to pay to the underwriter the underwriter's
discounts or commissions attributable to said Shares. In the event of such
consent, the Company shall give written notice to the Purchaser of its
intention to file a registration statement under the Act relating to a
current offering of the aforesaid securities of the Company sixty (60) or
more days prior to the filing of such registration statement, and the written
request provided for in the first sentence of this subsection shall be made
by the Purchaser thirty (30) or more days prior to the date specified in the
notice as the date on which it is intended to file such registration
statement. Neither the delivery of such notice by the Company nor of such
request by the Purchaser shall in any way obligate the Company to file such
registration statement and notwithstanding the filing of such registration
statement, the Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which such registration statement
relates, without liability to the Purchaser, except that the Company shall
pay such expenses, costs and the like as
3
<PAGE>
are contemplated to be paid by it under subsection (c) of this Section.
Furthermore, if the Purchaser exercises registration rights under this
Section 1.2(a) with respect to an offering made by the Company, the Purchaser
shall bear any additional expenses, costs and the like, including but not
limited to all reasonable legal, accounting and travel expenses, which are
caused by the inclusion of the Purchaser's Shares in such registration.
(b) TERMS OF UNDERWRITING In connection with any offering involving
an underwriting of shares issued by the Company, and in addition to the
underwriter's consent, the Company shall not be required to include any of
the Purchaser's Shares in such underwriting unless the Purchaser accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in
the written opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of Shares that the Purchaser
requests to be included in such offering exceeds the amount of shares that
the underwriters reasonably believe compatible with the success of the
offering, the Company shall only be required to include in the offering that
number of the Shares of the Purchaser (pro rata with the other offered shares
of the Company) which the underwriters believe will not jeopardize the
success of the offering provided that no such reduction shall be made as a
consequence of the filing of a registration statement with
4
<PAGE>
respect to treasury securities offered by the Company for its own account or
any securities offered by selling shareholders.
(c) DEMAND REGISTRATION RIGHTS; EXISTING REGISTRATION. In addition
to the aforementioned registration rights if, at anytime after the date
hereof, any Shares acquired hereunder have not been included in the
registration statement referred to in Section 1.2(a) either because the
Purchaser did not desire to sell or was not permitted to sell pursuant
thereto, or if said registration statement included some but not all of the
Shares owned by the Purchaser, then upon written notification to the Company
from the Purchaser that the Purchaser contemplates a sale under such
circumstances that constitute a public offering within the meaning of the Act,
the Company shall as expeditiously as reasonably possible prepare and file a
registration statement with the Securities and Exchange Commission for such
Shares and use its best efforts to cause such registration statement to become
and remain effective; provided, however, that (a) common Shares of the Company
are then publicly traded pursuant to an effective registration statement ,
and (b) in connection with any proposed registration intended to permit an
offering of any securities from time to time (ie., a so-called "shelf
registration") the Company shall in no event be obligated to cause any such
registration to remain effective for more than one hundred twenty (120) days.
The expense of this registration statement including, without limitation, all
legal and accounting
5
<PAGE>
fees, travel and all other expenses, shall be borne by the Company.
(d) DEMAND REGISTRATION RIGHTS; INITIAL REGISTRATION.
(i) In addition to the aforementioned registration rights, at
any time after February 1, 2001, if the Company has not filed a registration
statement as referred to in Section 1.2(a), then upon written notification to
the Company by the Purchaser that it wishes to cause a public offering of
some or all of the Shares, within the meaning of the Act, the Company shall
then as expeditiously as reasonably possible prepare and file a registration
statement with the Securities and Exchange Commission for such Shares and use
its best efforts to cause such registration statement to become and remain
effective; provided,however, that the Company be permitted to include an
offering of any other securities of the Company in such registration
statement and further provided that in connection with any proposed
registration intended to permit an offering of any ofthe Shares from time to
time (i.e., a so-called ""shelf registration'') the Company shall in no event
be obligated to cause any such registration to remain effective for more than
one hundred twenty (120) days. The expenses of this registration statement,
including but not limited to all legal and accounting fees, travel and all
other expenses, shall be borne by the Company.
(ii) In connection with this demand registration right, the
Purchaser shall have the right to compel the Company
6
<PAGE>
to adjust the number of its Shares outstanding in order to cause the
availability of that number of Shares for sale to the public which shall be
deemed by the Purchaser to be in the Purchaser's best interests in effecting
the registration of the Shares and ultimate disposition of the same.
(e) In each instance in which pursuant to this Section the Company
shall take any action to permit a public offering or sale or other
distribution of any of the Shares, the Company shall:
(i) Supply to the Purchaser if it intends to make a public
distribution four (4) executed copies of each registration statement or
Notification and four (4) executed copies of the preliminary, final and other
prospectus or offering circular in conformity with the requirements of the Act
and the rules and regulations promulgated thereunder.
(ii) Cooperate in taking such action as may be necessary to
register or qualify the Shares under such other securities acts or blue sky
laws of such jurisdictions as the Purchaser shall reasonably request and to do
any and all other acts and things which may be necessary or advisable to
enable the Purchaser to consummate such proposed sale or other disposition of
its Shares in any such jurisdiction; PROVIDED, HOWEVER, that in no event
shall the Company be obligated to qualify to do business or to file a general
consent to service of process in any jurisdiction where it shall not then be
qualified.
7
<PAGE>
(iii) Keep effective for a period of not less than one hundred
eighty (180) days after the initial effectiveness thereof all such
registration statements or Notifications under the Act and cooperate in
taking such action as may be necessary to keep effective such other
registrations and qualifications,and do any and all other acts and things for
such period - not to exceed twelve (12) months - as may be necessary to
permit the public sale or other disposition of such Shares by the Purchaser.
(iv) Indemnify and hold harmless the Purchaser and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Purchaser, any Shares, from and against any and all losses, claims,
damages, and liabilities (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending or
settling any claim) arising from (a) any untrue statement of a material
fact contained in any prospectus, registration statement or Notification
furnished pursuant to clause (i) of this subsection, or any prospectus or
offering circular included therein, or (b)any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (unless such untrue statement or omission
was based upon information furnished or required to be furnished in writing to
the Company by the Purchaser or any such underwriter expressly for use
therein), which indemnification shall include each person, if any, who
controls the Purchaser or any such underwriter within the meaning of the Act;
provided, however
8
<PAGE>
that the Company shall not be so obligated to indemnify the Purchaser or any
such underwriter or controlling person unless the Purchaser and underwriter
shall at the same time indemnify the Company, its directors, each officer
signing any registration statement or Notification or any amendment to any
registration statements or Notifications and each person, if any, who
controls the Company within the meaning of the Act, from and against any and
all losses, claims, damages and liabilities (including, but not limited to,
any and all expenses whatsoever reasonably incurred in investigating,
preparing, defending or settling any claim) arising from (a) any untrue
statement of a material fact contained in any registration statement or
Notification or any amendment to any registration statement or offering
circular furnished pursuant to Clause (i) of this subsection, or (b) any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but the indemnity of
the Purchaser, or any such underwriter or controlling person shall be limited
to liability based upon information furnished, or required to be furnished,
in writing to the Company by the Purchaser or any such underwriter or
controlling person expressly for use therein. The indemnity agreement of the
Company therein shall not inure to the benefit of any such underwriter (or to
the benefit of any person who controls such underwriter) on account of any
losses, claims, damages, liabilities (or actions or proceedings in respect
thereof) arising from the sale of any of such Shares by such
9
<PAGE>
underwriter to any person if such underwriter failed to send or give a copy of
the prospectus or offering circular furnished pursuant to Clause (i) of this
subsection, as the same may then be supplemented or amended.
The Company's obligation under said subsection 1.2(d) shall be conditioned
as to such public offering, upon a timely receipt by the Company in writing of:
(A) Information as to the terms of such public offering furnished by
or on behalf of the Purchaser, if it intends to make a public distribution of
its Shares; and
(B) Such other information as the Company may reasonably require from
the Purchaser, or any underwriter for any of them, for inclusion in such
registration statement, Notification or post-effective amendment.
SECTION II
GENERAL PROVISIONS
2.1 Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by
the parties hereto.
2.2 Without limiting any other indemnification set forth herein, each
party agrees to indemnify and hold harmless the others against any fee, loss
or expense arising out of claims by brokers or finders employed or alleged to
have been employed by the indemnifying party in connection with this
agreement.
10
<PAGE>
2.3 All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this agreement shall be in writing
and shall be considered as properly given or made if sent and actually
received by courier service, overnight delivery service or first class mail,
postage prepaid or if transmitted (and receipt confirmed) by any
telecommunication device (e.g. telex or telecopier) and addressed or sent to
the respective parties' addresses specified below. Any party may change its
address by giving notice in writing to the other parties of its new address.
To the Company: Puro Corporation of America,
a Delaware Corporation
56 45 58th Street
Maspeth, NY 11378
Attention: Messrs. Scott Levy
and Jack C. West,
Co Presidents
To any Investor: c/o Peter T. Dixon
79 East 79th Street
New York, NY 10021 0202
With a copy to: Lev & Berlin, P.C.
535 Connecticut Avenue
Norwalk, CT 06854
Attention: Duane L. Berlin, Esq.
2.4 This agreement and any agreements related hereto constitute the
entire agreement between the parties and supersede and cancel any other
agreement, representation, or communication,whether oral or written, between
the parties hereto relating to the transactions contemplated herein or the
subject matter hereof.
11
<PAGE>
2.5 The Company and the Investor hereby consent to submit themselves to
the jurisdiction of the United States District Court for the Southern District
of New York and the Courts of the State of New York in connection with any
disputes which may arise hereunder. The Company hereby consents to service of
process in the State of New York by naming the Secretary of State of the State
of New York as agent for service of process. Such submission to jurisdiction
and consent to service of process is nonexclusive of any other jurisdiction or
manner of service in which or by which personal jurisdiction over the Company
or the Investor may be obtained.
2.6 This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
2.7 This agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their successors and assigns; provided, however, that
any assignment by any party of its rights under this agreement without the
prior written consent of the other parties shall be void.
2.8 This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement effective
the day and year first above written.
PURO CORPORATION OF AMERICA
By: /s/ JACK C. WEST
---------------------------
Jack C. West,
Its Co President
Hereunto Duly Authorized
By: /s/ SCOTT LEVY
----------------------------
Scott Levy,
Its Co President
Hereunto Duly Authorized
The Trust Under Article 16 of
The Will of W. Palmer Dixon,
for the Benefit of Palmer
Dixon and The Trust Under
Article 16 of the Will of W.
Palmer Dixon, for the Benefit
of Peter T. Dixon
By: /s/ PETER T. DIXON
----------------------------
Peter T. Dixon,
Hereunto Duly Authorized
/s/ PETER T. DIXON
-----------------------------
Peter T. Dixon, Individually
13
<PAGE>
EX-10.27
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made this 28th day
of January, 1994 by and among PURO CORPORATION OF AMERICA, a Delaware
corporation, with its principal offices at 56-45 58th Street, Maspeth, New York
11378 (the "Company") and The Trust Under Article 16 of the Will of W. Palmer
Dixon, for the Benefit of Palmer Dixon and The Trust Under Article 16 of the
Will of W. Palmer Dixon, for the Benefit of Peter T. Dixon, c/o Peter T. Dixon
of 79 East 79th Street, New York, New York 10021-0202 (collectively "Purchaser"
or "Investor").
W I T N E S S E T H:
WHEREAS, this date, the Investor has been issued four hundred eighty
thousand (480,000) shares (the "Stock") of the Company's Common Voting Stock,
$.0l par value (the "Common Stock"); and
WHEREAS, this date, the Investor has been issued that certain Warrant to
Purchase Common Stock (the "Warrant"); and
WHEREAS, the Stock and the Common Stock available to the Investor pursuant
to the Warrant are hereinafter collectively referred to as the "Shares".
<PAGE>
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, it is agreed as follows:
SECTION I
REGISTRATION OF SHARES
1.1 The Shares have not been registered under the Securities Act of 1933,
as amended (the "Act"). Prior to any registration of the Shares, or in the
absence of an exemption from registration, the Purchaser shall make no offer,
sale or other disposition of any of the Shares except under circumstances which,
in the opinion of counsel to the Company, will be in compliance with the Act.
Each certificate for the Shares shall bear upon the face thereof the following
legend:
The shares represented by this certificate have been issued pursuant
to an exemption from registration under the Securities Act of 1933. These
shares may not be sold, transferred, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act or the rules
and regulations thereunder.
1.2 Registration under the Securities Laws.
(a) Contemporaneous Registration. In the event that the Company files
a registration statement (defined herein to include a Notification under
Regulation A under the Act and the offering circular included therein) under the
Act which relates to a current offering of securities of the Company (except in
connection with an offering solely to employees), such registration statement
and the prospectus included therein shall also, at the written request to the
Company by the Purchaser,
2
<PAGE>
include and relate to, and meet the requirement of the Act with respect to the
public offering of the Shares so as to permit the public sale thereof in
compliance with the Act, provided, however, the underwriter consents to
including said Shares in the contemplated public offering and the Purchaser
agrees to pay to the underwriter the underwriter's discounts or commissions
attributable to said Shares. In the event of such consent, the Company shall
give written notice to the Purchaser of its intention to file a registration
statement under the Act relating to a current offering of the aforesaid
securities of the Company sixty (60) or more days prior to the filing of such
registration statement, and the written request provided for in the first
sentence of this subsection shall be made by the Purchaser thirty (30) or more
days prior to the date specified in the notice as the date on which it is
intended to file such registration statement. Neither the delivery of such
notice by the Company nor of such request by the Purchaser shall in any way
obligate the Company to file such registration statement and notwithstanding the
filing of such registration statement, the Company may, at any time prior to the
effective date thereof, determine not to offer the securities to which such
registration statement relates, without liability to the Purchaser, except that
the Company shall pay such expenses, costs and the like as are contemplated to
be paid by it under subsection (c) of this Section. Furthermore, if the
Purchaser exercises registration rights under this Section 1.2(a) with respect
to an offering made
3
<PAGE>
by the Company, the Purchaser shall bear any additional expenses, costs and the
like, including but not limited to all reasonable legal, accounting and travel
expenses, which are caused by the inclusion of the Purchaser's Shares in such
registration.
(b) Terms of Underwriting. In connection with any offering involving
an underwriting of shares issued by the Company, and in addition to the
underwriter's consent, the Company shall not be required to include any of the
Purchaser's Shares in such underwriting unless the Purchaser accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the written
opinion of the underwriters, jeopardize the success of the offering by the
Company. If the total amount of Shares that the Purchaser requests to be
included in such offering exceeds the amount of shares that the underwriters
reasonably believe compatible with the success of the offering the Company shall
only be required to include in the offering that number of the Shares of the
Purchaser (pro rata with the other offered shares of the Company) which the
underwriters believe will not jeopardize the success of the offering provided
that no such reduction shall be made as a consequence of the filing of a
registration statement with respect to treasury securities offered by the
Company for its own account or any securities offered by selling shareholders.
(c) Demand Registration Rights; Existing Registration. In addition to
the aforementioned registration rights if, at any
4
<PAGE>
time after the date hereof, any Shares acquired hereunder have not been included
in the registration statement referred to in Section 1.2 (a) either because the
Purchaser did not desire to sell or was not permitted to sell pursuant thereto,
or if said registration statement included some but not all of the Shares owned
by the Purchaser, then upon written notification to the Company from the
Purchaser that the Purchaser contemplates a sale under such circumstances that
constitute a public offering within the meaning of the Act, the Company shall as
expeditiously as reasonably possible prepare and file a registration statement
with the Securities and Exchange Commission for such Shares and use its best
efforts to cause such registration statement to become and remain effective;
provided, however, that (a) Common Shares of the Company are then publicly
traded pursuant to an effective registration statement, and (b) in connection
with any proposed registration intended to permit an offering of any securities
from time to time (i.e., a so-called "shelf registration") the Company shall in
no event be obligated to cause any such registration to remain effective for
more than one hundred twenty (120) days. The expense of this registration
statement including, without limitation, all legal and accounting fees, travel
and all other expenses, shall be borne by the company.
(d) Demand Registration Rights; Initial Registration.
(i) In addition to the aforementioned registration rights, at any
time after February 1, 2001, if the
5
<PAGE>
Company has not filed a registration statement as referred to in Section 1.2(a),
then upon written notification to the Company by the Purchaser that it wishes to
cause a public offering of some or all of the Shares, within the meaning of the
Act, the Company shall then as expeditiously as reasonably possible prepare and
file a registration statement with the Securities and Exchange Commission for
such Shares and use its best efforts to cause such registration statement to
become and remain effective; provided, however, that the Company be permitted to
include in offering of any other securities of the Company in such registration
statement and; further provided that in connection with any proposed
registration intended to permit an offering of any of the Shares from time to
time (i.e., a so-called "shelf registration") the Company shall in no event be
obligated to cause any such registration to remain effective for more than one
hundred twenty (120) days. The expense of this registration statement, including
but not limited to all legal and accounting fees, travel and all other expenses,
shall be borne by the Company.
(ii) In connection with this demand registration right, the
Purchaser shall have the right to compel the Company to adjust the number of its
Shares outstanding in order to cause the availability of that number of Shares
for sale to the public which shall be deemed by the Purchaser to be in the
Purchaser's best interests in effecting the registration of the Shares and
ultimate disposition of the same.
6
<PAGE>
(e) In each instance in which pursuant to this Section the Company
shall take any action to permit a public offering or sale or other distribution
of any of the Shares, the Company shall:
(i) Supply to the Purchaser if it intends to make a public
distribution four (4) executed copies of each registration statement or
Notification and four (4) executed copies of the preliminary, final and other
prospectus or offering circular in conformity with the requirements of the Act
and the rules and regulations promulgated thereunder.
(ii) Cooperate in taking such action as may be necessary to
register or qualify the Shares under such other securities acts or blue sky laws
of such jurisdictions as the Purchaser shall reasonably request and to do any
and all other acts and things which may be necessary or advisable to enable the
Purchaser to consummate such proposed sale or other disposition of its Shares in
any such jurisdiction; provided, however, that in no event shall the Company be
obligated to qualify to do business or to file a general consent to service of
process in any jurisdiction where it shall not then be qualified.
(iii) Keep effective for a period of not less than one hundred
eighty (180) days after the initial effectiveness thereof all such registration
statements or Notifications under the Act and cooperate in taking such action as
may be necessary to keep effective such other registrations and qualifications,
and do any and all other acts and things for such period - not to
7
<PAGE>
exceed twelve (12) months - as may be necessary to permit the public sale or
other disposition of such Shares by the Purchaser.
(iv) Indemnify and hold harmless the Purchaser and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Purchaser, any Shares, from and against any and all losses, claims, damages,
and liabilities (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or settling any
claim) arising from (a) any untrue statement of a material fact contained in any
prospectus, registration statement or Notification furnished pursuant to clause
(i) of this subsection, or any prospectus or offering circular included therein
or (b) any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (unless such
untrue statement or omission was based upon information furnished or required to
be furnished in writing to the Company by the Purchaser or any such underwriter
expressly for use therein), which indemnification shall include each person, if
any, who controls the Purchaser or any such underwriter within the meaning of
the Act; provided. however, that the Company shall not be so obligated to
indemnify the Purchaser or any such underwriter or controlling person unless the
Purchaser and underwriter shall at the same time indemnify the Company, its
directors, each officer signing any registration statement or Notification or
any amendment to any registration statements or Notifications and each person,
if any, who controls
8
<PAGE>
the Company within the meaning of the Act, from and against any and all losses,
claims, damages and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing, defending
or settling any claim) arising from (c) any untrue statement of a material fact
contained in any registration statement or Notification or any amendment to any
registration statement or offering circular furnished pursuant to Clause (i) of
this subsection, or (d) any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but the indemnity of the Purchaser, or any such underwriter or controlling
person shall be limited to liability based upon information furnished, or
required to be furnished, in writing to the Company by the Purchaser or any such
underwriter or controlling person expressly for use therein. The indemnity
agreement of the Company therein shall not inure to the benefit of any such
underwriter (or to the benefit of any person who controls such underwriter) on
account of any losses, claims, damages, liabilities (or actions or proceedings
in respect thereof) arising from the sale of any of such Shares by such
underwriter to any person if such underwriter failed to send or give a copy of
the prospectus or offering circular furnished pursuant to Clause (i) of this
subsection, as the same may then be supplemented or amended.
9
<PAGE>
The Company's obligation under said subsection 1.2(d) shall be conditioned
as to such public offering, upon a timely receipt by the Company in writing of:
(A) Information as to the terms of such public offering furnished by
or an behalf of the Purchaser, if it intends to make a public distribution of
its Shares; and
(B) Such other information as the Company may reasonably require from
the Purchaser, or any underwriter for any of them, for inclusion in such
registration statement, Notification or post-effective amendment.
SECTION II
GENERAL PROVISIONS
2.1 Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
2.2 Each party agrees to indemnify and hold harmless the others against any
fee, loss or expense arising out of claims by brokers or finders employed or
alleged to have been employed by the indemnifying party in connection with this
agreement.
2.3 All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this agreement shall be in writing and
shall be considered as properly given or made if sent and actually received by
courier service, overnight delivery service or first class mail, postage prepaid
10
<PAGE>
or if transmitted (and actually received) by any telecommunication device (e.g.
telex or telecopier) and addressed or sent to the respective parties' addresses
specified below. Any party may change its address by giving notice in writing to
the other parties of its new address.
To the Company: Puro Corporation of America,
a Delaware Corporation
56-45 58th Street
Maspeth, NY 11378
Attention: Messrs. Scott Levy
and Jack C. West,
Co-Presidents
To the Investor: c/o Peter T. Dixon
79 East 79th Street
New York, 10021-0202
With a copy to: Bruce L. Lev, Esquire
Lev, Spalter & Berlin, P.C.
105 Rowayton Avenue
Rowayton, CT 06853
2.4 This agreement and any agreements related thereto constitute the entire
agreement between the parties and supersede and cancel any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
2.5 The Company and the Investor hereby consent to submit themselves to the
jurisdiction of the United States District Court for the Southern District of
New York and the Courts of the State of New York in connection with any disputes
which may arise hereunder. The Company hereby consents to service of process in
11
<PAGE>
the State of New York by naming the Secretary of State of the State of New York
as agent for service of process. Such submission to jurisdiction and consent to
service of process is nonexclusive of any other jurisdiction or manner of
service in which or by which personal jurisdiction over the Company or West may
be obtained.
2.6 This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
2.7 This agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns; provided, however, that any
assignment by any party of its rights under this agreement without the prior
written consent of the other parties shall be void.
2.8 This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective the
day and year first above written.
PURO CORPORATION OF AMERICA
By: /s/ Jack C. West, Scott Levy
-------------------------------------
Jack C. West & Scott Levy
Its Co-Presidents
Hereunto Duly Authorized
12
<PAGE>
The Trust Under Article 16 of The Will of
W. Palmer Dixon, for the Benefit of
Palmer Dixon and The Trust Under Article
16 of the Will of W. Palmer Dixon, for
the Benefit of Peter T. Dixon
By: /s/ Peter T. Dixon
-------------------------------------
Peter T. Dixon
Hereunto Duly Authorized
13
<PAGE>
EX-10.28
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made this 28th day
of January, 1994 by and among PURO CORPORATION OF AMERICA, a Delaware
corporation, with its principal offices at 56-45 58th Street, Maspeth, New York
11378 (the "Company") and Scott Levy and Beth Levy of 32 Morewood Oaks, Port
Wash., N.Y. 11050 (collectively "Levy") and JACK C. WEST of 3207 Victoria Drive,
Mt. Kisco, New York 10549 ("West").
W I T N E S S E T H:
WHEREAS, this date, Levy has been issued two hundred seventy thousand
(270,000) shares (the "Levy Stock") of the Company's Common Voting Stock, $.001
par value (the "Common Stock") and West has been issued two hundred fifty
thousand (250,000) shares of the Common Stock (the "West Stock"); and
WHEREAS, the Levy Stock and the West Stock are hereinafter referred to as
the "Shares", and Levy and West are hereinafter referred to as the "Purchaser".
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, it is agreed as follows:
<PAGE>
SECTION I
REGISTRATION OF SHARES
1.1 The Shares have not been registered under the Securities Act of 1933,
as amended (the "Act"). Prior to any registration of the Shares, or in the
absence of an exemption from registration, the Purchaser shall make no offer,
sale or other disposition of any of the Shares except under circumstances which,
in the opinion of counsel to the Company, will be in compliance with the Act.
Each certificate for the Shares shall bear upon the face thereof the following
legend:
The shares represented by this certificate have been issued pursuant
to an exemption from registration under the Securities Act of 1933. These
shares may not be sold, transferred, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act or the rules
and regulations thereunder.
1.2 Registration under the Securities Laws.
(a) Contemporaneous Registration. In the event that the Company files
a registration statement (defined herein to include a Notification under
Regulation A under the Act and the offering circular included therein) under the
Act which relates to a current offering of securities of the Company (except in
connection with an offering solely to employees), such registration statement
and the prospectus included therein shall also, at the written request to the
Company by the Purchaser, include and relate to, and meet the requirement of the
Act with respect to the public offering of the Shares so as to permit the public
sale thereof in compliance with the Act, provided,
2
<PAGE>
however, the underwriter consents to including said Shares in the contemplated
public offering and the Purchaser agrees to pay to the underwriter the
underwriter's discounts or commissions attributable to said Shares. In the event
of such consent, the Company shall give written notice to the Purchaser of its
intention to file a registration statement under the Act relating to a current
offering of the aforesaid securities of the Company sixty (60) or more days
prior to the filing of such registration statement, and the written request
provided for in the first sentence of this subsection shall be made by the
Purchaser thirty (30) or more days prior to the date specified in the notice as
the date on which it is intended to file such registration statement. Neither
the delivery of such notice by the Company nor of such request by the Purchaser
shall in any way obligate the Company to file such registration statement and
notwithstanding the filing of such registration statement, the Company may, at
any time prior to the effective date thereof, determine not to offer the
securities to which such registration statement relates, without liability to
the Purchaser, except that the Company shall pay such expenses, costs and the
like as are contemplated to be paid by it under subsection (c) of this Section.
Furthermore, if the Purchaser exercises registration rights under this Section
1.2(a) with respect to an offering made by the Company, the Purchaser shall bear
any additional expenses, costs and the like, including but not limited to all
reasonable
3
<PAGE>
legal, accounting and travel expenses, which are caused by the inclusion of the
Purchaser's Shares in such registration.
(b) Terms of Underwriting. In connection with any offering involving
an underwriting of shares issued by the Company, and in addition to the
underwriter's consent, the Company shall not be required to include any of the
Purchaser's Shares in such underwriting unless the Purchaser accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the written
opinion of the underwriters, jeopardize the success of the offering by the
Company. If the total amount of Shares that the Purchaser requests to be
included in such offering exceeds the amount of shares that the underwriters
reasonably believe compatible with the success of the offering, the Company
shall only be required to include in the offering that number of the Shares of
the Purchaser (pro rata with the other offered shares of the Company) which the
underwriters believe will not jeopardize the success of the offering provided
that no such reduction shall be made as a consequence of the filing of a
registration statement with respect to treasury securities offered by the
Company for its own account or any securities offered by selling shareholders.
(c) Demand Registration Rights; Existing Registration. In addition to
the aforementioned registration rights if, at any time after the date hereof,
any Shares acquired hereunder have not been included in the registration
statement referred to in
4
<PAGE>
Section 1.2(a) either because the Purchaser did not desire to sell or was not
permitted to sell pursuant thereto, or if said registration statement included
some but not all of the Shares owned by the Purchaser, then upon written
notification to the Company from the Purchaser that the Purchaser contemplates a
sale under such circumstances that constitute a public offering within the
meaning of the Act, the Company shall as expeditiously as reasonably possible
prepare and file a registration statement with the Securities and Exchange
Commission for such Shares and use its best efforts to cause such registration
statement to become and remain effective; provided, however, that (a) Common
Shares of the Company are then publicly traded pursuant to an effective
registration statement, and (b) in connection with any proposed registration
intended to permit an offering of any securities from time to time (i.e., a
so-called "shelf registration") the Company shall in no event be obligated to
cause any such registration to remain effective for more than one hundred twenty
(120) days. The expense of this registration statement including, without
limitation, all legal and accounting fees, travel and all other expenses, shall
be borne by the Company.
(d) Demand Registration Rights, Initial Registration.
(i) In addition to the aforementioned registration rights, at any
time after February 1, 2001, if the Company has not filed a registration
statement as referred to in Section 1.2(a), then upon written notification to
the Company by
5
<PAGE>
the Purchaser that it wishes to cause a public offering of some or all of the
Shares, within the meaning of the Act, the Company shall then as expeditiously
as reasonably possible prepare and file a registration statement with the
Securities and Exchange Commission for such Shares and use its best efforts to
cause such registration statement to become and remain effective; provided,
however, that the Company be permitted to include an offering of any other
securities of the Company in such registration statement and; further provided
that in connection with any proposed registration intended to permit an offering
of any of the Shares from time to time (i.e., a so-called "shelf registration")
the Company shall in no event be obligated to cause any such registration to
remain effective for more than one hundred twenty (120) days. The expense of
this registration statement, including but not limited to all legal and
accounting fees, travel and all other expenses, shall be borne by the Company.
(ii) In connection with this demand registration right, the
Purchaser shall have the right to compel the Company to adjust the number of its
Shares outstanding in order to cause the availability of that number of Shares
for sale to the public which shall be deemed by the Purchaser to be in the
Purchaser's best interests in effecting the registration of the Shares and
ultimate disposition of the same.
(e) In each instance in which pursuant to this Section the Company
shall take any action to permit a public offering or
6
<PAGE>
sale or other distribution of any of the Shares, the Company shall:
(i) Supply to the Purchaser if it intends to make a public
distribution four (4) executed copies of each registration statement or
Notification and four (4) executed copies of the preliminary, final and other
prospectus or offering circular in conformity with the requirements of the Act
and the rules and regulations promulgated thereunder.
(ii) Cooperate in taking such action as may be necessary to
register or qualify the Shares under such other securities acts or blue sky laws
of such jurisdictions as the Purchaser shall reasonably request and to do any
and all other acts and things which may be necessary or advisable to enable the
Purchaser to consummate such proposed sale or other disposition of its Shares in
any such jurisdiction; provided however, that in no event shall the Company be
obligated to qualify to do business or to file a general consent to service of
process in any jurisdiction where it shall not then be qualified.
(iii) Keep effective for a period of not less than one hundred
eighty (180) days after the initial effectiveness thereof all such registration
statements or Notifications under the Act and cooperate in taking such action as
may be necessary to keep effective such other registrations and qualifications,
and do any and all other acts and things for such period - not to exceed twelve
(12) months - as may be necessary to permit the public sale or other disposition
of such Shares by the Purchaser.
7
<PAGE>
(iv) Indemnify and hold harmless the Purchaser and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Purchaser, any Shares, from and against any and all losses, claims, damages,
and liabilities (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or settling any
claim) arising from (a) any untrue statement of a material fact contained in any
prospectus, registration statement or Notification furnished pursuant to clause
(i) of this subsection, or any prospectus or offering circular included therein
or (b) any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (unless such
untrue statement or omission was based upon information furnished or required to
be furnished in writing to the Company by the Purchaser or any such underwriter
expressly for use therein), which indemnification shall include each person, if
any, who controls the Purchaser or any such underwriter within the meaning of
the Act; provided, however, that the Company shall not be so obligated to
indemnify the Purchaser or any such underwriter or controlling person unless the
Purchaser and underwriter shall at the same time indemnify the Company, its
directors, each officer signing any registration statement or Notification or
any amendment to any registration statements or Notifications and each person,
if any, who controls the Company within the meaning of the Act, from and against
any and all losses, claims, damages and liabilities (including, but
8
<PAGE>
not limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim) arising from (c) any
untrue statement of a material fact contained in any registration statement or
Notification or any amendment to any registration statement or offering circular
furnished pursuant to Clause (i) of this subsection, or (d) any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but the indemnity of the Purchaser, or
any such underwriter or controlling person shall be limited to liability based
upon information furnished, or required to be furnished, in writing to the
Company by the Purchaser or any such underwriter or controlling person expressly
for use therein. The indemnity agreement of the Company therein shall not inure
to the benefit of any such underwriter (or to the benefit of any person who
controls such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect thereof) arising from the sale
of any of such Shares by such underwriter to any person if such underwriter
failed to send or give a copy of the prospectus or offering circular furnished
pursuant to Clause (i) of this subsection, as the same may then be supplemented
or amended.
The Company's obligation under said subsection 1.2(d) shall be conditioned
as to such public offering, upon a timely receipt by the Company in writing of:
9
<PAGE>
(A) Information as to the terms of such public offering furnished by
or on behalf of the Purchaser, if it intends to make a public distribution of
its Shares; and
(B) Such other information as the Company may reasonably require from
the Purchaser, or any underwriter for any of them, for inclusion in such
registration statement, Notification or post-effective amendment.
SECTION II
GENERAL PROVISIONS
2.1 Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
2.2 Each party agrees to indemnify and hold harmless the others against any
fee, loss or expense arising out of claims by brokers or finders employed or
alleged to have been employed by the indemnifying party in connection with this
agreement.
2.3 All notices, elections, demands or other communications required or
permitted to be made or given pursuant to this agreement shall be in writing and
shall be considered as properly given or made if sent and actually received by
courier service, overnight delivery service or first class mail, postage prepaid
or if transmitted (and actually received) by any telecommunication device (e.g.
telex or telecopier) and addressed or sent to the respective parties' addresses
specified below.
10
<PAGE>
Any party may change its address by giving notice in writing to the other
parties of its new address.
To the Company: Puro Corporation of America
56-45 58th Street
Maspeth, NY 11378
Attention: Messrs. Scott Levy
and Jack C. West,
Co-Presidents
To West: Mr. Jack C. West
3207 Victoria Drive
Mt. Kisco, NY 10549
With copies to: Epstein, Becker & Green
250 Park Avenue, 14th Floor
New York, NY 10177
Attention: Bernice K. Leber, Esquire
To Levy: Scott Levy and Beth Levy
With a copy to: Frederick A. Rossetti, Esquire
112 Madison Avenue
New York, NY 10018
2.4 This agreement and any agreements related thereto constitute the entire
agreement between the parties and supersede and cancel any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
2.5 The Company, West and Levy hereby consent to submit themselves to the
jurisdiction of the United States District Court for the Southern District of
New York and the Courts of the State of New York in connection with any disputes
which may arise
11
<PAGE>
hereunder. The Company hereby consents to service of process in the State of New
York by naming the Secretary of State of the State of New York as agent for
service of process. Such submission to jurisdiction and consent to service of
process is nonexclusive of any other jurisdiction or manner of service in which
or by which personal jurisdiction over the Company or West may be obtained.
2.6 This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
2.7 This agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns; provided, however, that any
assignment by any party of its rights under this agreement without the prior
written consent of the other parties shall be void.
2.8 This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective the
day and year first above written.
PURO CORPORATION OF AMERICA
By: /s/ Jack C. West, & Scott Levy
-------------------------------------
Jack C. West, & Scott Levy
Its, Presidents
Hereunto Duly Authorized
12
<PAGE>
SCOTT LEVY
/s/ Scott Levy
-----------------------------------------
BETH LEVY
/s/ Beth Levy
-----------------------------------------
JACK C. WEST
/s/ Jack C. West
-----------------------------------------
13
<PAGE>
EX-10.29
Master Note
[LOGO]
MASTER NOTE
- --------------------------------------------------------------------------------
$2,000,000 Date: 9/13, 1996
FOR VALUE RECEIVED, the undersigned, a New York corporation, promises to
pay to the order of EUROPEAN AMERICAN BANK (the "Bank"), on or before May 31,
1997 (the "Maturity Date"), the sum of Two Million Dollars ($2,000,000), or, if
less, the aggregate unpaid principal amount of all advances made by the Bank
pursuant to the line of credit, not to exceed an aggregate amount at any one
time outstanding of Two Million Dollars ($2,000,000), available to the
undersigned hereunder (the "Line").
The undersigned also promises to pay interest in like money on the unpaid
principal amount hereof from time to time outstanding at a fluctuating rate per
annum equal to the rate of interest as is publicly announced by the Bank at its
principal office from time to time as its prime rate (the "Prime Rate") plus a
margin of 1/4% per annum (the "Prescribed Rate"). Any change in the Prime Rate
shall be effective on the date such change is announced by the Bank. Interest
shall be calculated on the basis of a 360-day year for the actual number of days
elapsed and shall be payable on the first day of each month commencing on the
first such date to occur after the date the first advance is made, and on the
Maturity Date. All payments hereunder shall be payable in immediately available
funds in lawful money of the United States. The undersigned authorizes the Bank
to charge any of the undersigned's accounts for payments of principal or
interest.
Any payment of principal of or interest payable hereunder which is not paid
when due, whether at maturity, by acceleration, or otherwise, shall bear
interest from the date due until paid in full at a rate per annum equal to three
percent (3%) above the Prescribed Rate.
All requests for advances shall be irrevocable and shall be for a minimum
of $25,000 and must be received by the Bank no later than 12:00 noon on the date
of the proposed advance, The Bank may act without liability upon the basis of
telephonic notice believed by the Bank in good faith to be from the undersigned.
In each such case, the undersigned hereby waives the right to dispute the Bank's
record of the terms of such telephonic notice. The undersigned shall immediately
confirm to the Bank in writing each telephonic notice. All advances under the
Line are at the Bank's sole and absolute discretion and the Bank, at its option
and in its sole and absolute discretion and without notice to the undersigned,
may decline to make any advance requested by the undersigned.
Subject to the terms and conditions hereof and the terms and conditions set
forth in any agreement in writing between the Bank and the undersigned, the
undersigned may borrow, repay in whole or in part, and reborrow on a revolving
basis, up to the maximum amount of the Line. Advances may Be prepaid without
premium or penalty together with accrued interest thereon to and including the
date of prepayment. The Bank shall maintain its records to reflect the amount
and date of each advance and of each payment of principal and interest thereon.
All such records shall, absent manifest error, be conclusive as to the
outstanding principal amount hereof; provided, however, that the failure to make
any notation to the Bank's records shall not limit or otherwise affect the
obligations of the undersigned to repay each advance made by the Bank, in
accordance with the terms hereof.
As security for the payment of this Note and of all other obligations and
liabilities of the undersigned to the Bank, whether now or hereafter existing,
joint, several, direct, indirect, absolute, contingent, secured, matured or
unmatured, the undersigned grants to the Bank a right of setoff against, a
continuing security interest in, and an assignment and pledge of all moneys,
deposits (general or special), securities and other property of the undersigned
and the proceeds thereof, now or hereafter held by the Bank on deposit, in
safekeeping, in transit or otherwise, at any time credited by or due from the
Bank to the undersigned, or in which the undersigned shall have an interest.
Upon the occurrence and continuance of any of the following (each an "Event
of Default"): (a) default in the payment when due of any amount hereunder; (b)
filing by or against the undersigned of a petition commencing any proceeding
under any bankruptcy, reorganization, rearrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect, (c) making by the undersigned of an assignment for the benefit of
creditors; (d) petitioning or applying to any tribunal for the appointment of a
custodian, receiver or trustee for the undersigned or for a substantial part of
its assets; (e) death or incapacity of the undersigned (if an individual); (f)
entry of any judgment or order of attachment, injunction or governmental tax
lien or levy issued against the undersigned or against any property of the
undersigned; (g) consent by the undersigned to assume, suffer or allow to exist,
without the prior written consent of the Bank, any lien, mortgage, assignment or
other encumbrance on any of its assets or personal property, now owned or
hereafter acquired, except those liens, mortgages, assignments or other
encumbrances in existence on the date hereof and consented to in writing by the
Bank; (h) default in the punctual payment or performance of this or any other
obligation to the Bank or to any other lender at any time: (i) the existence or
occurrence at any time of one or more conditions or events which, in the sole
opinion of the Bank, has resulted or may result in a material adverse change in
the business, properties or financial condition of the undersigned; (j) failure
on request to furnish any financial information or to permit inspection of the
books and records of the undersigned; (1:)any warranty, representation or
statement in
<PAGE>
any application, statement or agreement with the Bank proves false in any
material respect, (l) default in the observance or performance of any covenant
or agreement of the undersigned herein or in any other agreement between the
Bank and the undersigned; or (m) any of the foregoing events (other than the
event described in clause (a)) shall occur with respect to any guarantor of the
undersigned's obligations hereunder then this Note shall, at the sole option of
the Bank, become due and payable without notice or demand; provided, however, if
an event described in clause (b), clause (c) or clause (d) above occurs, this
Note shall automatically become due and payable. Upon the occurrence and during
the continuance of an Event of Default, the Bank shall be entitled to setoff
against and apply to the payment hereof the balance of any account or accounts
maintained with the Bank by the undersigned and to exercise any other right or
remedy granted hereunder, or under any agreement between the undersigned and the
Bank or available at law or in equity, including, but not limited to, the rights
and remedies of a secured party under the New York Uniform Commercial Code. The
failure by the Bank at any time to exercise any such right shall not be deemed a
waiver thereof, nor shall it bar the exercise of any such right at a later date.
Each and every right and remedy granted to the Bank hereunder or under any
agreement between the undersigned and the Bank or available at law or in equity
shall be cumulative and not exclusive of any other rights, powers, privileges or
remedies, and may be exercised by the Bank from time to time and as often as may
be necessary in the sole and absolute discretion of the Bank.
The undersigned agrees to pay, on demand, all of the Bank's costs and
expenses, including reasonable counsel fees (whether in, house or outside
counsel), in connection with the collection of any amounts due to the Bank
hereunder or in connection with the enforcement of the Bank's rights under this
Note.
This Note shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles of conflict or choice
of laws.
THE UNDERSIGNED HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS NOTE OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND CONSENTS TO THE PLACING OF
VENUE IN THE COUNTY OF NASSAU OR OTHER COUNTY PERMITTED BY LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO HEREIN MAY NOT BE
LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE UNDERSIGNED AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF
THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR
JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH
JUDGMENT. THE UNDERSIGNED AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
CERTIFIED OR REGISTERED MAIL TO ITS ADDRESS SET FORTH BELOW OR SUCH OTHER
ADDRESS THAT THE UNDERSIGNED SHALL HAVE NOTIFIED THE BANK IN WRITING OR ANY
METHOD AUTHORIZED BY THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS PROHIBITED
BY LAW, THE UNDERSIGNED HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE.
The undersigned or any affiliate of the undersigned, shall not use any
portion of the proceeds of this Note nor have any letter of credit issued,
either directly or indirectly, for the purpose of (i) purchasing any securities
underwritten or privately placed by ABN AMRO Securities (USA) Inc. ("AASI"), an
affiliate of the Bank, or (ii) refinancing or making payments of principal,
interest or dividends on any securities issued by the undersigned or any
affiliate of the undersigned, and underwritten, privately placed or dealt in by
AASI.
The undersigned and the Bank hereby agree and acknowledge that any and all
information relating to the undersigned which is furnished by the undersigned to
the Bank (or to any affiliate of the Bank), and which is non-public,
confidential or proprietary in nature, shall be kept confidential by the Bank or
such affiliate in accordance with applicable law; provided, however, that such
information and other credit information relating to the undersigned may be
distributed by the Bank or such affiliate (a) to the Bank's or such affiliate's
directors, officers, employees, attorneys, affiliates, attorneys, auditors and
regulators, and (b) upon the order of a court or other governmental agency
having jurisdiction over the Bank or such affiliate, to any other party. The
undersigned and the Bank further agree that this provision shall survive the
termination of this Note.
The Bank shall not, by any act, delay, omission or otherwise, be deemed to
have waived any of its rights and/or remedies
2
<PAGE>
hereunder. No change, amendment, modification, termination, waiver, or
discharge, in whole or in part, of any provision of this Note shall be effective
unless in writing and signed by the Bank, and if so given by the Bank, shall be
effective only in the specific instance in which given. The undersigned
acknowledges that this Note and the undersigned's obligations under this Note
are, and shall at all times continue to be, absolute and unconditional in all
respects, and shall at all times be valid and enforceable irrespective of any
other agreements or circumstances of any nature whatsoever which might otherwise
constitute a defense to this Note and the obligations of the undersigned under
this Note. The undersigned absolutely, unconditionally and irrevocably waives
any and all right to assert any set-off, counterclaim or crossclaim of any
nature whatsoever with respect to this Note or the undersigned's obligations
hereunder.
In the event any one or more of the provisions contained in this Note
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
The undersigned hereby waives presentment, demand for payment, protest,
notice of dishonor, and any and all other notices or demands in connection with
the delivery, acceptance, performance, default, or enforcement of this Note.
The term "Bank" as used herein shall be deemed to include the Bank and its
successors and assigns, and any holder hereof.
The term "undersigned" as used herein shall, if this Note is signed by more
than one party, unless otherwise stated herein, mean the "undersigned and each
of them" and each undertaking herein contained shall be their joint and several
undertaking. The Bank may proceed against one or more of the undersigned at one
time or from time to time as it elects in its sole and absolute discretion.
At no time shall the rate of interest charged under this Note exceed the
maximum rate of interest permitted under applicable law. If at any time the
Prescribed Rate shall exceed such maximum rate, and thereafter the Prescribed
Rate is below such maximum rate, then the Prescribed Rate shall be increased to
the maximum rate for such period of time as is required so that the total amount
of interest received by the Bank is that which would have been received by the
Bank but for the first sentence of this paragraph.
In the event that any change in applicable law or regulation, or in the
interpretation thereof by any governmental authority charged with the
administration thereof, shall impose on or deem applicable to the Bank any
reserve requirements against this Note or the Line or impose upon the Bank any
other costs or assessments, the undersigned shall pay to the Bank on demand an
amount sufficient to compensate the Bank for the additional cost resulting from
the maintenance or imposition of such reserves, costs or assessments.
Any consents, agreements, instructions or requests pertaining to any matter
in connection with this Note, signed by any one of the undersigned, shall be
binding upon all of the undersigned. This Note shall bind the respective
successors, heirs or representatives of the undersigned. This Note and the Line
shall not be assigned by the undersigned without the Bank's prior written
consent.
IN WITNESS WHEREOF, the undersigned has duly executed this Note the day and
year first above written.
Puro Water Group, In
Witness: By: /s/ Scott Levy
----------------------- --------------------------------
EAB Officer Name: Scott Levy
Title: President
Borrower's Address:
56-45 58th Street
Maspeth, NY 11378
3
<PAGE>
EX-10.30
Commercial Note
[LOGO]
COMMERCIAL NOTE (Term Loan - Floating Rate)
- --------------------------------------------------------------------------------
$ 1,500,000 Date: 9/13, 1996
FOR VALUE RECEIVED, the undersigned a New York corporation, having an
office and principal place of business at 56-45 58th Street, Maspeth, NY 11378
promises to pay to the order of EUROPEAN AMERICAN BANK (the "Bank"), the
principal sum of One Million Five Hundred Thousand ($1,500,000) Dollars, on or
before September 15, 2001 (the "Maturity Date") in fifty-nine (59) equal,
consecutive monthly principal installments of $17,857.14 each on the fifteenth
day of each month commencing October 15, 1996; and a sixtieth (60th) installment
equal to the remaining principal amount outstanding.
The undersigned also promises to pay interest on the unpaid principal
amount hereof on the fifteenth day of each month commencing October 15, 1996 and
on the Maturity Date, at a fluctuating rate per annum equal to the rate of
interest publicly announced from time to time by the Bank at its principal
office to be its prime rate (the "Prime Rate"), plus a margin of 1/2% per annum
(the "Prescribed Rate"). Any change in the Prime Rate shall be effective on the
date such change is announced by the Bank.
Any amount of principal hereunder which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest until paid in
full at a rate 3% per annum in excess of the Prescribed Rate. Interest shall be
calculated on the basis of a 360 day year for the actual number of days elapsed.
All payments hereunder shall be payable in immediately available funds in lawful
money of the United States. The undersigned authorizes the Bank to charge any of
the undersigned's accounts for payments of principal or interest.
The undersigned may, at any time and from time to time, prepay this Note,
in whole or in part, without premium or penalty. All prepayments shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment.
Upon the occurrence and continuance of any of the following (each an "Event
of Default"): (a) default in the payment when due of any amount hereunder; (b)
filing by or against the undersigned of a petition commencing any proceeding
under any bankruptcy, reorganization, rearrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect; (c) the undersigned making an assignment for the benefit of
creditors; (d) petitioning or applying to any tribunal for the appointment of a
custodian, receiver or trustee for the undersigned or for a substantial part of
its assets; (e) death or incapacity of the undersigned (if an individual); (f)
entry of any judgment or order of attachment, injunction or governmental tax
lien or levy issued against the undersigned or against any property of the
undersigned; (g) consent by the undersigned to assume, suffer or allow to exist,
without the prior written consent of the Bank, any lien, mortgage, assignment or
other encumbrance on any of its assets, now owned or hereafter acquired, except
those liens, mortgages, assignments or other encumbrances in existence on the
date hereof and consented to in writing by the Bank; (h) default in the punctual
payment or performance of this or any other obligation to the Bank or to any
other lender at any time; (i) the existence or occurrence at any time of one or
more conditions or events which, in the sole opinion of the Bank, has resulted
or may result in a material adverse change in the business, properties or
financial condition of the undersigned; (j) failure on request to furnish any
financial information or to permit inspection of the books and records of the
undersigned; (k) any warranty, representation or statement in any application,
statement or agreement with the Bank proves false in any material respect; (l)
default in the observance or performance of any covenant or agreement of the
undersigned herein or in any other agreement between the Bank and the
undersigned; or (m) any of the foregoing events (other than the event described
in clause (a)) shall occur with respect to any guarantor of the undersigned's
obligations hereunder, then this Note shall, at the sole option of the Bank,
become due and payable without notice or demand; provided, however, if an Event
of Default described in clause (b), clause (c) or clause (d) above occurs, this
Note shall automatically become due and payable.
As security for the payment of all amounts due or to become due under this
Note and of all other obligations and liabilities of the undersigned to the
Bank, whether now or hereafter existing, joint, several, direct, indirect,
absolute, contingent, secured, matured or unmatured, the undersigned grants to
the Bank a right of setoff against, a continuing security interest in, and an
assignment and pledge of, all moneys, deposits (general or special), securities
and other property of the undersigned and the proceeds thereof, now or hereafter
held by the Bank on deposit, in safekeeping, in transit or otherwise, at any
time credited by or due from the Bank to the undersigned, or in which the
undersigned shall have any interest.
Upon the occurrence and during the continuance of an Event of Default, the
Bank shall be entitled to setoff against and apply to the payment hereof the
balance of any account or account's maintained with the Bank by the undersigned
and to exercise any other right or remedy granted hereunder, or under any
agreement between the undersigned and the Bank or available at law or in equity,
including, but not limited to, the rights and remedies of a secured party under
the New York Uniform Commercial Code. The failure by the Bank at any time to
exercise any such right shall not be deemed a waiver thereof, nor shall it bar
the exercise of any such right at a later date. Each and every right and remedy
granted to the Bank hereunder or under any agreement between the undersigned and
the Bank or available at law or in equity shall be cumulative and not exclusive
of any other rights, powers, privileges or remedies, and may be exercised by the
Bank
<PAGE>
from time to time and as often as may be necessary in the sole and absolute
discretion of the Bank.
In the event that the Bank for any reason shall refer this Note to an
attorney for the enforcement thereof, the undersigned agrees to pay in addition
to the unpaid principal, interest and late charges due hereunder, the Bank's
reasonable attorneys' fees (whether in-house or outside counsel), together with
all costs and expenses of any such action.
The Bank shall not, by any act, delay, omission or otherwise, be deemed to
have waived any of its rights and/or remedies hereunder. No change, amendment,
modification, termination, waiver, or discharge, in whole or in part, of any
provision of this Note shall be effective unless in writing and signed by the
Bank, and if so given by the Bank, shall be effective only in the specific
insurance in which given. The undersigned acknowledges that this Note and the
undersigned's obligations under this Note are, and shall at all times continue
to be, absolute and unconditional in all respects, and shall at all times be
valid and enforceable irrespective of any other agreements or circumstances of
any nature whatsoever which might otherwise constitute a defense to this Note
and the obligations of the undersigned under this Note. The undersigned
absolutely, unconditionally and irrevocably waives any and all right to assert
any set-off, counterclaim or crossclaim of any nature whatsoever with respect to
this Note or the undersigned's obligations hereunder.
This Note shall be governed by and construed in accordance with the laws of
the State of New York without giving effect to principles of conflict or choice
of laws.
THE UNDERSIGNED HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS NOTE OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND CONSENTS TO THE PLACING OF
VENUE IN THE COUNTY OF NASSAU OR OTHER COUNTY PERMITTED BY LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO HEREIN MAY NOT BE
LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE UNDERSIGNED AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF
THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR
JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH
JUDGMENT. THE UNDERSIGNED AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
CERTIFIED OR REGISTERED MAIL TO ITS ADDRESS SET FORTH BELOW OR SUCH OTHER
ADDRESS THAT THE UNDERSIGNED SHALL HAVE NOTIFIED THE BANK IN WRITING OR ANY
METHOD AUTHORIZED BY THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS PROHIBITED
BY LAW, THE UNDERSIGNED HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE.
The undersigned or any affiliate of the undersigned, shall not use any
portion of the proceeds of this Note nor have any letter of credit issued,
either directly or indirectly, for the purpose of (i) purchasing any securities
underwritten or privately placed by ABN AMRO Securities (USA) Inc. ("AASI"), an
affiliate of the Bank, or (ii) refinancing or making payments of principal,
interest or dividends on any securities issued by the undersigned or any
affiliate of the undersigned, and underwritten, privately placed or dealt in by
AASI.
The undersigned and the Bank hereby agree and acknowledge that any and all
information relating to the undersigned which is furnished by the undersigned to
the Bank (or to any affiliate of the Bank), and which is non-public,
confidential or proprietary in nature, shall be kept confidential by the Bank or
such affiliate in accordance with applicable law; provided, however, that such
information and other credit information relating to the undersigned may be
distributed by the Bank or such affiliate (a) to the Bank's or such affiliate's
directors, officers, employees, attorneys, affiliates, attorneys, auditors and
regulators, and (b) upon the order of a court or other governmental agency
having jurisdiction over the Bank or such affiliate, to any other party. The
undersigned and the Bank further agree that this provision shall survive the
termination of this Note.
2
<PAGE>
At no time shall the rate of interest charged under this Note exceed the
maximum rate of interest permitted under applicable law. If at any time the
Prescribed Rate shall exceed such maximum rate, and thereafter the Prescribed
Rate is below such maximum rate, then the Prescribed Rate shall be increased to
the maximum rate for such period of time as is required so that the total amount
of interest received by the Bank is that which would have been received by the
Bank but for the first sentence of this paragraph.
The undersigned hereby waives presentment, demand for payment, protest,
notice of dishonor, and any and all other notices or demands in connection with
the delivery, acceptance, performance, default, or enforcement of this Note.
In the event any one or more provisions contained in this Note should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
The term the "Bank" as used herein shall be deemed to include the Bank and
its successors and assigns and any bolder hereof.
The term "undersigned" as used herein shall, if this Note is signed by more
than one party, unless otherwise stated herein, mean the "undersigned and each
of them" and each undertaking herein contained shall be their joint and several
undertaking. The Bank may proceed against one or more of the undersigned at one
time or from time to time as it sees fit in its sole and absolute discretion.
This Note shall bind the respective successors, assigns, heirs and
representatives of the undersigned. This Note shall not be assigned by the
undersigned without the Bank's prior written consent.
Any consents, agreements, instructions or requests pertaining to any matter
in connection with this Note, signed by any one of the undersigned, shall be
binding upon all of the undersigned.
IN WITNESS WHEREOF, the undersigned has duly executed this Note the day and
year first above written.
Witness: Puro Water Group, Inc.
-----------------------
EAB Officer
By: /s/ Scott Levy
--------------------------------
Name:
Title: President
Borrower's Address:
56-45 58th Street
Maspeth, NY 11378
3
<PAGE>
EX-10.31
[Letterhead of EAB]
GENERAL SECURITY AGREEMENT*
- --------------------------------------------------------------------------------
Date: 7/31,1996
The undersigned (herein, whether one or more in number, referred to as
"Debtor" and which, if two or more in number, shall be jointly and severally
bound) with an address as it appears with the signature below, hereby agree(s)
in favor of European American Bank, a New York banking corporation having its
principal office at One EAB Plaza, Uniondale, New York (herein referred to as
"Secured Party"), as follows:
1. Security Interest.
(a) Grant of Security. As security for the Obligations (as defined below),
Debtor hereby grants to Secured Party a first priority security interest in, all
of Debtor's right, title and interest, whether now existing or hereafter arising
or acquired, in and to any and all items of personal property described on
Schedule A hereto together with all attachments, accessions and equipment now or
hereafter affixed thereto or used in connection therewith, all substitutions and
replacements thereof and any products and proceeds thereof (the "Collateral").
Security for Obligations. This Security Agreement secures the payment of
all now existing or hereafter arising obligations of Debtor to Secured Party,
whether primary or secondary, direct or indirect, absolute or contingent, joint
or several, secured or unsecured, due or not, liquidated or unliquidated,
arising by operation of law or otherwise under any promissory note, guarantee,
loan or credit agreement, letter of credit, draft, acceptance, interest rate or
foreign exchange agreement, mortgage or other documents evidencing indebtedness
whether for principal, interest, fees, expenses or otherwise, together with all
costs of collection or enforcement, including, without limitation, reasonable
attorneys' fees incurred in any collection efforts or in any action or
proceeding (all such obligations being the "Obligations").
(c) Debtor Remains Liable. This Security Agreement shall not affect
Debtor's liability to perform all of its duties and obligations under the
transactions giving rise to the Obligations. The exercise by Secured Party of
any of the rights hereunder shall not release Debtor from any of its duties or
obligations under the transactions giving rise to the Obligations, which shall
remain unchanged as if this Security Agreement had not been executed. Secured
Party shall not have any obligation or liability under the transactions giving
rise to the Obligations by reason of this Security Agreement, nor shall Secured
Party be obligated to perform any of the obligations or duties of Debtor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
(d) Continuing Agreement. This Security Agreement shall create a continuing
security interest in the Collateral and shall remain in full force and effect
until payment in full of the Obligations.
2 Debtor's Title; Liens and Encumbrances.
Debtor represents and warrants that Debtor is, or to the extent that this
Security Agreement states that the Collateral is to be acquired after the date
hereof, will be, the owner of the Collateral, having good and marketable title
thereto, free from any and all liens, security interests, encumbrances and
claims. Debtor will not create, assume or permit to exist any such lien,
security interest, encumbrance or claim on or against the Collateral except as
permitted by this Security Agreement, and Debtor will promptly notify Secured
Party of any such other claim, lien, security interest or other encumbrance made
or asserted against the Collateral and will defend the Collateral against any
such claim, lien, security interest or other encumbrance.
3. Representations and Warranties;
Location of Collateral and Records;
Business and Trade Names of Debtor.
(a) Debtor represents and warrants to Secured Party as follows: Debtor has
no place of business, offices where Debtor's books of account and records are
kept, or places where the Collateral is used, stored or located, except as set
forth on Schedule I annexed hereto. Debtor shall promptly notify Secured Party
of any change in the foregoing representation. Debtor shall at all times
maintain its records as to the Collateral at its chief place of business at the
address referred to on Schedule I and at none other. Debtor
- ----------
* This form is intended for use if collateral is personal property. Not intended
for use if collateral is any form of bank account or marketable securities.
<PAGE>
further covenants that, except for Collateral delivered to Secured Party or an
agent for Secured Party, Debtor will not store, use or locate any of the
Collateral at any place other than as listed on Schedule I annexed hereto.
(b) Debtor currently uses, and during the last five years has used, no
business or trade names, except as set forth on Schedule I annexed hereto.
Debtor shall promptly notify Secured Party, in sufficient detail, of any changes
in, additions to, or deletions from the business or trade names used by Debtor
for billing purposes.
(c) The Collateral is now and will be used in Debtor's business and not for
personal, family, household or farming use.
(d) Debtor has paid and will continue to pay or otherwise provide for the
payment when due, of all taxes, assessments or contributions required by law
which have been or may be assessed or levied against Debtor, whether with
respect to any of the Collateral, to any wages or salaries paid by Debtor, or
otherwise, and will deliver satisfactory proof of such payment to Secured Party
on demand.
(e) The grant of the security interest in the Collateral is effective to
vest in Secured Party a valid first priority security interest, superior to the
rights of any person in and to the Collateral as set forth herein.
4. Perfection of Security Interest.
Debtor shall execute all such financing statements pursuant to the Uniform
Commercial Code or other notices appropriate under applicable law, including the
Federal Assignment of Claims Act and any state motor vehicles registration
statute, as Secured Party may require, each in form satisfactory to Secured
Party. Debtor also shall pay all filing or recording costs with respect thereto,
and all costs of filing or recording this Security Agreement or any other
agreement or document executed and delivered pursuant hereto or to the
Obligations (including the cost of all federal, state or local mortgage,
documentary, stamp or other taxes), in each case, in all public offices where
filing or recording is deemed by Secured Party to be necessary or desirable.
Debtor authorizes Secured Party to (i) file any Uniform Commercial Code
financing statements or amendments thereto without the signature of Debtor or by
signing of Debtor's name to any such financing statements as its
attorney-in-fact, (ii) file a photographic or other reproduction of this
Security Agreement as a financing statement, (iii) file notices of assignment
pursuant to the Federal Assignment of Claims Act, (iv) file applications for
certificates of title or (v) take all other action which Secured Party may deem
necessary or desirable to perfect or otherwise protect the liens and security
interests created hereunder and to obtain the benefits of this Security
Agreement.
5. General Covenants.
Debtor shall:
(a) furnish Secured Party from time to time, at Secured Party's request,
written statements and schedules further identifying and describing the
Collateral in such detail as Secured Party may reasonably require;
(b) advise Secured Party promptly, in sufficient detail, of any substantial
change in the Collateral or of the occurrence of any event which would affect
the value of the Collateral or Secured Party's security interest therein;
(c) comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to Debtor or any
Collateral or to the operation of Debtor's business except where the failure to
comply (i) is non-material and (ii) has no effect on the value of the Collateral
or on the ability of Secured Party to exercise its rights and remedies
hereunder;
(d) perform and observe all covenants, restrictions and conditions
contained in any agreement or document executed in connection with the
Obligations as though the same were fully set forth in this Security Agreement;
(e) promptly execute and deliver to Secured Party such further agreements
or other instruments and take such further action from time to time as Secured
Party may deem necessary to perfect, protect or enforce its security interests
in the Collateral or otherwise to effect the intent of this Security Agreement;
(f) keep or cause to be kept the Collateral in good working order and
marketable condition, ordinary wear and tear excepted;
2
<PAGE>
(g) insure the Collateral against loss or damage by fire or other hazards,
and extended coverage, theft, burglary, bodily injury and such other risks, with
such companies and in such amounts, as is required by Secured Party at any time;
(h) use the Collateral for lawful purposes only in conformity with all
laws, rules and regulations;
(i) allow Secured Party and its agents, at all reasonable times, to inspect
any of the Collateral and to examine and make extracts from Debtor's books and
records relating to the Collateral; and
(j) not assign, sell, mortgage, lease, transfer, pledge, grant a security
interest in or lien upon, encumber or otherwise dispose of or abandon, any part
or all of the Collateral, without the express prior written consent of Secured
Party, except for the sale from time to time in the ordinary course of business
of Debtor of such items of Collateral as may constitute part of the business
inventory of Debtor.
6. Assignment of Insurance.
At or prior to the date hereof, Debtor shall deliver to Secured Party
certificates of the issuing companies with respect to all policies of insurance
owned by Debtor covering or in any manner relating to the Collateral, in form
and substance satisfactory to Secured Party, naming Secured Party as an
additional insured party as its interests may appear with respect to liability
coverage and as loss payee with respect to property and extended insurance
coverage, and indicating that no such policy will be terminated, or reduced in
coverage or amount, without at least thirty (30) days prior written notice from
the insurer to Secured Party. Debtor hereby assigns to Secured Party all sums,
including returned or unearned premiums, which may become payable under or in
respect of any such policy of insurance, and Debtor hereby directs each
insurance company issuing any such policy to make payment of sums directly to
Secured Party. Debtor hereby appoints Secured Party as Debtor's attorney-in-fact
with authority to endorse any check or draft representing any such payment and
to execute any proof of claim, subrogation receipt and any other document
required by such insurance company as a condition to or otherwise in connection
with such payment, and upon the occurrence of any Event of Default, to cancel,
assign or surrender any such policies. All such sums received by Secured Party
shall be applied by Secured Party to satisfaction of the Obligations or, to the
extent that such sums represent unearned premiums in respect of any policy of
insurance on the Collateral refunded by reason of cancellation, toward payment
for similar insurance protecting the respective interests of Debtor and Secured
Party, or as otherwise required by applicable law.
7. Fixtures.
Except to the extent that fixtures are included in the description of the
Collateral in Schedule A hereto, it is the intent of Debtor and Secured Party
that none of the Collateral is or shall be regarded as fixtures, as that term is
used or defined in Article 9 of the Uniform Commercial Code, and Debtor
represents and warrants that it has not made and is not bound by any lease or
other agreement which is inconsistent with such intent. Nevertheless, if the
Collateral or any part thereof is or is to become attached or affixed to any
real estate, Debtor will, upon request, furnish Secured Party with a disclaimer
or subordination in form satisfactory to Secured Party of the holder of any
interest in the real estate to which the Collateral is attached or affixed,
together with the names and addresses of the record owners of, and all other
persons having interest in, and a general description of, such real estate.
8. Collections.
(a) Except as provided herein, Debtor may collect all checks, drafts, cash
or other remittances (i) in payment of any of its accounts, contract rights or
general intangibles constituting part of the Collateral, (ii) in payment of any
Collateral sold, transferred, leased or otherwise disposed of, or (iii) in
payment of or in account of its accounts, contracts, notes, drafts, acceptances
and all other forms of obligations relating to any of the Collateral so sold,
transferred, or leased or otherwise disposed of. All of the foregoing amounts so
collected after the occurrence of an Event of Default shall be held in trust by
Debtor for and as the property of Secured Party, and shall not be commingled
with other funds, money or property of Debtor.
(b) Upon the request of Secured Party, Debtor will immediately upon receipt
of all such checks, drafts, cash or other remittances in payment of any of its
accounts, contract rights or general intangibles constituting part of the
Collateral or in payment for any Collateral sold, transferred, leased or
otherwise disposed of, deliver any such items to Secured Party accompanied by a
remittance report in form supplied or approved by Secured Party. Debtor shall
deliver such items in the same form received, endorsed or otherwise assigned by
Debtor where necessary to permit collection of such items.
3
<PAGE>
(c) Upon the request of Secured Party, Debtor will promptly notify Secured
Party in writing of the return or rejection of any goods represented by any
accounts, contract rights or general intangibles and Debtor shall forthwith
account therefor to Secured Party in cash without demand or notice. Until such
payment has been received by Secured Party, Debtor will receive and hold all
such goods separate and apart, in trust for and subject to the security interest
in favor of Secured Party, and Secured Party is authorized to sell, for Debtor's
account and at Debtor's sole risk, all or any part of such goods.
(d) In its discretion, Secured Party may, upon the occurrence of an Event
of Default, in its name or Debtor's or otherwise, notify any account debtor or
obligor of any account, contract, instrument, chattel paper or general
intangible included in the Collateral to make payment to Secured Party.
(e) All of the foregoing remittances shall be applied and credited by
Secured Party in accordance with the provisions of Section 10(c) of this
Security Agreement.
9. Events of Default.
The occurrence of any one or more of the following events shall constitute
an event of default ("Event of Default") by Debtor under this Security
Agreement: (a) if a "Default" or "Event of Default" shall occur under the terms
of any agreement giving rise to or executed in connection with the Obligations;
(b) if at any time Secured Party shall, in its sole discretion, consider the
Obligations insecure or any part of the Collateral unsafe, insecure or
insufficient, and Debtor shall not on demand furnish other collateral or make
payment on account, satisfactory to Secured Party; (c) if Debtor or any obligor,
guarantor of or any party to any of the Obligations or the Collateral (the same,
including Debtor, being collectively referred to herein as "Obligors") shall
default in the punctual payment of any sum payable with respect to, or in the
observance or performance of any of the terms and conditions of, any Obligations
or of this Security Agreement or any other agreement between any Obligor and
Secured Party; (d) if any warranty or representation made to Secured Party by or
on behalf of any Obligor is false or misleading in any material respect; (e) in
the event of loss, theft, substantial damage to or destruction of any
Collateral, or the making or filing of any lien, levy, or execution on, or
seizure, attachment or garnishment of, any of the Collateral; (f) if any of the
Obligors being a natural person or any general partner or member of an Obligor
which is a partnership or a limited liability company, shall die or (being a
partnership, limited liability company or corporation) shall be dissolved, or if
any of the Obligors (if an entity) shall fail to maintain its existence in good
standing; (g) if any of the Obligors shall become insolvent (however defined or
evidenced) or make an assignment for the benefit of creditors, or make or send
notice of an intended bulk transfer, or if there shall be convened a meeting of
the creditors or principal creditors of any of the Obligors or if a committee of
creditors is appointed for any of them; (h) if there shall be filed by or
against any of the Obligors any petition for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any insolvency,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity); (i) if
the usual business of any of the Obligors shall be terminated or suspended; (j)
if any proceedings, procedure or remedy supplementary to or in enforcement of
judgment shall be commenced against, or with respect to any property of, any of
the Obligors; or (k) if any petition or application to any court or tribunal, at
law or in equity, be filed by or against any of the Obligors for the appointment
of any receiver or trustee for any of the Obligors or any part of the property
of any of them.
10. Rights and Remedies.
(a) In the event of the occurrence and continuance of any Event of Default,
Secured Party shall at any time thereafter have the right, with or without (to
the extent permitted by applicable law) notice to Debtor, as to any or all of
the Collateral, by any available judicial procedure or without judicial process,
to take possession of the Collateral and without liability for trespass to enter
any premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral, and generally to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, Debtor agrees
that Secured Party shall have the right to sell, lease, or otherwise dispose of
all or any part of the Collateral, whether in its then condition or after
further preparation or processing, either at public or private sale or at any
broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such terms and conditions, all as
Secured Party in its sole discretion may deem advisable, and Secured Party shall
have the right to purchase at any such sale; and, if any Collateral shall
require rebuilding, repairing, maintenance, preparation, or is in process or
other unfinished state, Secured Party shall have the right, at its sole option
and discretion, and at Debtor's sole cost and expense, to do such rebuilding,
repairing, preparation, processing or completion of manufacturing, for the
purpose of putting the Collateral in such saleable or disposable form as it
shall deem appropriate. At Secured Party's request, Debtor shall assemble the
Collateral and make it available to Secured Party at places which Secured Party
shall select, whether at Debtor's premises or elsewhere, and make available to
Secured Party, without rent, all of Debtor's premises and facilities for the
purpose of Secured Party's taking possession of, removing or putting the
Collateral in saleable or disposable form. If any of the Collater-
4
<PAGE>
al consists of motor vehicles, Secured Party may use Debtor's license plates.
(b) Any such sale, lease or other disposition of Collateral may be made
without demand for performance or any notice of advertisement whatsoever except
that where an applicable statute requires reasonable notice of sale or other
disposition, Debtor agrees that the sending of five days notice by ordinary
mail, postage prepaid, to Debtor of the place and time of any public sale or of
the time at which any private sale or other intended disposition is to be made,
shall be deemed reasonable notice thereof. Notwithstanding the foregoing, if any
of the Collateral is perishable and may be materially diminished in value during
such five day period, Secured Party shall provide Debtor with such shorter
notice as it deems reasonable under the circumstances.
(c) The proceeds of any such sale, lease or other disposition of the
Collateral shall be applied first to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like, and to the reasonable
attorneys' fees and legal expenses incurred by Secured Party, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which Secured Party shall account to Debtor
for any surplus proceeds. If, upon the sale, lease or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
Secured Party is legally entitled, Debtor will be liable for the deficiency,
together with interest thereon, at the rate prescribed in the agreements giving
rise to the Obligations, and the reasonable fees of any attorneys employed by
Secured Party to collect such deficiency. To the extent permitted by applicable
law, Debtor waives all claims, damages and demands against Secured Party arising
out of the repossession, removal, retention or sale of the Collateral.
11. Costs and Expenses.
Any and all fees, costs and expenses, of whatever kind or nature, including
the reasonable attorneys' fees and legal expenses incurred by Secured Party, in
connection with the filing or recording of financing statements and other
documents (including all taxes in connection therewith) in public offices, the
payment or discharge of any taxes, insurance premiums, encumbrances or otherwise
protecting, maintaining or preserving the Collateral and Secured Party's
security interest therein, or in defending or prosecuting any actions or
proceedings arising out of or related to the transaction to which this Security
Agreement relates, shall be paid by Debtor on demand. Until so paid, all such
amounts shall be added to the principal amount of the Obligations and shall bear
interest at the rate prescribed in the agreements giving rise to the
Obligations.
12. Power of Attorney.
Debtor authorizes Secured Party and does hereby make, constitute and
appoint Secured Party, and any officer or agent of Secured Party, with full
power of substitution, as Debtor's true and lawful attorney-in-fact, with power,
in its own name or in the name of Debtor: (a) to endorse any notes, checks,
drafts, money orders, or other instruments of payment (including payments
payable under or in respect of any policy of insurance) in respect of the
Collateral that may come into possession of Secured Party; (b) to sign and
endorse any invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts, and other documents relating to Collateral;
(c) to pay or discharge any taxes, liens, security interest or other
encumbrances at any time levied or placed on or threatened against the
Collateral; (d) to demand, collect, receipt for, compromise, settle and sue for
monies due in respect of the Collateral; (e) to receive, open and dispose of all
mail addressed to Debtor and to notify the Post Office authorities to change the
address for delivery of mail addressed to Debtor to such address as Secured
Party may designate; and (f) generally to do all acts and things which Secured
Party deems necessary to protect, preserve and realize upon the Collateral and
Secured Party's security interest therein. Debtor hereby approves and ratifies
all acts of said attorney or designee, who shall not be liable for any acts of
commission or omission, nor for any error or judgment or mistake of fact or law
except for its own gross negligence or willful misconduct. This power of
attorney shall be irrevocable for the term of this Security Agreement and
thereafter as long as any of the Obligations shall be outstanding.
13. Notices.
Unless the party to be notified otherwise notifies the other party in
writing as provided in this Section, notices shall be given hereunder by
telecopy, by certified mail or by recognized overnight delivery services to
Debtor at its address on the signature page of this Security Agreement and to
Secured Party at One EAB Plaza, Uniondale, New York 11555, Attn.: Legal
Department. Notices shall be effective (a) if given by certified mail, on the
third day after deposit in the mails with postage prepaid, addressed as
aforesaid; (b) if given by recognized overnight delivery service, on the
business day following deposit with such service, addressed as aforesaid; or (c)
if given by telecopy, when the telecopy is transmitted to the telecopy number as
aforesaid; provided that all notices to Secured Party shall be effective on
receipt.
5
<PAGE>
14. Other Security.
To the extent that the Obligations are now or hereafter secured by property
other than the Collateral or by the guarantee, endorsement or property of any
other person, then Secured Party shall have the right in its sole discretion to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of Secured Party's rights
and remedies hereunder.
15. Further Security.
To further secure the Obligations, Debtor hereby grants, pledges and
assigns to Secured Party a continuing lien on, security interest in and rights
of set-off in all money, securities and other property of Debtor, and the
proceeds thereof, how or here-after actually or constructively held or received
by or for Secured Party or any affiliate of Secured Party. Debtor hereby
authorizes Secured Party to deliver a copy of this Agreement to others as
written notification of Debtor's transfer of a security interest in the
foregoing property. Secured Party is hereby authorized at any time and from time
to time, without notice, to apply all or part of such moneys, securities,
property, proceeds, deposits or credits to any of the Obligations in such
amounts as Secured Party may elect in its sole and absolute discretion, although
the Obligations may then be contingent or unmatured and whether or not the
collateral security may be deemed adequate.
16. Miscellaneous.
(a) Beyond the safe custody thereof, Secured Party shall have no duty as to
the collection of any Collateral in its possession or control or in the
possession or control of any agent or nominee of Secured Party, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
(b) No course of dealing between Debtor and Secured Party, or Secured
Party's failure to exercise or delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof. Any single or partial exercise of
any right, power or privilege hereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) All of Secured Party's rights and remedies with respect to the
Collateral, whether established hereby or by any other agreements, instruments
or documents or by law, shall be cumulative and may be exercised singly or
concurrently.
(d) This Security Agreement may be amended or modified, and a provision
hereof may be waived, only by a writing signed by all of the patties hereto.
(e) The provisions of this Security Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Security Agreement in any jurisdiction.
(f) The benefits of this Security Agreement shall inure to the benefit of
the successors and assigns of Secured Party. The rights and obligations of
Debtor under this Security Agreement shall not be assigned or delegated without
the prior consent of Secured Party.
(g) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAWS
PRINCIPLES.
(h) Debtor hereby irrevocably consents to the jurisdiction of the courts of
the State of New York and of any Federal Court located in such State in
connection with any action or proceeding arising out of or relating to the
Obligations, this Security Agreement or the Collateral, or any document or
instrument delivered with respect to any of the Obligations. Debtor hereby
waives personal service of any summons, complaint or other process in connection
with any such action or proceeding and agrees that the service thereof may be
made by certified mail directed to Debtor at the address provided herein for
receipt of notices. Debtor so served shall appear or answer to such summons,
complaint or other process within thirty days after the mailing thereof. Should
Debtor so served fail to appear or answer within said thirty-day period, Debtor
shall be deemed in default and judgment may be entered by Secured Party against
Debtor for the amount or such other relief as may be demanded in any summons,
complaint or other process so served. In the alternative, in its discretion
Secured Party may effect service upon Debtor in any other form or manner
permitted by law.
6
<PAGE>
(i) IN THE EVENT OF ANY LITIGATION RELATING TO THIS AGREEMENT OR THE
OBLIGATIONS, DEBTOR WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY.
IN WITNESS WHEREOF, the Debtor has executed this Agreement as of the day
and year first written above.
/s/ [ILLEGIBLE] Puro Water Group, Inc.
- -----------------------
Witness:
By: /s/ Jack C. West
------------------------
Name: Jack C. West
Title: PRESIDENT
Borrower's Address:
56-45 58th Street
Maspeth, NY 11378
7
<PAGE>
SCHEDULE I
TO
GENERAL SECURITY AGREEMENT
Offices Where Records Are Kept:
56-45 58th Street
Maspeth, NY 11378
Other Locations Where Collateral
Is Stored, Used or Located:
101 North Park St.
East Orange, NJ 07017
Business and Trade Names
Used by Debtor:
N/A
8
<PAGE>
SCHEDULE A TO GENERAL SECURITY AGREEMENT DATED 7/31, 1996
All personal property of Debtor, now owned and hereafter acquired, of every kind
and description, including, without limitation, all inventory, equipment,
fixtures, accounts, chattel paper, contract rights, instruments, documents and
general intangibles, and all products and proceeds thereof.
Puro Water Group, Inc.
By: /s/ Jack C. West
------------------------
Name: Jack C. West
Title: PRESIDENT
Witnessed By: [ILLEGIBLE]
--------------------
<PAGE>
EX-10.32
[Letterhead of EAB] AGREEMENT OF SUBORDINATION AND ASSIGNMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT OF SUBORDINATION AND ASSIGNMENT, is entered into as of
January 31, 1996 by Trust U/W W. Palmer Trust located at 79 East 79th Street,
New York, NY 10021 (the "Creditor"), in favor of and for the benefit of EUROPEAN
AMERICAN BANK, a New York banking corporation (the "Bank").
RECITALS
A. The Bank has made and may make, from time to time, loans, advances,
extensions of credit and/or other financial accommodations (collectively, the
"Loans") for the account of The Puro Water Group, Inc. (the "Debtor").
B. The Creditor, being affiliated with the Debtor, acknowledges and agrees
that the Creditor will receive direct and indirect benefits from the extension
of the Loans and any further extensions of credit made to the Debtor from time
to time.
C. In order to induce the Bank, its successors or assigns, from time to
time to make the Loans and such other advances, loans, discounts or extensions
of credit as it may deem advisable, directly or indirectly, to or for the
account of the Debtor, or to others upon the Debtor's obligations, or to acquire
obligations (direct or indirect) of the Debtor, or to have the Debtor become
obligated to the Bank in any manner, and/or to grant to or for the account of
the Debtor such renewals, extensions, forbearance's, releases of collateral or
other relinquishments of legal rights, as the Bank may deem advisable and in
consideration of advances, loans, discounts or extensions of credit, due or to
become due, whether heretofore or hereafter made to the Debtor and for other
valuable consideration, receipt of which is hereby duly acknowledged, the
Creditor agrees to subordinate the obligations of the Debtor to the Creditor on
the terms set forth herein.
Accordingly, the Creditor hereby agrees as follows:
1. Subordination. The Creditor agrees that all indebtedness now or
hereafter owing to the Creditor by the Debtor whether for principal, interest,
extensions of credit after the filing of a petition initiating any proceeding
referenced in paragraph 2 hereof, premiums, fees, indemnities, expenses or
otherwise and all claims and demands which the Creditor now has or may hereafter
have or acquire against the Debtor (such indebtedness, claims and demands,
collectively, hereinafter called "Subordinated Indebtedness") are not to be
payable, and that no payment on account thereof, nor any security therefor,
shall be received, accepted or retained by the Creditor and no suit or
proceeding seeking such payment or to foreclose or take any other action with
respect to the collateral therefor shall be commenced unless and until the
Debtor has paid and satisfied in full all its obligations to the Bank of every
kind and description whether for principal, interest (including, without
limitation, interest after the filing of a petition initiating any proceeding
referenced in paragraph 2 hereof), premiums, fees, indemnities, expenses or
otherwise, whether or not represented by negotiable instruments or other
writings, whether direct or indirect, absolute or contingent, due or not due,
secured or unsecured, original, deferred, renewed or extended, now in existence
or hereafter incurred, originally contracted with the Bank or, with another and
assigned or transferred to or otherwise acquired by the Bank, or in which the
Bank may acquire a participation, and whether contracted by the Debtor alone or
jointly and/or severally with another or others (such obligations, collectively,
hereinafter called the "Senior Indebtedness").
2. Assignment. The Creditor pledges, transfers and assigns, and grants to
the Bank a security interest in, the Subordinated Indebtedness and all
collateral therefor and all proceeds thereof with the full and irrevocable right
on the part of the Bank, but without obligation, in its own name or in the name
of the Creditor, to enforce, demand, collect, compromise and receive payment of
the Subordinated Indebtedness or any part thereof by suit, proof of claim in any
proceeding with respect to bankruptcy, reorganization, arrangement, adjustment
of debts, insolvency or liquidation or otherwise and to vote the Subordinated
Indebtedness in any such proceedings for or against any proposal or resolution,
for a trustee or trustees or for a committee of creditors or for the acceptance
or rejection of any proposed arrangement, plan of reorganization, wage earner's
plan, composition, settlement or extension, all as the Bank deems necessary to
protect its interest. The Creditor shall not transfer, assign, encumber or
subordinate any right, claim or interest of any kind in or to any of the
Subordinated Indebtedness except as expressly contemplated by this agreement.
3. Waiver and Consent. The Creditor waives any and all notice of acceptance
of this agreement and of the creation, modification, renewal or extension or
accrual of the Senior Indebtedness, or any part thereof, present or future, and
of the reliance of the Bank upon this agreement. The Creditor hereby consents
that, without notice to or further assent by the Creditor, the Senior
Indebtedness, or any part thereof, may from time to time in whole or in part, be
renewed, extended, modified, compromised or released by the Bank, as the Bank
may deem advisable, that any collateral and/or lien or liens for the Senior
Indebtedness, or any part thereof, may from time to time, in whole or in part,
be exchanged, sold or surrendered by the Bank, as it deems advisable, and that
any deposit balance or balances as to the credit of the Debtor may from time to
time, in whole or in part, be surrendered or released by the Bank, as it may
deem advisable, all
<PAGE>
without impairing, abridging, affecting or releasing the subordination and
rights of the Bank contained in this agreement.
4. Payments. Should any payment, dividend, security, proceeds or other
distribution be received by the Creditor for or on account of the Subordinated
Indebtedness, or any part thereof, prior to the satisfaction of all Senior
Indebtedness, the Creditor shall promptly deliver and assign the same to the
Bank in the form received and, if necessary, properly endorsed to permit
collection, for application on account of the Senior Indebtedness or any part
thereof principal and/or interest as the Bank may elect), whether matured or
unmatured, and until so delivered, the same shall be held in trust by the
Creditor as the property of the Bank and shall not be commingled with any assets
of the Creditor. In the event of the failure of the Creditor to endorse or
assign any security or instrument for the payment of money so received by the
Creditor or payable to the Creditor's order, the Bank or any officer or employee
thereof is hereby irrevocably constituted and appointed attorneys in fact for
the Creditor, with full power to make any such endorsement or assignment and
with full power of substitution.
5. Representations and Warranties; Additional Instruments; Books and
Records. The Creditor represents and warrants to the Bank that: (i) the
aggregate principal sum of the Subordinated Indebtedness on the date hereof is
$4,000,000 without counterclaim, defense or offset, (ii) the Subordinated
Indebtedness is not represented by any notes or other negotiable instruments,
except such notes or other negotiable instruments, if any, as have been endorsed
and delivered by the Creditor to the Bank simultaneously with the execution of
this agreement or have been marked with a legend, referring to this agreement,
in form and substance satisfactory to the Bank, and (iii) the Creditor is
solvent and has granted no security interest in and has made no prior transfer
or assignment of the Subordinated Indebtedness or any part thereof. The Creditor
agrees that at no time hereafter will the Subordinated Indebtedness, or any part
thereof, be represented by any notes, other negotiable instruments or other
writings, except notes, other negotiable instruments or other writings endorsed
and delivered to the Bank, or marked with a legend, as above provided. The
Creditor agrees that (i) its books and records shall appropriately indicate that
the Subordinated Indebtedness is subject to this agreement and (ii) the Bank
shall have access from time to time to its books and records in order that the
Bank may examine the state of accounts of the Creditor with the Debtor and the
Bank shall be permitted to make copies thereof.
6. Continuing Agreement. This is a continuing agreement of subordination
and assignment and shall remain in full force and effect and be binding upon the
undersigned and its legal representatives, successors and assigns until the Bank
shall actually receive from the Creditor written notice of its discontinuance;
provided, however, this agreement shall remain in full force and effect
thereafter until all of the Senior Indebtedness outstanding, or contracted or
committed for, whether or not outstanding, before the receipt of such notice by
the Bank, and any extension or renewals thereof, whether made before or after
receipt of such notice, together with interest accruing thereon after such
notice, shall be finally and irrevocably paid in full. If after receipt of any
payment of all or any part of the Senior Indebtedness, the Bank is for any
reason compelled to surrender such payment to any person or entity, because such
payment is determined to be void or voidable as a preference, impermissible set
off, or a diversion of trust funds, or for any other reason, this agreement
shall continue in full force and effect notwithstanding any contrary action
which may have been taken by the Bank in reliance upon such payment; and any
such contrary actions so taken shall be without prejudice to the Bank's right
under this agreement and shall be deemed to have been conditioned upon such
payment having become final and irrevocable. The Creditor agrees that payment in
full of the Senior Indebtedness from time to time shall not operate as a
termination of this agreement.
7. Further Assurances. The Creditor agrees, upon request of the Bank, to
execute such further documents and instruments, including, without limitation,
additional notes or negotiable instruments, assignments, security agreements and
financing statements under the Uniform Commercial Code, as the Bank may require.
The Bank is authorized to file financing statements signed only by the Bank and
the cost of filing shall be payable by the Creditor.
8. Expenses. In the event that the Bank shall retain or engage an attorney
or attorneys to collect, enforce or protect its interest with respect to this
agreement or the Subordinated Indebtedness, all the costs and expenses of such
collection, enforcement or protection, including, without limitation, reasonable
attorneys' fees, shall be payable by the Creditor to the extent such collection,
enforcement or protection is sought against the Creditor.
9. No Waiver: Cumulative Remedies. No waiver shall be deemed to have been
made by the Bank of any of its rights hereunder unless same shall be in writing
and each waiver, if any, shall be a waiver only with respect to the specific
instance involved and shall in no way impair the Bank's rights and/or the
obligations of the Creditor to the Bank in any other respect or at any other
time, nor shall same establish a course of conduct. The rights, remedies, powers
and privileges provided in this Agreement are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
10. Amendments; Continued Enforceability. No modification, waiver, release
or amendment of any provision of this Agreement
2
<PAGE>
shall be made except by a written agreement executed by the Creditor and a duly
authorized officer of the Bank. Any provision of this agreement which may prove
unenforceable under any law shall not affect the validity of any other
provisions contained herein.
11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Creditor and the Bank and their respective successors and
assigns and, if applicable, heirs and legal representations.
12. Notices. Any notice to the Bank shall be deemed effective only if in
writing and sent to and received at the branch, division or department of the
Bank conducting the transaction or transactions hereunder. Any notice to the
Creditor shall be deemed sufficient when sent to the Creditor at the last known
address of the Creditor appearing on the records of the Bank.
13. Severability. If any one or more of the provisions contained in this
agreement, or any application thereof, shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein, and any other application thereof, shall
not in any way be affected or impaired thereby.
14. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE CREDITOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK AND ANY
COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST
THE CREDITOR AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE CREDITOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT THE
CREDITOR IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE CREDITOR AGREES (i) NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY
REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR
JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT
AND (ii) NOT TO ASSERT ANY COUNTERCLAIM, IN ANY SUCH SUIT, ACTION OR PROCEEDING
UNLESS SUCH COUNTERCLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE
PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION. THE
CREDITOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON THE CREDITOR BY
CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS
AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. THE CREDITOR
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed on the date written in the first paragraph hereof.
CREDITOR
Trust U/W W. Palmer Dixon
/s/ Richard Dzwlewicz, AVP By: /s/ Peter T. Dixon
-------------------------- --------------------------
Name: Trust U/W W. Palmer Dixon
Peter T. Dixon
Managing Trustee
3
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss:
COUNTY OF _____ )
On this ____ day of ___________, _____, before me personally came
____________________________, to me known and known to me to be the individual
described in and who executed the foregoing instrument and acknowledged to me
that [HE/SHE] executed the same.
_____________________________
Notary Public
CORPORATE ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss:
COUNTY OF _____ )
On the _____ day of _________, ____, before me personally came
_____________________________, to me known, who, being by me duly sworn did
depose and say that [HE/SHE] resides at ________________________; that [he/she]
is the __________ ________ of ____________________; the corporation described in
and which executed the above instrument; and that [HE/SHE] signed [HIS/HER] name
thereto by authority of the Board of Directors of said corporation.
_____________________________
Notary Public
GENERAL PARTNERSHIP ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss:
COUNTY OF _____ )
On the _____ day of ___________, ____, before me personally came
_______________________________ and ____________________, to me known and known
to me to be the partners of _________________________, a _____________________
general partnership, and known to me to be the individuals described in and who
executed the foregoing instrument as partners of __________________________, and
acknowledged before me that they executed the same as partners aforesaid for the
uses and purposes in said instrument set forth.
_____________________________
Notary Public
4
<PAGE>
AGREEMENT OF THE DEBTOR
The undersigned, the Debtor described in the Agreement of Subordination and
Assignment dated the date hereof between Trust U/W W. Palmer Dixon and European
American Bank (the "Agreement"), hereby acknowledges receipt of a copy thereof,
acknowledges that the Subordinated Indebtedness mentioned therein is payable as
stated therein, and agrees to make no payment, whether principal, interest fees,
indemnities, expenses or otherwise on the Subordinated Indebtedness so long as
the undersigned shall be indebted to the Bank, except such payments as may be
made to the Bank or with the prior written consent of the Bank. If (i) the
undersigned makes any other payment of the Subordinated Indebtedness, (ii) the
undersigned makes any loan, advances or extensions of credit to the Creditor or
acquires any notes receivables or other obligations as to which the Creditor is
the obligor, (iii) any term of the foregoing agreement or this Agreement of the
Debtor is breached by any party which executed same, or (iv) the undersigned
fails to make any payment of the Subordinated Indebtedness when due after the
Bank has given its written consent to the making of such payment, then the Bank
may, at its sole election, declare all or any part of the Senior Indebtedness or
the Subordinated Indebtedness as defined in the Agreement to be immediately due
and payable without demand or notice of any kind.
Dated: January 31, 1996
The Puro Water Group, Inc.
By: /s/ Peter T. Dixon
----------------------
Name: Peter T. Dixon
Title: Chairman
/s/ Richard Dzwlewicz, AVP
- --------------------------
Witness:
<PAGE>
EX-10.33
[LOGO EAB] PLEDGE AGREEMENT*
- --------------------------------------------------------------------------------
THIS PLEDGE AGREEMENT is made on January 31, 1996, by the undersigned
(herein, whether one or more in number, referred to as "Pledgor" and which, if
two or more in number shall be jointly and severally bound) with an address as
it appears with the signature below to European American Bank, a New York
banking corporation (herein referred to as "Bank").
RECITALS
WHEREAS, Bank has extended credit to Pledgor; and
WHEREAS, to induce Bank to extend credit to Pledgor and in
consideration of any existing and future obligation of Pledgor to Bank, Pledgor
wishes to grant further security for Borrower's performance of its obligations
to Bank and, to that effect, to pledge and assign to Bank all of its rights,
title and interest in securities owned by Pledgor, represented by the stock
certificates listed on Schedule A hereto (the "Pledged Shares"):
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, Pledgor agrees as follows:
1. Security Interest.
(a) As security for the Obligations (as defined below), Pledgor hereby
delivers, pledges to Bank, and creates in Bank, a first security interest in all
of its right, title and interest in and to all of the Pledged Shares together
with all rights and privileges of Pledgor with respect thereto, all proceeds,
income and profits thereof and all property received with respect to the Pledged
Shares in addition thereto, in exchange thereof or in substitution therefor (the
"Collateral").
(b) This Pledge Agreement secures the payment of all now existing or
hereafter arising obligations of Pledgor to Bank, whether primary or secondary,
direct or indirect, absolute or contingent, joint or several, secured or
unsecured, due or not, liquidated or unliquidated, arising by operation of law
or otherwise under any promissory note, guarantee, loan or credit agreement,
letter of credit, draft, acceptance, interest rate or foreign exchange
agreement, mortgage or other documents evidencing indebtedness whether for
principal, interest, fees, expenses or otherwise, together with all costs of
collection or enforcement, including, without limitation, reasonable attorneys
fees incurred in any collection efforts or in any action or proceeding (all such
obligations being the "Obligations").
2. Stock Dividends, Options, or Other Adjustments. Until the date on
which this Pledge Agreement terminates as provided in Section 11 hereof, Bank
shall receive as Collateral any and all additional shares of stock or any other
property of any kind distributable on or by reason of the Collateral, whether in
the form of or by way of stock dividends, warrants, liquidation, partial
liquidation, conversion, prepayments or redemptions (in whole or in part) or
otherwise. If any additional shares of capital stock, instruments, or other
property against which a security interest can only be perfected by possession
by Bank, which are distributable on or by reason of the Collateral shall come
into the possession or control of Pledgor, Pledgor shall hold or control and
forthwith transfer and deliver the same to Bank, subject to the provisions
hereof. However, Pledgor may receive and retain cash dividends or cash interest
payments made prior to the occurrence of an Event of Default (as defined below).
3. Delivery of Share Certificates: Stock Powers: Registration of
Pledge. All instruments and share certificates representing the Collateral are
being delivered to Bank simultaneously herewith together with stock powers duly
executed in blank by Pledgor. Pledgor shall deliver or cause the entity issuing
the Collateral to deliver directly to Bank all instruments, share certificates
or other documents representing Collateral acquired or received after the date
of this Agreement with a stock power duly executed by Pledgor. If at any time
Bank notifies Pledgor that additional stock powers endorsed in blank held by
Bank with respect to the Collateral are required, Pledgor shall promptly execute
in blank and deliver such stock powers as Pledgee may request. If advisable in
the sole determination of Bank, Pledgor shall cause the issuer of the Pledged
Shares to register Bank as the record owner of the Pledged Shares on its stock
books.
4. Power of Attorney. Whether or not any Event of Default (as defined
below) has occurred, Pledgor hereby constitutes and irrevocably appoints Bank,
with full power of substitution and revocation by Bank, as Pledgor's true and
lawful attorney-in-fact, to the full extent permitted by law, to transfer or
cause the transfer of the Collateral, or any part thereof on the books of the
entity issuing
- ----------
* This form is to be used when Borrower pledges shares owned by it to secure
its own obligations.
This form is to be used when Pledgor holds share certificates and delivers
possession to Bank.
<PAGE>
the same, to the name of Bank or Bank's nominee and thereafter exercise as to
such Collateral all the rights, power and remedies of an owner and otherwise to
take such actions and execute such instruments as Bank may deem necessary or
advisable to accomplish the purposes of this Agreement. The power of attorney
granted pursuant to this Agreement and all authority hereby conferred are
granted and conferred solely to protect the interest of Bank in the Collateral
and shall not impose any duty upon Bank to exercise any power. This power of
attorney shall be irrevocable as one coupled with an interest prior to the
payment in full or other satisfaction of all of the Obligations to Bank.
5. Inducing Representations of Pledgor. Pledgor represents and
warrants to Bank that:
(a) Pledgor is the sole legal and beneficial owner of, and has good
and marketable title to, the Collateral, free and clear of all pledges, liens,
security interests and other encumbrances other than the security interest
created by this Agreement, and Pledgor has the unqualified right and authority
to execute this Agreement and to pledge the Collateral to Bank, as provided for
herein;
(b) There are no outstanding options, warrants or other agreements
with respect to the Collateral;
(c) The Pledged Shares have been validly issued and are fully paid and
non-assessable; the holder or holders thereof are not and will not be subject to
any personal liability as such holder; and are not subject to any charter,
bylaw, statutory, contractual or other restriction governing their issuance,
pledge, transfer, ownership or control except that sale or transfer may be
limited in the absence of an effective registration statement (i) under the
Securities Act of 1933, as amended (the "Act"), (ii) under applicable state
securities laws, and (iii) under applicable non-U.S. laws provided however that
if any such registration statement is unnecessary, Pledgor shall provide Bank an
opinion of counsel satisfactory to Bank that the sale or transfer is exempt from
registration under said Act and laws);
(d) Any consent, approval or authorization of or designation or filing
with any authority on the part of Pledgor which is required in connection with
the pledge and security interest granted under this Agreement has been obtained
or effected and is in full force and effect; and
(e) The execution and delivery of this Agreement by Pledgor, and the
performance by Pledgor of its obligations hereunder, will not result in a
violation of any mortgage, indenture, contract, instrument, judgment, decree,
order, statute, rule or regulation to which Pledgor is subject.
6. Obligations of Pledgor. Pledgor further covenants to Bank that,
during the term hereof:
(a) Pledgor will not sell, transfer or convey any interest in, or
suffer or permit any lien or encumbrance to be created upon or with respect to,
any of the Collateral (other than as created under this Agreement);
(b) Pledgor will, at its own expense, at any time and from time to
time at Bank's request, execute and deliver such agreements and other documents
as may be requested by Bank to further preserve, perfect or enforce Bank's
rights, interests and remedies provided in this Agreement.
7. Rights of Pledgor. Prior to the occurrence and continuance of an
Event of Default (as defined below), and so long as Bank has not transferred the
Collateral to its own name under Section 4 hereof, Pledgor shall be entitled to
vote or consent with respect to the Collateral in any manner not inconsistent
with this Agreement or any note, document or instrument delivered pursuant to or
in connection with this Agreement or with the Obligations. Pledgor hereby grants
to Bank an irrevocable proxy to vote the Collateral, which proxy shall be
effective immediately upon the occurrence of an Event of Default or registration
of the Collateral in the name of Bank.
8. Rights of Bank. At any time whether or not an Event of Default
shall exist, unless otherwise explicitly noted below in this Section and without
notice, Bank may:
(a) Collect by legal proceedings or otherwise all dividends, interest,
principal payments, capital distributions and other sums now or hereafter
payable on account of said Collateral, and hold the same as part of the
Collateral, or apply the same to any of the Obligations in such manner and order
as Bank may decide in its sole discretion;
(b) Upon the occurrence and continuance of an Event of Default, enter
into any extension, subordination, reorganization, deposit, merger, or
consolidation agreement or any other agreement relating to or affecting the
Collateral and, in connection
2
<PAGE>
therewith, deposit or surrender control of such Collateral thereunder, and
accept other property in exchange therefor and hold and apply such property or
money so received in accordance with the provisions hereof; or
(c) Discharge any taxes, liens, security interests or other
encumbrances levied or placed on the Collateral, or pay for the maintenance and
preservation of the Collateral; and the amount of such payments, plus any and
all fees, costs and expenses of Bank (including attorneys' fees and
disbursements), in connection therewith, shall, at Bank's option, be reimbursed
by Pledgor on demand, with interest thereon at the highest interest rate
applicable with respect to the Obligations from the date paid, or added to the
Obligations secured hereby
9. Event of Default: Remedies.
(a) The occurrence of any one or more of the following events shall
constitute an event of default ("Event of Default") under this Agreement: (i) if
a "Default" or "Event of Default" shall occur under the terms of any agreement
giving rise to or executed in connection with the Obligations; (ii) if at any
time Bank shall, in its sole discretion, consider the Obligations insecure or
any part of the Collateral unsafe, insecure or insufficient, and Pledgor shall
not on demand furnish other collateral or make payment on account, satisfactory
to Bank; (iii) if Pledgor or any obligor or guarantor of, or any party to, any
of the Obligations or the Collateral (the same, including Pledgor, being
collectively referred to herein as "Obligors") shall default in the punctual
payment of any sum payable with respect to, or in the observance or performance
of any of the terms and conditions of, any Obligations or of this Pledge
Agreement or any other agreement between any Obligor and Bank; (iv) if any
warranty or representation made to Bank at any time by or on behalf of any
Obligor is false or misleading in any material respect when made; (v) in the
event of the making or filing of any lien, levy, or execution on, or seizure,
attachment or garnishment of, any of the Collateral; (vi) if any of the Obligors
being a natural person or any general partner or member of an Obligor which is a
partnership or limited liability company, shall die or (being a partnership,
limited liability company or corporation) shall be dissolved, or if any of the
Obligors (if a corporation) shall fail to maintain its corporate existence in
good standing; (vii) or if any of the Obligors shall become insolvent however
defined or evidenced) or make an assignment for the benefit of creditors, or
make or send notice of an intended bulk transfer, or if there shall be convened
a meeting of the creditors or principal creditors of any of the Obligors or if a
committee of creditors is appointed for any of them; (viii) or if there shall be
filed by or against any of the Obligors any petition for any relief under the
bankruptcy laws of the United States now or hereafter in effect or under any
insolvency, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity); (ix)
if the usual business of any of the Obligors shall be terminated or suspended;
(x) if any proceedings, procedure or remedy supplementary to or in enforcement
or judgment shall be commenced against, or with respect to any property or, any
of the Obligors; or (xi) if any petition or application to any court or
tribunal, at law or in equity, be filed by or against any of the Obligors for
the appointment of any receiver or trustee for any of the Obligors or any part
of the property of any of them.
(b) Upon the occurrence and continuance of an Event of Default as
hereinbefore defined:
(i) In addition to all the rights and remedies of a secured party
under the Uniform Commercial Code, Bank shall have the right, and without demand
of performance or other demand, advertisement or notice of any kind, except as
specified below, to or upon the Pledgor or any other person (all and each of
which demands, advertisements and/or notices are hereby expressly waived to the
extent permitted by law), to proceed forthwith to collect, receive, appropriate
and realize upon the Collateral, or any part thereof and to proceed forthwith to
sell, assign, give an option or options to purchase, contract to sell, or
otherwise dispose of and deliver the Collateral or any part thereof in one or
more parcels at public or private sale or sales at any stock exchange, broker's
board or at any of Bank's offices or elsewhere at such prices and on such terms
(including, without limitation, a requirement that any purchaser of all or any
part of the Collateral shall be required to purchase any securities constituting
the Collateral solely for investment and without any intention to make a
distribution thereof) as Bank in its sole and absolute discretion deems
appropriate without any liability for any loss due to decrease in the market
value of the Collateral during the period held or the manner in which the
Collateral is sold. If any notification of intended disposition of the
Collateral is required by law, such notification shall be deemed reasonable and
properly given if mailed, postage prepaid, at least ten (10) days before any
such disposition, to Pledgor's address indicated below. Any disposition of the
Collateral or any part thereof may be for cash or on credit or for future
delivery without assumption of any credit risk, with the right to Bank to
purchase all or any part of the Collateral so sold at any such sale or sales,
public or private, free of any equity of redemption or right of redemption in
the Pledgor, which right or equity is, to extent permitted by applicable law,
hereby expressly waived or released by the Pledgor.
(ii) All of Bank's rights and remedies, including but not limited
to the foregoing, shall be cumulative and not exclusive and shall be enforceable
alternatively, successively or concurrently as Bank may deem expedient.
3
<PAGE>
(iii) Bank may elect, at Pledgor's expense, to obtain the advice
of any investment banking firm or other advisor, with respect to the method and
manner of sale or other disposition of any of the Collateral, the best price
reasonably obtainable therefor, the consideration of cash or credit terms, or
any other details concerning such sale or disposition. Bank, in its sole
discretion, may elect to sell on such credit terms which it deems reasonable.
The sale of any of the Collateral on credit terms shall not relieve Pledgor of
its liability under any of the Obligations until the full purchase price for the
Collateral has been paid in full. All payments received by Bank in respect of
all sale of Collateral shall be applied to the Obligations in such order as Bank
shall elect, as and when such payments are received.
(iv) Pledgor recognizes that Bank may be unable to effect a
public sale of all or a part of the Collateral by reason of certain prohibitions
contained in the Act or in any applicable U.S. state laws or non-U.S. laws, but
may be compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view for the
distribution or resale thereof. Pledgor agrees that private sales so made may be
at prices and on other terms less favorable to the seller than if the Collateral
were sold at public sale, and that Bank has no obligation to delay the sale of
any Collateral for the period of time necessary to permit the registration of
the Collateral for public sale under the Act. Pledgor agrees that a private sale
or sales made under the foregoing circumstances shall be deemed to have been
made in a commercially reasonable manner.
(v) If any consent, approval or authorization of any state,
municipal or other governmental department, agency or authority should be
necessary to effect any sale or other disposition of the Collateral, or any
partial disposition of the Collateral, Pledgor will execute all such
applications and other instruments as may be required in connection with
securing any such consent, approval or authorization, and will otherwise use its
best efforts to secure the same. Pledgor further agrees to use its best efforts
to secure such sale or other disposition of the Collateral as Bank may deem
necessary pursuant to the terms of this Agreement.
(vi) Upon any sale or other disposition, Bank shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold or disposed of. Each purchaser at any such sale or other disposition
(including Bank) shall hold the Collateral free from any claim or right of
whatever kind, including any equity of redemption or right of redemption of
Pledgor. Pledgor specifically waives, to the extent permitted by applicable law,
all rights of redemption, stay or appraisal which they had or may have under any
rule of law or statute now existing or hereafter adopted.
(vii) Bank shall not be obligated to make any sale or other
disposition, unless the terms thereof shall be satisfactory to it. Bank may,
without notice or publication, adjourn any private or public sale, and, upon
five (5) days prior notice to Pledgor, hold such sale at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral, on credit or future delivery, the Collateral so sold may be
retained by Bank until the selling price is paid by the purchaser thereof, but
Bank shall incur no liability in case of the failure of such purchaser to take
up and pay for the property so sold and, in case of any such failure, such
property may again be sold as herein provided.
10. Disposition of Proceeds.
The proceeds of any sale or disposition of all or any part of the
Collateral shall be applied by Bank in the following order:
(i) to the payment in full of the costs and expenses of such sale
or sales, collections, and the protection, declaration and enforcement of any
security interest granted hereunder, including the reasonable compensation of
Bank's agents and attorneys;
(ii) to the payment of the Obligations in such order as Bank may
elect; and
(iii) to the payment to Pledgor of any surplus then remaining
from such proceeds, subject to the rights of any holder of a lien on the
Collateral of which Bank has actual notice.
11. Termination. This Pledge Agreement shall continue in full force
and effect until all of the Obligations shall have either been paid in full or
otherwise satisfied. Subject to any sale or other disposition by Bank of the
Collateral or any part thereof pursuant to this Agreement, at such termination
Bank shall return the Collateral to Pledgor without warranty by or recourse to
Bank.
4
<PAGE>
12. General Provisions.
(a) All expenses (including reasonable fees and disbursements of
counsel) incurred by Bank in connection with any actual or attempted sale of the
Collateral, or any other action taken by Bank hereunder whether directly or as
attorney-in-fact pursuant to a power of attorney or other authorization herein
conferred, for the purpose of enforcing satisfaction of the liability of Pledgor
hereunder, including Pledgor's failure to pay Bank's costs of acting against the
Collateral as provided herein, shall be deemed an Obligation of Pledgor for all
purposes of this Agreement and Bank may apply the Collateral to payment of or
reimbursement of itself for such liability.
(b) Bank and its assigns shall have no obligation in respect of the
Collateral, except to use reasonable care in holding the Collateral and to hold
and dispose of the same in accordance with the terms of this Agreement.
(c) Unless the party to be notified otherwise notifies the other party
in writing as provided in this Section, notices shall be given hereunder by
telecopy, by certified mail or by recognized overnight delivery services to any
party at its address on the signature page of this Pledge Agreement. Notices
shall be effective (a) if given by certified mail, on the third day after
deposit in the mails with postage prepaid, addressed as aforesaid; (b) if given
by recognized overnight delivery service, on the business day following deposit
with such service, addressed as aforesaid; or (c) if given by telecopy, when the
telecopy is transmitted to the telecopy number as aforesaid; provided that all
notices to Bank shall be effective on receipt.
(d) No course of dealing between Pledgor and Bank or Bank's failure to
exercise or delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof. Any single or partial exercise of any right, power
or privilege hereunder shall not preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(e) The provisions of this Pledge Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Pledge Agreement in any jurisdiction.
(f) This Pledge Agreement is subject to modification only by a writing
signed by all of the parties hereto.
(g) The benefits and burdens of this Pledge Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto; provided, however, that the rights and obligations of Pledgor
under this Pledge Agreement shall not be assigned or delegated without the prior
consent of Bank.
(h) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its conflicts of laws
principles, Pledgor hereby irrevocably consents to the jurisdiction of the
courts of the State of New York and of any Federal Court located in such State
in connection with any action or proceeding arising out of or relating to the
Obligations, this Pledge Agreement or the Collateral, or any document or
instrument delivered with respect to any of the Obligations. Pledgor hereby
waives personal service of any summons, complaint or other process in connection
with any such action or proceeding and agrees that the service thereof may be
made by certified mail directed to Pledgor at the address provided herein for
receipt of notices. Pledgor so served shall appear or answer to such summons,
complaint or other process within thirty days after the mailing thereof. Should
Pledgor so served fail to appear or answer within said thirty-day period, such
Pledgor shall be deemed in default and judgment may be entered by Bank against
such Pledgor for the amount or such other relief as may be demanded in any
summons, complaint or other process so served. In the alternative, in its
discretion Bank may effect service upon Pledgor in any other form or manner
permitted by law.
(i) IN THE EVENT OF ANY LITIGATION RELATING TO THIS AGREEMENT OR THE
OBLIGATIONS, PLEDGOR AND BANK EACH WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY.
5
<PAGE>
IN WITNESS WHEREOF, Pledgor has executed and delivered this Agreement as of the
date first above written.
Trust U/W W. Palmer Dixon
By: /s/ Peter T. Dixon
------------------------------
Name: Trust U/W W. Palmer Dixon
Title: Peter T. Dixon
Managing Trustee
79 East 79th Street
New York, NY 10021
WITNESS:
[illegible]
6
<PAGE>
SCHEDULE "A" TO PLEDGE AGREEMENT DATED JANUARY 31, 1996
Pledged Shares
American International Group, Inc.: 87,468 shares I/N/O Trust U/W W. Palmer
Dixon Cusip 026874107.
Investment Account # 5990.
Trust U/W W. Palmer Dixon
By: /s/ Peter T. Dixon
------------------------------
Name: Trust U/W W. Palmer Dixon
Title: Peter T. Dixon
Managing Trustee
<PAGE>
EX-10.34
[Letterhead of EAB] GUARANTY OF ALL LIABILITY
THIS GUARANTY, is entered into as of 2/5, 1996 by the undersigned (the
"Guarantor"), in favor of and for the benefit of EUROPEAN AMERICAN BANK, a New
York banking corporation (the "Bank").
RECITALS
A. The Bank has made and may make, from time to time, loans, advances,
extensions of credit and/or other financial accommodations (collectively, the
"Loans") for the account of Puro Water Group, Inc. (the "Borrower").
B. The Guarantor, being affiliated with the Borrower, acknowledges and
agrees that the Guarantor has received and will receive direct and indirect
benefits from the extension of the Loans made to the Borrower from time to time.
C. The Guarantor wishes to grant the Bank security and assurance in
order to secure the payment and performance by the Borrower of all of its
present and future Obligations (as that term is defined below), and, to that
effect, to guaranty the Borrower's Obligations as set forth herein.
Accordingly, the Guarantor hereby agrees as follows:
1. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably
guarantees to the Bank the full and punctual payment by the Borrower, when due,
whether at the stated due date, by acceleration or otherwise of all Obligations
(as defined below) of the Borrower, howsoever created, arising or evidenced,
voluntary or involuntary, whether direct or indirect, absolute or contingent now
or hereafter existing or owing to the Bank, (collectively, the "Guaranteed
Obligations"). This Guaranty is an absolute, unconditional, continuing guaranty
of payment and not of collection of the Guaranteed Obligations and includes
Guaranteed Obligations arising from successive transactions which shall either
continue such Guaranteed Obligations or from time to time renew such Guaranteed
Obligations after the same has been satisfied. This Guaranty is in no way
conditioned upon any attempt to collect from the Borrower or upon any other
event or contingency, and shall be binding upon and enforceable against the
Guarantor without regard to the validity or enforceability of any document,
instrument or agreement evidencing or governing the Obligations or any other
agreement or instrument executed in connection therewith (including, without
limitation, this Guaranty) or contemplated thereby (each, a "Loan Document" and,
collectively, the "Loan Documents"). If for any reason the Borrower shall fail
or be unable duly and punctually to pay any of the Guaranteed Obligations
(including, without limitation, amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a)), the Guarantor will forthwith pay the same, in cash,
immediately upon demand. As used herein "Obligations" shall mean all
obligations, liabilities and indebtedness of the Borrower to the Bank, whether
now existing or hereafter created, absolute or contingent, direct or indirect,
due or not, whether created directly or acquired by assignment or otherwise,
including, without limitation, the Loan and the payment and performance of all
other obligations, liabilities, and indebtedness of the Borrower to the Bank
under the Loan Documents, including without limitation all fees, costs, expenses
and indemnity obligations thereunder.
(b) In the event any Loan Document shall be terminated as a
result of the rejection thereof by any trustee, receiver or liquidating agent of
the Borrower or any of its properties in any bankruptcy, insolvency,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar proceeding, the Guarantor's obligations hereunder shall continue to
the same extent as if such Loan Document had not been so rejected.
(c) The Guarantor agrees to pay all costs, expenses (including,
without limitation, attorneys' fees and disbursements) and damages incurred in
connection with the enforcement of the Guaranteed Obligations of the Borrower to
the extent that such costs, expenses and damages are not paid by the Borrower
pursuant to the respective Loan Documents.
(d) The Guarantor further agrees that if any payment made by the
Borrower or the Guarantor to the Bank on any Guaranteed Obligation is rescinded,
recovered from or repaid by the Bank, in whole or in part, in any bankruptcy,
insolvency or similar proceeding instituted by or against the Borrower or
Guarantor, this Guaranty shall continue to be fully applicable to such
Guaranteed Obligation to the same extent as though the payment so recovered or
repaid had never originally been made on such Guaranteed Obligation regardless
of, and, without giving effect to, any discharge or release of the Guarantor's
obligations hereunder granted by the Bank after the date hereof.
<PAGE>
2. Guaranty Continuing, Absolute, Unlimited.
The obligations of the Guarantor hereunder shall be continuing, absolute,
unlimited and unconditional, shall not be subject to any counterclaim, setoff,
deduction or defense based upon any claim the Guarantor may have against the
Bank or the Borrower or any other person, and shall remain in full force and
effect without regard to, and, to the fullest extent permitted by applicable
law, shall not be released, discharged or in any way affected by, any
circumstance or condition (whether or not any Guarantor shall have any knowledge
or notice thereof) whatsoever which might constitute a legal or equitable
discharge or defense including, but not limited to, (a) any express or implied
amendment, modification or supplement to any Loan Document or any other
agreement referred to in any Loan Document; (b)any failure on the part of the
Borrower to perform or comply with any Loan Document, or any failure of any
other person to perform or comply with any term of any Loan Document; (c) any
waiver, consent, change, extension, indulgence or other action or any action or
inaction under or in respect of any Loan Document or any other agreement as
aforesaid, whether or not the Bank, the Borrower or the Guarantor has notice or
knowledge of any of the foregoing; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to the Borrower, or its properties or its creditors, or
any action taken by any trustee or receiver or by any court in any such
proceeding; (e) any furnishing or acceptance of additional security or any
release of any security; (f) any limitation on the liability or obligations of
the Borrower under any Loan Document or any termination, cancellation,
frustration, invalidity or unenforceability, in whole or in part, of any Loan
Document; (g) any lien, charge or encumbrance on or affecting the Guarantor's or
any of the Borrower's respective assets and properties; (h) any act, omission or
breach on the part of the Bank under any Loan Document or any other agreement at
any time existing between the Bank and the Borrower or any law or governmental
regulation applicable to the Bank or any Loan Document; (i) any claim as a
result of any other dealings among the Bank, the Guarantor or the Borrower; (j)
the assignment of this Guaranty, any Loan Document to any other person; or (k)
any change in the name of the Bank, the Borrower or any other person or entity
referred to herein.
3. Waiver.
The Guarantor unconditionally and irrevocably waives, to the fullest extent
permitted by applicable law: (a) notice of any of the matters referred to in
Section 2 hereof; (b) all notices which may be required by statute, rule of law
or otherwise to preserve any rights against the Guarantor hereunder, including,
without limitation, notice of the acceptance of this Guaranty, or the creation,
renewal, extension, modification or accrual of the Guaranteed Obligations or
notice of any other matters relating thereto, any presentment, demand, notice of
dishonor, protest, nonpayment of any damages or other amounts payable under any
Loan Document; (c) any requirement for the enforcement, assertion or exercise of
any right, remedy, power or privilege under or in respect of any Loan Document,
including, without limitation, diligence in collection or protection of or
realization upon the Guaranteed Obligations or any part thereof or any
collateral therefor; (d) any requirement of diligence; (e) any requirement to
mitigate the damages resulting from a default by the Borrower under any Loan
Document; (f) the occurrence of every other condition precedent to which the
Guarantor or the Borrower may otherwise be entitled; (g) the right to require
the Bank to proceed against the Borrower or any other person liable on the
Guaranteed Obligations, to proceed against or exhaust any security held by the
Borrower or any other person, or to pursue any other remedy in the Bank's power
whatsoever, (h) the right to have the property of the Borrower first applied to
the discharge of the Guaranteed Obligations and any and all rights it may now or
hereafter have under any agreement or at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Bank) to
assert any claim against or seek contribution, indemnification or any other form
of reimbursement from the Borrower or any other party liable for payment of any
or all of the Guaranteed Obligations for any payment made by the Guarantor under
or in connection with this Guaranty or otherwise.
The Bank may, at its election, exercise any right or remedy it may have
against the Borrower without affecting or impairing in any way the liability of
the Guarantor hereunder and the Guarantor waives, to the fullest extent
permitted by applicable law, any defense arising out of the absence, impairment
or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of the Guarantor against the Borrower, whether resulting from
such election by the Bank or otherwise. The Guarantor waives any defense arising
by reason of any disability or other defense of the Borrower or by reason of the
cessation for any cause whatsoever of the liability, either in whole or in part,
of the Borrower to the Bank for the Guaranteed Obligations.
The Guarantor assumes the responsibility for being and keeping informed of
the financial condition of the Borrower and of all other circumstances bearing
upon the risk of nonpayment of the Guaranteed Obligations and agrees that the
Bank shall not have any duty to advise the Guarantor of information regarding
any condition or circumstance or any change in such condition or circumstance.
The Guarantor acknowledges that the Bank has not made any representations to the
Guarantor concerning the financial condition of the Borrower.
2
<PAGE>
4. Representations and Warranties of the Guarantor.
The Guarantor hereby represents and warrants that:
(a) If not an individual, it is a general partnership, limited
partnership, corporation, limited liability company or limited liability
partnership (as indicated on the signature page hereto) duly organized or
formed, as the case may be, under the laws of the jurisdiction of its
incorporation or formation and has all requisite power and authority to enter
into this Guaranty and to carry out its obligations hereunder .
(b) The execution, delivery and performance of this Guaranty by the
Guarantor have been duly authorized by all necessary action (other than a
Guarantor who is an individual) and this Guaranty constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms.
(c) If not an individual, it has the power and authority to own its
properties and assets and to conduct its business as now being conducted and is
duly qualified to do business in every jurisdiction in which the nature of its
assets or the conduct of its business requires it to be so qualified.
(d) Neither this Guaranty nor any other Loan Document to which the
Guarantor is a party will violate any provision of law, rule or regulation or
any order of any court or other governmental agency to which the Guarantor is
subject, the organizational documents of the Guarantor, any provision of any
agreement or instrument to which the Guarantor is a party or by which the
Guarantor or any of the Guarantor's properties or assets are bound, or be in
conflict with, result in a breach of, or constitute a default under (with or
without notice or lapse of time), any such agreement or instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any properties or assets of the Guarantor.
(e) No action or approval by or of and no filing or registration with
any governmental or public body or authority, or any subdivision thereof, nor
the consent of any other person or entity, nor any other legal formality is
required in connection with the entering into, performance or enforcement of
this Guaranty, except such as have been obtained or taken and with respect to
which a copy or other satisfactory evidence thereof has been furnished to the
Bank.
5. Security; Events of Default.
As security for any and all of the obligations of the Guarantor under this
Guaranty, now existing or hereafter arising hereunder or otherwise
(collectively, the "Liabilities"), the Guarantor hereby grants to the Bank a
lien upon and a security interest in any and all moneys or other property (i.e.,
goods and merchandise, as well as any and all documents relative thereto; funds,
securities, choses in action and any and all other forms of property whether
real, personal or mixed, and any right, title or interest of the Guarantor
therein or thereto), and the proceeds thereof, which have been, or may hereafter
be, deposited or delivered to the Bank (or with any third party acting on the
Bank's behalf) by or for the account or credit of the Guarantor whether for
safekeeping, custody, pledge, deposit, transmission, collection or otherwise.
All remittances and property shall be deemed delivered to the Bank as soon as
put in transit to the Bank by mail or carrier.
Upon the occurrence of any of the following events (each an "Event of
Default"):
(a) the Guarantor defaults under this Guaranty or any Loan Document to
which the Guarantor is a party;
(b) any representation or warranty made by the Guarantor herein or in
any other Loan Document to which the Guarantor is a party is false or untrue as
of the date such representation or warranty is made;
(c) the Guarantor commences any case, proceeding, or other action
under any law of any jurisdiction relating to bankruptcy, insolvency,
reorganization, or relief of debtors or seeks to have an order for relief
entered with respect to the Guarantor or seeks to be adjudicated a bankrupt or
insolvent, or seeks reorganization, arrangement, adjustment, liquidation,
dissolution, composition or other relief with respect to the Guarantor or the
Guarantor's debts, or seeks the appointment of a receiver, trustee, custodian,
or other similar official for the Guarantor or for all or any substantial part
of the Guarantor's property;
(d) the Guarantor makes a general assignment for the benefit of
creditors;
3
<PAGE>
(e) there is commenced against the Guarantor, any case, proceeding or
other action of the type referred to in clause (c) above or seeking the issuance
of a warrant of attachment, execution, distraint, or similar process against all
or any substantial part of the Guarantor's property, which case, proceeding or
other action results in an entry of an order for relief or is not dismissed,
discharged or bonded within sixty days of the commencement thereof;
(f) the Guarantor takes any action indicating the Guarantor's consent
to, approval of, or acquiescence in or in furtherance of, any of the acts set
forth in clause (c) and (e) above;
(g) the death or incapacity of a Guarantor, if an individual;
(h) the Guarantor admits in writing the Guarantor's inability to pay
the Guarantor's debts as they mature; or
(i) the Guarantor terminates or dissolves or suspends the Guarantor's
usual business activities or conveys, sells, leases, transfers or otherwise
disposes of all or a substantial part of the Guarantor's property, business or
assets other than in the ordinary course of business;
then, any or all of the Liabilities shall, at the Bank's option, become (for the
purpose of this Guaranty) immediately due and payable by the Guarantor, without
demand or notice. In addition, upon the occurrence of any Event of Default, the
Bank shall have all of the rights and remedies provided to a secured party by
the Uniform Commercial Code as in effect in New York State at that time. The
Guarantor agrees that in the event that notice is necessary, written notice
mailed to the Guarantor at the address given below three business days prior to
the date of public sale of the property subject to the lien and security
interest created herein or prior to the date after which private sale or any
other disposition of said property will be made shall constitute reasonable
notice, but notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
6. Parties.
This Guaranty shall inure to the benefit of the Bank and its successors,
assigns or transferees, and shall be binding upon each Guarantor and its
successors and assigns. No Guarantor may delegate any of the Guarantor's duties
under this Guaranty without the prior written consent of the Bank.
7. Notices.
Any notice shall be conclusively deemed to have been received by a party
hereto and to be effective on the day on which delivered to such party at the
address set forth below if hand delivered or sent by Federal Express or other
reputable courier of national reputation, or if sent by registered or certified
mail, on the third business day after the day on which mailed in the United
States, addressed to such party at said address:
(a) if to the Bank, at
European American Bank
335 Madison Avenue
New York, NY 10017
Attention: Richard Dzwlewicz, Assistant Vice President
(b) if to the Guarantor,
Peter T. Dixon
79 E 79th Street
New York, NY 10021
- and -
(c) as to each such party at such other address as such party shall
have designated to the other in a written notice complying as to delivery with
the provisions of this Section 7.
4
<PAGE>
8. Right to Deal with the Borrower.
At any time and from time to time, without terminating, affecting or
impairing the validity of this Guaranty or the obligations of the Guarantor
hereunder, the Bank may deal with the Borrower in the same manner and as fully
as if this Guaranty did not exist and shall be entitled, among other things, to
grant the Borrower, without notice or demand and without affecting the
Guarantor's liability hereunder, such extension or extensions of time to
perform, renew, compromise, accelerate or otherwise change the time for payment
of or otherwise change the terms of indebtedness or any part thereof contained
in or arising under any Loan Document or any other document evidencing
Obligations of the Borrower to the Bank, or to waive any obligation of the
Borrower to perform, any act or acts as the Bank may deem advisable.
9. Delivery of Financial Statements.
The Guarantor shall deliver to the Bank:
(a) If the Guarantor is other than an individual, annually, as soon as
available, but in any event within 120 days after the last day of each of its
fiscal years, a balance sheet of the Guarantor and its subsidiaries, as at such
last day of the fiscal year, and statements of income and retained earnings and
cash flow for such fiscal year, each prepared in accordance with generally
accepted accounting principles consistently applied, in reasonable detail.
(b) If the Guarantor is an individual, annually, as soon as available,
but in any event within 120 days after the last day of each calendar year, the
personal financial statement of the Guarantor on the Bank's standard form or
such other form as may be acceptable to the Bank from time to time.
(c) Promptly after a written request therefor, such other financial
data or information as the Bank may reasonably request from time to time .
10. Survival of Representations, Warranties, and Agreements.
All representations, warranties, covenants and agreements made herein,
including representations and warranties deemed made herein, shall survive any
investigation or inspection made by or on behalf of the Bank and shall continue
in full force and effect until all of the obligations of the Guarantor under
this Guaranty shall be fully performed in accordance with the terms hereof, and
until the payment in full of the Guaranteed Obligations.
11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK AND ANY
COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST
THE GUARANTOR AND RELATED TO OR IN CONNECTION WITH THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT THE
GUARANTOR IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE GUARANTOR AGREES (i) NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY
REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR
JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT
AND (ii) NOT TO ASSERT ANY COUNTER-CLAIM, IN ANY SUCH SUIT, ACTION OR PROCEEDING
UNLESS SUCH COUNTERCLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE
PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION. THE
GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON THE GUARANTOR BY
CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS
GUARANTY OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. THE GUARANTOR
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
5
<PAGE>
12. Miscellaneous.
(a) If this Guaranty is executed by two or more parties, they shall be
jointly and severally liable hereunder, and the word "Guarantor" wherever used
herein shall be construed to refer to each of such parties separately, all in
the same manner and with the same effect as if each of them had signed separate
instruments; and in any such case this Guaranty shall not be revoked or impaired
as to any one or more of such parties by the death or dissolution of any of the
others or by the revocation or release of any liabilities hereunder of any one
or more of such other parties and the Bank may proceed against none, one or more
of the Guarantors at one time, or from time to time, in its sole and absolute
discretion.
(b) If any term of this Guaranty or any application hereof shall be
invalid or unenforceable, the remainder of this Guaranty and any other
application of such term shall not be affected thereby.
(c) Any term of this Guaranty may be amended, waived, discharged or
terminated only by an instrument in writing signed by the Guarantor and the
Bank. No notice to or demand on the Guarantor shall be deemed to be a waiver of
the obligations of the Guarantor or of the right of the Bank to take further
action without notice or demand as provided in this Guaranty. No course of
dealing between the Guarantor and the Bank shall change, modify or discharge, in
whole or in part, this Guaranty or any obligations of the Guarantor hereunder.
No waiver of any term, covenant or provision of this Guaranty shall be effective
unless given in writing by the Bank and if so given shall only be effective in
the specific instance in which given.
(d) The headings in this Guaranty are for purposes of reference only
and shall not limit or define the meaning hereof.
(e) No delay or omission by the Bank in the exercise of any right
under this Guaranty shall impair any such right, nor shall it be construed to be
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise of any other right.
(f) The liability of any Guarantor under this Guaranty may be
terminated, but only with respect to Guaranteed Obligations arising subsequent
to the effective Date of Termination, upon written notice to that effect, signed
and delivered by the Guarantor to the Bank, provided, however, that such
termination shall only be effective upon the Bank's receipt thereof. In the
event of such termination, the Guarantor shall remain liable with respect to the
Guaranteed Obligations prior to date of termination, including any renewals,
extensions, modifications thereof, and this Guaranty shall remain in full force
and effect as if no such termination has been made.
(g) The execution and delivery of this Guaranty shall not supersede,
terminate, modify or supplement in any manner any other Guaranty previously
executed and delivered to the Bank by a Guarantor and no release or termination
of any Guaranty shall be construed to terminate or release any other Guarantee
unless such Guaranty is specifically referred to in any such termination.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Guaranty as of the day and year first above written.
/s/ Peter T. Dixon
------------------
Peter T. Dixon
WITNESS: /s/ Richard K. Dzwlewicz, AVP
-----------------------------
6
<PAGE>
RIDER TO GUARANTY OF ALL LIABILITY DATED 2/5, 1996
WITH RESPECT TO LIMITED RECOURSE
- --------------------------------------------------------------------------------
(F) Limited Recourse. Notwithstanding anything to the contrary contained
herein, the maximum monetary obligations of the Guarantor hereunder shall not
exceed One Million ($1,000,000) Dollars, together with interest on such
Guaranteed Obligations at the rate applicable after an Event of Default under
this Guaranty:
Name of Guarantor GUARANTEED OBLIGATIONS
- ----------------- ----------------------
One Million ($1,000,000) Dollars
/s/ Peter T. Dixon
- --- --------------
Peter T. Dixon
Witnessed by: /s/ Richard K. Dzwlewicz
------------------------
<PAGE>
EX-10.35
SECURED NOTE
PURO CORPORATION OF AMERICA
$250,000.00 Maspeth, New York
January 28, 1994
FOR VALUE RECEIVED, the undersigned PURO CORPORATION OF AMERICA
(herein called the "Borrower"), a corporation incorporated and existing under
the laws of the State of New York, hereby promises to pay to the order of The
Trust Under Article 16 of the Will of W. Palmer Dixon, for the Benefit of Palmer
Dixon and The Trust Under Article 16 of the Will of W. Palmer Dixon, for the
Benefit of Peter T. Dixon, (herein collectively called the "Holder") the
principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) as
hereinafter provided, together with simple interest thereon (computed on the
basis of a 365-day year) on the unpaid principal amount hereof at the annual
rate of Three Quarters Percent (3/4%) above the prime interest rate then in
effect for Chase Manhattan Bank, as published by the Wall Street Journal, from
the date hereof to the Maturity Date (as hereinafter defined), whether by
acceleration or otherwise, which interest shall be payable as hereinafter
provided. In the event of a failure by the Borrower to pay interest or
principal when due, the Borrower shall, unless prohibited by applicable law, pay
interest (computed as aforesaid) on any such overdue principal or overdue
interest at
<PAGE>
the rate of Twelve Percent (12%) per annum (or, in each case at the highest rate
permitted by applicable law, whichever is less)
1. Payment.
(a) The principal of this Note shall be paid in sixteen (16)
equal quarterly installments of Eighteen Thousand Seven Hundred Fifty Dollars
($18,750.00) commencing on April __, 1997 and continuing thereafter on the ___
day of July, October, January and April until January __, 2001 (the "Maturity
Date") when the entire outstanding principal balance hereunder shall be due and
payable in full.
(b) Interest on the outstanding principal of this Note shall
be payable quarterly, in arrears, commencing on April __, 1994 and continuing
thereafter on the __ day of July, October, January and April until the Maturity
Date, when all accrued and unpaid interest shall be due and payable in full.
2. Method of Payment. All payments of principal and interest are to
be made in immediately available funds (checks are acceptable) at Holder's
offices, 79 East 79th Street, New York, New York 10021-0202, or at such other
place or into such account or accounts as the Holder shall designate.
3. Lien and Security Interest. The Borrower hereby gives and grants
to the Holder a first lien and security interest, for the amount of this
indebtedness, in and upon all the property and assets, both tangible and
intangible, including but not limited to all inventory and accounts receivable
and all extensions, additions, profits and products thereof and thereto,
2
<PAGE>
wheresoever in the world located, whether or not in the possession of the
Borrower, owned by the Borrower, excluding, however, the Borrower's real
property located at 56-45 58th Street, Maspeth, New York (the "Collateral", more
particularly described in the Rider attached hereto and made a part hereof),
subject only to the discrete equipment financing liens set forth on Schedule A,
attached hereto, statutory liens arising and satisfied in the ordinary course
and liens or encumbrances affecting the Collateral arising out of or in
connection with that certain mortgage dated May 24, 1988, granted to Maspeth
Federal Savings & Loan Association, covering the Borrower's real property
located at 56-45 58th Street, Maspeth, New York. The Borrower agrees to execute
and file any and all documentation, including New York Uniform Commercial Code
Financing Statements, necessary to implement, evidence or perfect such lien and
security interest. Upon repayment of all principal, and full payment of all
interest and other charges due hereunder, Holder shall execute and record any
and all termination statements necessary to release said lien.
4. Events of Default. If any of the following events shall occur,
hereinafter individually referred to as an Event of Default, then the entire
unpaid principal and accrued interest thereon shall immediately become due and
payable:
(a) Failure in the making of any payment due under this Note
when it becomes due and payable (after written
3
<PAGE>
notice is given in accordance with paragraph 11) and continuance of such failure
for a period of ten (10) days; or
(b) The institution by the Borrower or any other party of
proceedings to have the Borrower adjudicated a bankrupt or insolvent (which
proceedings, brought by another party other than the Borrower have not been
dismissed within 120 days of commencement), or the consent by the Borrower to
the institution of bankruptcy or insolvency proceedings against the Borrower or
the filing by the Borrower of a petition or answer or consent seeking
reorganization or release under the United States Federal Bankruptcy Act or any
other United States, Federal or State Bankruptcy laws, or the consent by the
Borrower to the filing of any such petition or the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other court-appointed official)
of the Borrower (which petition or appointment brought by any other party other
than Borrower has not been dismissed within 120 days of commencement) or of any
substantial part of its property, or the making by the Borrower of a general
assignment for the benefit of creditors, or the admission by the Borrower in
writing of its inability to pay its debts generally as they become due or the
taking of corporate action by the Borrower in furtherance of any such action; or
(c) The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Borrower a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of
4
<PAGE>
or in respect of the Borrower under the United States Federal Bankruptcy Act or
any other United States estate law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Borrower or
of any substantial part of its property or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order for
a period of thirty (30) consecutive days unless stayed; or
(d) Any material attachment of the Collateral or any other
property or assets of the Borrower which is not discharged or bonded within
thirty (30) days; or
(e) Any default, uncured breach, nonperformance or
non-observance (after application of all applicable cure periods) of any
material covenant, condition, representation, promise or agreement between the
Borrower and Holder, including but not limited to, any default under any other
promissory note or other obligation between the Borrower and Holder, or any
material adverse default by the Borrower, under or with respect to any
indebtedness or debt obligation of the Borrower with any other creditor.
5. Acceleration on Default. The Borrower agrees that after the
occurrence of an Event of Default, and the giving of any applicable notice and
cure period, this Note, and, at the option of the Holder, all obligations, if
any, of the Borrower to the Holder, shall become at once due and payable without
notice, presentment, or demand of payment.
5
<PAGE>
6. Remedies and Collateral. Upon the occurrence of any Event of
Default: (i) the Holder shall be entitled to exercise forthwith all of the
rights and remedies provided for in this Note and all rights and remedies of a
secured party under the New York Uniform Commercial Code or other applicable
law; and (ii) the Holder may, upon ten (10) days prior written notice to
Borrower in accordance with paragraph 11, sell all or any part of the
Collateral, said sale to be either public or private at the Holder's sole
discretion at such prices as it may deem best, for cash or credit, with the
right of the Holder or Borrower at any such sale to purchase all or any part
thereof, free from any right of redemption, applying the net proceeds of such
sale to the payment of this Note or of any other obligations to the Holder of
the Borrower, which shall remain liable to the Holder for any deficiency
hereunder and/or thereunder.
7. Cross Collateralization. All Collateral which the Holder may at
any time acquire from the Borrower from any source in connection with
obligations arising under this Note shall constitute Collateral for each and
every obligation of Borrower to the Holder and/or any affiliate or subsidiary of
the Holder, without apportionment or designation as to particular obligations.
All obligations of the Borrower to the Holder and/or any affiliate or subsidiary
of the Holder, however and whenever incurred, shall be secured by all Collateral
above-referenced however and whenever acquired, and the Holder shall have the
right, in its sole discretion, to determine the order in
6
<PAGE>
which the Holder's rights in or remedies against any such Collateral are to be
exercised and which type of Collateral or which portions of such Collateral the
Holder shall proceed against and the order of application of proceeds of such
Collateral as against any particular obligations.
8. Non-waiver. No delay or failure on the part of the Holder to
exercise any power or right hereunder shall operate as a waiver and such rights
and powers shall be deemed continuous, nor shall a partial exercise preclude
full exercise, and no right or remedy of the Holder shall be deemed abridged or
modified by any course of conduct and no waiver thereof shall be predicated
thereon, nor shall failure to exercise any such power or right subject the
Holder to any liability.
9. Jurisdiction. The Borrower hereby consents to submit itself to
the jurisdiction of the United States District Court for the Southern District
of New York, as well as the Courts of the State of New York in connection with
any disputes which may arise hereunder. The Borrower hereby consents to service
of process in the State of New York by naming the Secretary of State of the
State of New York as its agent for such service. Such submission to jurisdiction
and consent to service of process is nonexclusive of any other jurisdiction or
manner of service in which or by which personal jurisdiction over the Borrower
may be obtained.
10. Costs of Collection. Should the indebtedness represented by this
Note or any part thereof be placed in the
7
<PAGE>
hands of attorneys for collection after an Event of Default, as defined herein,
the Borrower agrees to pay the principal, premium if any, and interest due and
payable hereon, and all reasonable costs of collecting this Note, including but
not limited to reasonable attorneys' fees and expenses.
11. Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this Note shall be in
writing if sent by pre-paid first-class mail, overnight courier or delivery
service and in addition, if transmitted by any telecommunication device (e.g.
telex or telecopier) and addressed or sent to the respective parties' addresses
specified below and shall be considered given or made when received by
recipient. Either party may change its address by giving prior written notice to
the other party of its new address.
To the Borrower: Puro Corporation of America
56-45 58th Street
P. 0. Box 10
Maspeth, NY 11378
Attention: Mr. Jack C. West,
President
With a copy to: Epstein, Becker & Green
250 Park Avenue, 14th Floor
New York, NY 10177
Attention: Bernice K. Leber, Esquire
To the Holder: c/o Peter T. Dixon
79 East 79th Street
New York, NY 10021-0202
With a copy to: Bruce L. Lev, Esquire
Lev, Spalter & Berlin, P.C.
105 Rowayton Avenue
Rowayton, CT 06853
8
<PAGE>
12. Prepayment. The Borrower shall have the privilege of paying the
whole or any part of this indebtedness at any time while this Note remains
unpaid without penalty or premium.
13. Applicable Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
14. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY
SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY
WAY RELATED TO THIS NOTE AND/OR THE DEFENSE OR ENFORCEMENT OF ANY OF THE
HOLDER'S RIGHTS AND REMEDIES IN CONNECTION THEREWITH. BORROWER ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
PURO CORPORATION OF AMERICA
By /s/ Jack C. West
------------------------------
Jack C. West,
Its President
Hereunto duly Authorized
Dated: January 28, 1994
Attest:
________________________________
9
<PAGE>
RIDER TO
SECURED NOTE
(a) All present and future accounts, contract rights, chattel paper, and
general intangibles (including but not limited to all BORROWER'S now
existing or hereafter arising tax and duty claims and refunds, all now
owned or hereafter acquired patents, trademarks, copyrights, licenses or
license agreements relative to the rendering of services or the
manufacture of goods, choses in action, rights to sue any third party and
proceeds of any lawsuit or proceeding brought by BORROWER against any
third party) documents, instruments, customer lists, monies, deposits,
securities, credits and letters of credit whether now owned or hereafter
acquired by the BORROWER; BORROWER's interest in the goods represented
thereby and all returned, reclaimed or repossessed goods with respect
thereto; all rights and remedies of BORROWER under or in connection with
such collateral;
(b) All inventory, wherever located, whether now owned or hereafter acquired
by BORROWER, including without limitation, raw materials, materials used
or consumed in the BORROWER's business, wrapping, packing and shipping
materials, work in process and finished goods of whatever kind, nature and
description wherever located and whether in the possession or control of a
third party and all right, title and interest of BORROWER therein and
thereto, all BORROWER's rights as a seller of goods, and all inventory
which may be returned to BORROWER by its customers stopped in transit by
BORROWER or repossessed by BORROWER;
(c) All equipment, machinery, vehicles and fixtures, including, without
limitation, all designs, models, molds, tools, dies and jigs, molds,
whether now owned or hereafter acquired by BORROWER and all accessions,
improvements and attachments thereto and replacements and substitutions
thereof, wherever located; all BORROWER's rights to acquire any of the
foregoing, whether by exercise of purchase options or otherwise;
(d) All BORROWER's books and records and equipment relating to any of the
above;
(e) Insurance relating to all of the above; and
(f) Any and all products and proceeds of the foregoing in any form including,
without limitation, any claims by BORROWER against third parties for loss
or damage or destruction of any or all of the foregoing.
All terms used above which are defined in the Uniform Commercial Code,
shall have the meanings set forth therein.
<PAGE>
SCHEDULE A
Equipment Financing Liens
<PAGE>
EX-10.36
STANDBY SECURED NOTE
PURO CORPORATION OF AMERICA
$50,000.00 Maspeth, New York
January 28, 1994
FOR VALUE RECEIVED, the undersigned PURO CORPORATION OF AMERICA
(herein called the "Borrower"), a corporation incorporated and existing under
the laws of the State of New York, hereby promises to pay to the order of The
Trust Under Article 16 of the Will of W. Palmer Dixon, for the Benefit of Palmer
Dixon and The Trust Under Article 16 of the Will of W. Palmer Dixon, for the
Benefit of Peter T. Dixon, (herein collectively called the "Holder") the
principal amount of FIFTY THOUSAND DOLLARS ($50,000.00) as hereinafter provided,
or so much thereof as has been advanced hereunder, together with simple interest
thereon (computed on the basis of a 365-day year) on the unpaid principal amount
hereof at the annual rate of Three Quarters Percent (3/4%) above the prime
interest rate then in effect for Chase Manhattan Bank, as published by the Wall
Street Journal, from the date hereof to the Maturity Date (as hereinafter
defined), whether by acceleration or otherwise, which interest shall be payable
as hereinafter provided. In the event of a failure by the Borrower to pay
interest or principal when due, the Borrower shall, unless prohibited by
applicable law, pay interest (computed as aforesaid) on any such overdue
principal or
<PAGE>
overdue interest at the rate of Twelve Percent (12%) per annum (or, in each case
at the highest rate permitted by applicable law, whichever is less).
1. Payment.
(a) The principal of this Note shall be paid in full ON DEMAND
(the "Maturity Date").
(b) Interest on the outstanding principal of this Note shall be
payable quarterly, in arrears, commencing on the first day of the next calendar
month occurring after the first advance hereunder until the Maturity Date, when
all accrued and unpaid interest shall be due and payable in full.
2. Method of Payment All payments of principal and interest are to be
made in immediately available funds (checks are acceptable) at Holder's offices,
79 East 79th Street, New York, New York 10021-0202, or at such other place or
into such account or accounts as the Holder shall designate.
3. Lien and Security Interest. The Borrower hereby gives and grants to
the Holder a second lien and security interest, for the amount of this
indebtedness, in and upon all the property and assets, both tangible and
intangible, including but not limited to all inventory and accounts receivable
and all extensions, additions, profits and products thereof and thereto,
wheresoever in the world located, whether or not in the possession of the
Borrower, owned by the Borrower, excluding, however, the Borrower's real
property located at 56-45 58th Street, Maspeth, New York (the "Collateral", more
particularly
2
<PAGE>
described in the Rider attached hereto and made a part hereof), subject only to
the discrete equipment financing liens set forth on Schedule A, attached hereto,
statutory liens arising and satisfied in the ordinary course and liens or
encumbrances affecting the Collateral arising out of or in connection with that
certain mortgage dated May 24, 1988, granted to Maspeth Federal Savings & Loan
Association, covering the Borrower's real property located at 56-45 58th Street,
Maspeth, New York and the lien in favor of Holder created by that certain
$250,000.00 Secured Note of even date herewith. The Borrower agrees to execute
and file any and all documentation, including New York Uniform Commercial Code
Financing Statements, necessary to implement, evidence or perfect such lien and
security interest. Upon repayment of all principal, and full payment of all
interest and other charges due hereunder, Holder shall execute and record any
and all termination statements necessary to release said lien.
4. Events of Default. If any of the following events shall occur,
hereinafter individually referred to as an Event of Default, then the entire
unpaid principal and accrued interest thereon shall immediately become due and
payable:
(a) Failure in the making of any payment due under this Note when
it becomes due and payable (after written notice is given in accordance with
paragraph 11) and continuance of such failure for a period of ten (10) days; or
3
<PAGE>
(b) The institution by the Borrower or any other party of
proceedings to have the Borrower adjudicated a bankrupt or insolvent (which
proceedings, brought by another party other than the Borrower have not been
dismissed within 120 days of commencement), or the consent by the Borrower to
the institution of bankruptcy or insolvency proceedings against the Borrower or
the filing by the Borrower of a petition or answer or consent seeking
reorganization or release under the United States Federal Bankruptcy Act or any
other United States, Federal or State Bankruptcy laws, or the consent by the
Borrower to the filing of any such petition or the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other court-appointed official)
of the Borrower (which petition or appointment brought by any other party other
than Borrower has not been dismissed within 120 days of commencement) or of any
substantial part of its property, or the making by the Borrower of a general
assignment for the benefit of creditors, or the admission by the Borrower in
writing of its inability to pay its debts generally as they become due or the
taking of corporate action by the Borrower in furtherance of any such action; or
(c) The entry of a decree or order by a court having jurisdiction
in the premises adjudging the Borrower a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Borrower under the United States Federal
Bankruptcy Act or any other United States estate law, or
4
<PAGE>
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Borrower or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for a period of thirty (30) consecutive days unless
stayed; or
(d) Any material attachment of the Collateral or any other
property or assets of the Borrower which is not discharged or bonded within
thirty (30) days; or
(e) Any default, uncured breach, nonperformance or non-observance
(after application of all applicable cure periods) of any material covenant,
condition, representation, promise or agreement between the Borrower and Holder,
including but not limited to, any default under any other promissory note or
other obligation between the Borrower and Holder, or any material adverse
default by the Borrower, under or with respect to any indebtedness or debt
obligation of the Borrower with any other creditor.
5. Acceleration on Default The Borrower agrees that after the
occurrence of an Event of Default, and the giving of any applicable notice and
cure period, this Note, and, at the option of the Holder, all obligations, if
any, of the Borrower to the Holder, shall become at once due and payable without
notice, presentment, or demand of payment.
6. Remedies and Collateral. Upon the occurrence of any Event of
Default: (i) the Holder shall be entitled to
5
<PAGE>
exercise forthwith all of the rights and remedies provided for in this Note and
all rights and remedies of a secured party under the New York Uniform Commercial
Code or other applicable law; and (ii) the Holder may, upon ten (10) days prior
written notice to Borrower in accordance with paragraph 11, sell all or any part
of the Collateral, said sale to be either public or private at the Holder's sole
discretion at such prices as it may deem best, for cash or credit, with the
right of the Holder or Borrower at any such sale to purchase all or any part
thereof, free from any right of redemption, applying the net proceeds of such
sale to the payment of this Note or of any other obligations to the Holder of
the Borrower, which shall remain liable to the Holder for any deficiency
hereunder and/or thereunder.
7. Cross Collateralization. All Collateral which the Holder may at any
time acquire from the Borrower from any source in connection with obligations
arising under this Note shall constitute Collateral for each and every
obligation of Borrower to the Holder and/or any affiliate or subsidiary of the
Holder, without apportionment or designation as to particular obligations. All
obligations of the Borrower to the Holder and/or any affiliate or subsidiary of
the Holder, however and whenever incurred, shall be secured by all Collateral
above-referenced however and whenever acquired, and the Holder shall have the
right, in its sole discretion, to determine the order in which the Holder's
rights in or remedies against any such Collateral are to be exercised and which
type of Collateral or
6
<PAGE>
which portions of such Collateral the Holder shall proceed against and the order
of application of proceeds of such Collateral as against any particular
obligations.
8. Non-waiver. No delay or failure on the part of the Holder to
exercise any power or right hereunder shall operate as a waiver and such rights
and powers shall be deemed continuous, nor shall a partial exercise preclude
full exercise; and no right or remedy of the Holder shall be deemed abridged or
modified by any course of conduct and no waiver thereof shall be predicated
thereon, nor shall failure to exercise any such power or right subject the
Holder to any liability.
9. Jurisdiction. The Borrower hereby consents to submit itself to the
jurisdiction of the United States District Court for the Southern District of
New York, as well as the Courts of the State of New York in connection with any
disputes which may arise hereunder. The Borrower hereby consents to service of
process in the State of New York by naming the Secretary of State of the State
of New York as its agent for such service. Such submission to jurisdiction and
consent to service of process is nonexclusive of any other jurisdiction or
manner of service in which or by which personal jurisdiction over the Borrower
may be obtained.
10. Costs of Collection. Should the indebtedness represented by this
Note or any part thereof be placed in the hands of attorneys for collection
after an Event of Default, as defined herein, the Borrower agrees to pay the
principal, premium
7
<PAGE>
if any, and interest due and payable hereon and all reasonable costs of
collecting this Note, including but not limited to reasonable attorneys' fees
and expenses.
11. Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this Note shall be in
writing if sent by pre-paid first-class mail, overnight courier or delivery
service and in addition, if transmitted by any telecommunication device (e.g.
telex or telecopier) and addressed or sent to the respective parties' addresses
specified below and shall be considered given or made when received by
recipient. Either party may change its address by giving prior written notice to
the other party of its new address
To the Borrower: Puro Corporation of America
56-45 58th Street
P.0. Box 10
Maspeth, NY 11378
Attention: Mr. Jack C. West,
President
With a copy to: Epstein, Becker & Green
250 Park Avenue, 14th Floor
New York, NY 10177
Attention: Bernice K. Leber, Esquire
To the Holder: c/o Peter T. Dixon
79 East 79th Street
New York, NY 10021-0202
With a copy to: Bruce L. Lev, Esquire
Lev, Spalter & Berlin, P.C.
105 Rowayton Avenue
Rowayton, CT 06853
8
<PAGE>
12. Prepayment. The Borrower shall have the privilege of paying the
whole or any part of this indebtedness at any time while this Note remains
unpaid without penalty or premium.
13. App1icab1e Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
14. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THIS NOTE AND/OR THE DEFENSE OR ENFORCEMENT OF ANY OF THE HOLDER'S
RIGHTS AND REMEDIES IN CONNECTION THEREWITH. BORROWER ACKNOWLEDGES THAT IT MAKES
THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
PURO CORPORATION OF AMERICA
By /s/ Jack C. West
-------------------------------
Jack C. West,
Its President
Hereunto duly Authorized
Dated: January 28, 1994
Attest:
________________________________
9
<PAGE>
RIDER TO
SECURED NOTE
(a) All present and future accounts, contract rights, chattel paper, and
general intangibles (including but not limited to all BORROWER's now
existing or hereafter arising tax and duty claims and refunds, all now
owned or hereafter acquired patents, trademarks, copyrights, licenses or
license agreements relative to the rendering of services or the manufacture
of goods, choses in action, rights to sue any third party and proceeds of
any lawsuit or proceeding brought by BORROWER against any third party)
documents, instruments, customer lists, monies, deposits, securities,
credits and letters of credit whether now owned or hereafter acquired by
the BORROWER; BORROWER's interest in the goods represented thereby and all
returned, reclaimed or repossessed goods with respect thereto; all rights
and remedies of BORROWER under or in connection with such collateral;
(b) All inventory, wherever located, whether now owned or hereafter acquired by
BORROWER, including without limitation, raw materials, materials used or
consumed in the BORROWER's business, wrapping, packing and shipping
materials, work in process and finished goods of whatever kind, nature and
description wherever located and whether in the possession or control of a
<PAGE>
EX-10.37
EAB
EUROPEAN AMERICAN BANK
LETTER OF CREDIT GROUP
1 EAB PLAZA -- PLAZA LEVEL
UNIONDALE, NY 11555-2541
ISSUE/AMEND INQUIRY: 516-296-6872 PAYMENT INQUIRY: 516-296-6871
TELEX NUMBER: 420771 SWIFT ADDRESS: EABCUS33
JUNE 27, 1996
BENEFICIARY APPLICANT
MOUNTAINWOOD SPRING WATER CO.INC., TRUST U/W W. PALMER DIXON
C/O THOMAS E. DURKIN III, ESQ. C/O PETER DIXON
DURKIN AND DURKIN, ESQS. 79 EAST 79TH STREET
ONE GATEWAY CENTER, SUITE 1700 NEW YORK, NY 10021
NEWARK, N.J. 07102
EAB LETTER OF CREDIT NUMBER: S029798
DATE OF EXPIRY: JULY 01, 1997 AT: OUR COUNTER
AMOUNT: USD 500,000.00 (FIVE HUNDRED THOUSAND 00/100) UNITED
STATES DOLLARS
GENTLEMEN:
WE HEREBY OPEN OUR IRREVOCABLE LETTER OF CREDIT NO. S029798, IN YOUR FAVOR UP
TO AN AGGREGATE AMOUNT OF USD 500,000.00 (FIVE HUNDRED THOUSAND 00/100 UNITED
STATES DOLLARS) PAYABLE TO YOU AGAINST YOUR PRESENTATION TO US OF YOUR SIGHT
DRAFT(S) DRAWN ON US, ACCOMPANIED BY DOCUMENTS AS DETAILED HEREIN.
1. AT THE REQUEST AND FOR THE ACCOUNT OF TRUST U/W W. PALMER DIXON, C/O PETER
DIXON, 79 E. 79TH STREET, NEW YORK, NY, 10021 IN THE "ACCOUNT PARTY") ON
BEHALF OF PURO WATER GROUP INC., IN FAVOR OF MOUNTAIN WOOD SPRING WATER CO.,
INC., ITS SUCCESSORS, ASSIGNS AND TRANSFEREES AS BENEFICIARY (THE BENEFICIARY),
EUROPEAN AMERICAN BANK (THE "ISSUING BANK") HEREBY ESTABLISHES IN THE
BENEFICIARY'S FAVOR THIS IRREVOCABLE STANDBY LETTER OF CREDIT IN AN AMOUNT NOT
EXCEEDING FIVE HUNDRED THOUSAND (USD500,000.00) (THE "STATED AMOUNT")
EFFECTIVE IMMEDIATELY AND EXPIRING AT THE CLOSE OF BANKING BUSINESS AT THE
PAYMENT OFFICE (AS DEFINED IN PARAGRAPH 2) ON JULY 01, 1997 (THE "EXPIRATION
DATE").
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR AN ADDITIONAL ONE YEAR FROM THE
EXPIRATION HEREOF, OR ANY FUTURE EXPIRATION DATE, UNLESS 60 DAYS PRIOR TO ANY
EXPIRATION DATE WE NOTIFY YOU THE BENEFICIARY BY TELECOMMUNICATION/CERTIFIED
MAIL OR OVERNIGHT COURIER THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT
RENEWED FOR ANY SUCH ADDITIONAL PERIOD. IN ANY EVENT THIS LETTER OF CREDIT
SHALL NOT BE EXTENDED BEYOND JULY 01, 2003.
SHOULD THE EXPIRATION DATE OF THIS LETTER OF CREDIT FALL ON A DAY ON WHICH
THE BANK TO WHICH PRESENTATION HAS TO BE MADE
<PAGE>
IS CLOSED FOR REASONS OTHER THAN THOSE REFERRED TO IN ARTICLE 17 OF THE UCP
500 THE STIPULATED EXPIRY DATE SHALL BE EXTENDED TO THE FIRST FOLLOWING
BUSINESS DAY ON WHICH SUCH BANK IS OPEN. THAT BEING THE CASE.
2. THE BENEFICIARY MAY MAKE DRAWINGS ON THE ISSUING BANK UNDER THIS
IRREVOCABLE LETTER OF CREDIT BY PRESENTING TO THE ISSUING BANK AT ITS OFFICE
AT EAB PLAZA, UNIONDALE, NEW YORK 11555, ATTENTION: STANDBY LETTER OF CREDIT
DEPARTMENT (THE "PAYMENT OFFICE") A SIGHT DRAFT IN THE FORM OF EXHIBIT A
ANNEXED HERETO APPROPRIATELY COMPLETED, STATING ON ITS FACE "DRAWN UNDER
IRREVOCABLE LETTER OF CREDIT NO. S029798 DATED JUNE 27, 1996 ACCOMPANIED BY A
COMPLETED CERTIFICATE SIGNED BY THE BENEFICIARY IN THE FORM OF EXHIBIT B
ANNEXED HERETO (SUCH DRAFT ACCOMPANIED BY SUCH CERTIFICATE REFERRED TO AS
YOUR DRAFT"). THE DELIVERY OF THE CERTIFICATE IN ACCORDANCE WITH THE FOREGOING
PROVISIONS SHALL BE CONCLUSIVE AS TO ALL MATTERS THEREIN FOR THE PURPOSE OF
OUR OBLIGATION TO HONOR A DRAFT UNDER THIS LETTER OF CREDIT. PARTIAL DRAWINGS
ARE PERMITTED IN THE AMOUNT CERTIFIED. THE ORIGINAL LETTER OF CREDIT WILL BE
ENDORSED ON THE REVERSE AND RETURNED WITH THE PROCEEDS ON ANY DRAFT WHICH DOES
NOT EXHAUST THE TOTAL AVAILABLE AMOUNT OF THE CREDIT.
3. WE HEREBY ENGAGE WITH THE BENEFICIARY THAT THE DRAFTS PRESENTED IN
CONFORMITY WITH THE TERMS OF THIS IRREVOCABLE LETTER OF CREDIT WILL BE DULY
HONORED BY US IF PRESENTED ON OR BEFORE THE EXPIRATION DATE.
IN THE EVENT THE LETTER OF CREDIT IS TRANSFERRED THE BENEFICIARY AT THE TIME
OF TRANSFER MUST SUBMIT TO EUROPEAN AMERICAN BANK A STATEMENT DULY SIGNED BY
AN AUTHORIZED INDIVIDUAL ADVISING EUROPEAN AMERICAN BANK OF THE NEW
BENEFICIARY'S NAME.
4. THIS IRREVOCABLE LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 NO. 500).
VERY TRULY YOURS
EUROPEAN AMERICAN BANK
BY:
NAME
TITLE
/s/ Susan J. Lo Franco
Asst. Treasurer
/s/ Micheline Woolley
Asst. Treasurer
<PAGE>
This forms an Integral part of Letter of Credit No. S029798
EXHIBIT A
---------
Draft under Irrevocable Letter of Credit No. S029798
Pay to the order of ourselves the aggregate amount of _____________
and __________/100 dollars (USD_______).
This draft is drawn under Irrevocable Letter of Credit No. S029798
dated June 27, 1996, issued for the account of Trust U/W W. Palmer
Dixon.
Dated:________________
Drawn on: European American Bank
EAB Plaza, Uniondale,
New York
By:___________________
Name:
Title:
<PAGE>
This forms an Integral part of Letter of Credit No. S029798
EXHIBIT B
---------
To: EUROPEAN AMERICAN BANK
The undersigned, __________________________ (the "Beneficiary") hereby
certifies, with reference to European American Bank irrevocable letter of
credit no. S029798 (the "Letter of Credit" the terms defined therein and not
otherwise defined herein being used herein as therein defined), that:
The amount of our draft accompanying this certificate, to wit:
USD__________________, is now due and owing to the beneficiary from Puro
Water Group, Inc. under that certain negotiable promissory note dated
June 27, 1996 payable to the order of the beneficiary.
Dated:_______________________, 19__
By:_____________________
Title
<PAGE>
EX-10.38
- --------------------------------------------------------------------------------
EAB [LOGO]
EUROPEAN AMERICAN BANK
LETTER OF CREDIT GROUP
1 EAB PLAZA - PLAZA LEVEL
UNIONDALE, NY 11555-2041
ISSUE/AMEND INQUIRY: 516-296-6872 PAYMENT INQUIRY: 516-296-6871
TELEX NUMBER: 420771 SWIFT ADDRESS: EABCUS33
JANUARY 31, 1996
BENEFICIARY APPLICANT
RLB, INC. TRUST U/W W PALMER DIXON
FKA ELECTRIFIED COMPANIES INC. C/O PETER DIXON
C/O ROBERT BRUNDAGE 79 EAST 79TH STREET
20 RANDALL NEW YORK NY 10021
SHORT HILLS, NJ 07078
EAB LETTER OF CREDIT NUMBER: S027958
DATE OF EXPIRY: AUGUST 31, 1997 AT: OUR COUNTER
AMOUNT: USD 4,000,000.00 (FOUR MILLION 00/100) UNITED STATES
DOLLARS
GENTLEMEN:
WE HEREBY OPEN OUR IRREVOCABLE LETTER OF CREDIT NO. S027958, IN YOUR FAVOR UP TO
AN AGGREGATE AMOUNT OF USD 4,000,000.00 (FOUR MILLION 00/100 UNITED STATES
DOLLARS) PAYABLE TO YOU AGAINST YOUR PRESENTATION TO US OF YOUR SIGHT DRAFT(S)
DRAWN ON US, ACCOMPANIED BY DOCUMENTS AS DETAILED HEREIN.
1. AT THE REQUEST AND FOR THE ACCOUNT OF TRUST U/W W. PALMER DIXON, C/O PETER
DIXON, 79 E. 79TH STREET, NEW YORK, NY 10021 THE "ACCOUNT PARTY") ON BEHALF OF
PURO WATER GROUP INC. IN FAVOR OF RLB, INC., FKA ELECTRIFIED COMPANIES INC. ITS
SUCESSORS, ASSIGNS AND TRANSFEREES AS BENEFICIARY (THE BENEFICIARY), EUROPEAN
AMERICAN BANK (THE "ISSUING BANK") HEREBY ESTABLISHES IN THE BENEFICIARY'S FAVOR
THIS IRREVOCABLE STANDBY LETTER OF CREDIT IN AN AMOUNT NOT EXCEEDING FOUR
MILLION DOLLARS (USD4,000,000.00) (THE "STATED AMOUNT") EFFECTIVE IMMEDIATELY
AND EXPIRING AT THE CLOSE OF BANKING BUSINESS AT THE PAYMENT OFFICE (AS DEFINED
IN PARAGRAPH 2) ON AUGUST 31, 1997 (THE "EXPIRATION DATE").
THIS LETTER OF CREDIT SHALL AUTOMATICALLY REDUCE WITHOUT AMENDMENT IN THE AMOUNT
OF USD500,000.00 ON SEPTEMBER 03, 1996.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY
EXTENDED WITHOUT AMENDMENT FOR AN ADDITIONAL ONE YEAR FROM THE EXPIRATION
HEREOF, OR ANY FUTURE EXPIRATION DATE, UNLESS 60 DAYS PRIOR TO ANY EXPIRATION
DATE WE NOTIFY YOU THE BENEFICIARY BY TELECOMMUNICATION/CERTIFIED MAIL OR
OVERNIGHT COURRIER THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED
FOR ANY SUCH ADDITIONAL PERIOD. IN ANY EVENT THIS LETTER OF CREDIT SHALL NOT BE
EXTENDED BEYOND FEBRUARY 02, 2000.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
EAB [LOGO]
IN THE EVENT WE ELECT TO RENEW THIS LETTER OF CREDIT THE FOLLOWING REDUCTION
SCHEDULE SHALL APPLY: ON THE FIRST BUSINESS DAY OF EVERY MONTH BEGINNING WITH
MARCH 1997, THE LETTER OF CREDIT SHALL REDUCE BY USD97,222.23. SHOULD THE
EXPIRATION DATE OF THIS LETTER OF CREDIT FALL ON A DAY ON WHICH THE BANK TO
WHICH PRESENTATION HAS TO BE MADE IS CLOSED FOR REASONS OTHER THAN THOSE
REFERRED TO IN ARTICLE 17 OF THE UCP 500 THE STIPULATED EXPIRY DATE SHALL BE
EXTENDED TO THE FIRST FOLLOWING BUSINESS DAY ON WHICH SUCH BANK IS OPEN. THAT
BEING THE CASE, THE REDUCTION OF USD97,322.23 WILL TAKE PLACE ON THE DAY
FOLLOWING THE FIRST BUSINESS DAY ON WHICH THE BANK IS OPEN.
2. THE BENEFICIARY MAY MAKE DRAWINGS ON THE ISSUING BANK UNDER THIS IRREVOCABLE
LETTER OF CREDIT BY PRESENTING TO THE ISSUING BANK AT ITS OFFICE AT EAB PLAZA,
UNIONDALE, NEW YORK 11555. ATTENTION: STANDBY LETTER OF CREDIT DEPARTMENT (THE
"PAYMENT OFFICE") A SIGHT DRAFT IN THE FORM OF EXHIBIT A ANNEXED HERETO
APPROPRIATELY COMPLETED, STATING ON ITS FACE "DRAWN UNDER IRREVOCABLE LETTER OF
CREDIT NO. S027958 DATED JANUARY 31, 1996 ACCOMPANIED BY A COMPLETED CERTIFICATE
SIGNED BY THE BENEFICIARY IN THE FORM OF EXHIBIT B ANNEXED HERETO (SUCH DRAFT
ACCOMPANIED BY SUCH CERTIFICATE REFERRED TO AS YOUR DRAFT"). THE DELIVERY OF THE
CERTIFICATE IN ACCORDANCE WITH THE FOREGOING PROVISIONS SHALL BE CONCLUSIVE AS
TO ALL MATTERS THEREIN FOR THE PURPOSE OF OUR OBLIGATION TO HONOR A DRAFT UNDER
THIS LETTER OF CREDIT. PARTIAL DRAWINGS ARE PERMITTED IN THE AMOUNT CERTIFIED.
THE ORIGINAL LETTER OF CREDIT WILL BE ENDORSED ON THE REVERSE AND RETURNED WITH
THE PROCEEDS ON ANY DRAFT WHICH DOES NOT EXHAUST THE TOTAL AVAILABLE AMOUNT OF
THE CREDIT.
3. WE HEREBY ENGAGE WITH THE BENEFICIARY THAT THE DRAFTS PRESENTED IN CONFORMITY
WITH THE TERMS OF THIS IRREVOCABLE LETTER OF CREDIT WILL BE DULY HONORED BY US
IF PRESENTED ON OR BEFORE THE EXPIRATION DATE.
IN THE EVENT THE LETTER OF CREDIT IS TRANSFERRED THE BENEFICIARY AT THE TIME OF
TRANSFER MUST SUBMIT TO EUROPEAN AMERICAN BANK A STATEMENT DULY SIGNED BY AN
AUTHORIZED INDIVIDUAL ADVISING EUROPEAN AMERICAN BANK OF THE NEW BENEFICIARY'S
NAME.
4. THIS IRREVOCABLE LETTER OF CREDIT IS SUBJECT OT THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 NO. 500.
VERY TRULY YOURS
/s/ Susan J. LoFranco
EUROPEAN AMERICAN BANK
BY: /s/ Kathleen M. Kraus
NAME SUSAN J. LOFRANCO KATHLEEN M. KRAUS
TITLE Asst. Treasurer ASSISTANT VICE PRESIDENT
- --------------------------------------------------------------------------------
<PAGE>
This forms an Integral part of Letter of Credit No._______
EXHIBIT A
Draft under Irrevocable Letter of Credit No.
Pay to the order of ourselves the aggregate amount of S027958
and __________/100 dollars (USD_______).
This draft is drawn under Irrevocable Letter of Credit No. S027958
dated January 31, 1996, issued for the account of Trust U/W W Palmer
Dixon.
Dated:________________
Drawn on: European American Bank
EAB Plaza, Uniondale,
New York
By:___________________
Name:
Title:
<PAGE>
Exhibit B
This forms an Integral part of Letter of Credit No. 2027958
To: EUROPEAN AMERICAN BANK
The undersigned, ___________________________________, (the "Beneficiary") hereby
certifies, with reference to European American Bank irrevocable letter of credit
no. S027958 (the "Letter of Credit" the terms defined therein and not otherwise
defined herein being used herein as therein defined), that:
The amount of our draft accompanying this certificate, to wit:
USD______________, is now due and owing to the beneficiary, jointly and
severally from Puro Water Group, Inc. under one or more of its promissory notes
dated January , 1996 payable to the order of the beneficiary.
Dated: ____________________, 19__
By:____________________
Title
<PAGE>
EX-10.39
CONSULTING AGREEMENT
January 28, 1994
Puro Corporation of America
56-45 58th Street
Maspeth, NY 11378
Re: Peter T. Dixon and
Puro Corporation of America
Gentlemen:
This will confirm the arrangements, terms and conditions, whereby Peter T.
Dixon (hereinafter referred to as the "Consultant") shall serve as investment
banker and financial advisor to Puro Corporation of America (hereinafter
referred to as the "Company") for the period set forth below. The undersigned
hereby agree to the following terms and conditions:
1. Consulting Services. From the date hereof through January __, 1999, the
Consultant shall provide to the Company investment banking services, including
advice with respect to mergers or acquisitions, or sales of all or part of the
Company; and advice regarding financial strategy, debt and equity offerings,
capital structure, and other financial matters. Without limiting the generality
of the foregoing, this agreement relates to assistance to the Company in
developing, studying and evaluating financing and merger and acquisition
proposals. Notwithstanding the same, however, in the event that the Consultant
facilitates a merger, financing or other like transaction on behalf of the
Company, the Consultant shall be provided separate consideration for same on
mutually agreeable terms and conditions.
2. Compensation.
(a) The Company agrees to pay the Consultant for its services to be
rendered pursuant to this agreement a monthly fee of One Thousand Dollars
($1,000.00) commencing on January 28, 1994 and continuing to and including
January 28, 1999.
(b) All reasonable out-of-pocket expenses incurred by the Consultant
in performance of the services to be rendered hereunder shall be borne by the
Company and reimbursed to the Consultant upon presentation of appropriate
documentation provided, however, that expenses in excess of $250.00 per month
shall require the prior written consent of the Company
<PAGE>
Puro Corporation of America
January 28, 1994
Page 2
3. Relationship. Nothing herein shall be deemed to constitute an
employment or agency relationship between the Consultant and the Company.
Nevertheless, nothing contained herein shall be deemed to preclude the creation
of such relationship by separate agreement of the parties, in writing, for a
particular purpose. Except as expressly agreed in writing, the Consultant shall
not have the authority to obligate, bind or commit the Company in any manner
whatsoever.
4. Assignment and Termination. This agreement shall not be assignable
by either party except to successors to all or substantially all of the business
of either, nor may this agreement be terminated by either party for any reason
whatsoever without the prior written consent of the other party, which consent
may be arbitrarily withheld by the party whose consent is required.
Very truly yours,
/s/ Peter T. Dixon
---------------------------------
Peter T. Dixon
AGREED AND ACCEPTED BY:
PURO CORPORATION OF AMERICA
By: /s/ Jack C. West
----------------------------
Jack C. West,
Its President
Hereunto Duly Authorized
<PAGE>
EX-10.40
[LETTERHEAD]
November 14, 1996
Mr. Jack C. West
Mr. Scott Levy
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Re: Consulting Agreement with Puro Water group, Inc., formerly known as
Puro Corporation of America ("Puro"), dated January 29, 1994 (the
"Agreement")
-------------------------------------------------------------------
Dear Jack and Scott:
Reference is made to the Agreement and, specifically, Paragraph 1 thereof.
This letter serves to confirm that the undersigned waives any and all rights to
receive consideration from Puro or any third party arising out of Paragraph 1 of
the Agreement in connection with the contemplated initial public offering of
common stock of Puro.
Sincerely,
/s/ Peter T. Dixon
-----------------------------------
Peter T. Dixon
<PAGE>
EX-10.41
THE SECURITIES REPRESENTED BY THIS OPTION MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT MADE UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR PURSUANT TO AN EXEMPTION FROM THE ACT.
VOID AFTER 3:30 P.M., NEW YORK TIME, ON
THE FACE EXPIRATION DATE, AS DEFINED HEREINBELOW,
OR SUCH LATER DATE AS MAY BE SPECIFIED HEREIN
Option to Purchase
Shares of Common Stock
.003125 Par Value (Subject to Adjustment)
OPTION TO PURCHASE COMMON STOCK
PURO WATER GROUP, INC.
This is to Certify That, FOR TEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE
CONSIDERATION, EDBERG ASSOCIATES LIMITED PARTNERSHIP, a Connecticut limited
partnership having an address of 56 Woodland Lane, Orange, Connecticut 06477
(the "Optionee"), is entitled to purchase, subject to the provisions of this
Option, from PURO WATER GROUP, INC., a corporation duly organized under the laws
of the State of Delaware and having a principal place of business at 56-45 58th
Street, Maspeth, New York 11378 (the "Company"), at any time on or after the
date hereof and not later than the date which is Four (4) years and six (6)
months following the date hereof (hereinafter the "Face Expiration Date") (or
such later date as may be specified herein), that number of shares of common
voting stock of the Company, $.003125 par value (unless the Reverse Split
(defined below) is implemented, in which case the par value shall be $.0063)
("Common Stock"), as set forth in Section (d) hereinbelow, at a total and
aggregate purchase price per share equal to the price at
<PAGE>
which the shares of Common Stock are offered at an initial public offering less
the underwriter's discount or commission with respect thereto (hereinafter the
"IPO Price"). The number of shares of Common Stock to be received upon the
exercise of this Option may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, as adjusted
from time to time, are hereinafter sometimes referred to as "Shares" or "Option
Stock" and the exercise price of this Option is hereinafter sometimes referred
to as the "Exercise Price"
(a) Exercise of Option. This Option may be exercised within the
limitations set forth in this paragraph at any time or from time to time on or
after the date hereof; provided, however, that this Option may not be exercised
later than the Face Expiration Date (or such later date as may be specified
hereinafter). This Option may be exercised by presentation and surrender hereof
to the Company at the address set forth hereinbelow and accompanied by payment
of the Exercise Price, together with all federal or state taxes applicable upon
such exercise. After the Face Expiration Date (or such later date as may be
specified herein), this Option shall be null, void and of no further force or
effect. Upon receipt by the Company of this Option in proper form for exercise,
the Optionee shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Optionee.
(b) Loss or Destruction of Option. The term "Option" as used herein
includes any Options issued in substitution for or replacement of this Option,
or into which this Option may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss,
2
<PAGE>
theft, destruction or mutilation of this Option, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification and upon surrender
and cancellation of this Option, if mutilated, the Company will execute and
deliver a new Option of like tenor and date. Any such new Option executed and
delivered shall constitute the same contractual obligation on the part of the
Company, whether or not this Option so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.
(c) Rights of the Optionee. The Optionee shall not, solely by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Optionee hereunder are limited to those
expressed in this Option and are not enforceable against the Company except to
the extent set forth herein.
(d) Shares Available Hereunder.
(1) Number Shares Pursuant to Option. The Optionee shall be entitled
to receive One Hundred Thousand (100,000) shares of the issued and outstanding
Common Stock of the Company (herein referred to as the "Face Amount" of this
Option) provided, however, that in the event that the Company implements a
reverse stock split (the "Reverse Split") pursuant to which holders of the
Common Stock would own .4928 shares for each share owned prior to the Reverse
Split, then optionee shall be entitled to receive 49,284 shares. In such event,
the exercise price shall remain unchanged, i.e. shall be equal to the IPO Price.
(2) Determination of Date of Issue. In case the Company shall make a
record of any holder of any Common Stock for the purpose of entitling such
holder (i) to receive a dividend or other distribution payable in Common Stock
or in other securities convertible into or
3
<PAGE>
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being hereinafter referred to as "Convertible Securities"), or (ii)
to subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(e) Reclassification Reorganization or Merger.
In the case of any reclassification, or capital reorganization
(other than a change in par value, or as a result of an issuance of Common Stock
by way of stock dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or capital reorganization) or in case of any sale or conveyance
to another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company shall cause effective provision to be
made so that the Optionee shall have the right thereafter, by exercising this
Option, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, capital reorganization,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Option. The foregoing
provisions of this Section (e)(1) shall similarly apply to successive
reclassifications capital reorganizations and exchanges of shares of Common
Stock
4
<PAGE>
and to successive consolidations, mergers, sales or conveyances. In the event
that in any such capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for or of a
security of the Company other than Common Stock, any such issue shall be treated
as an issue of Common Stock covered by the provisions of subsection (d)(1)
hereof.
(f) Nontransferability. This Option may not be assigned, transferred
(except as provided above), pledged, or hypothecated in any way, shall not be
assignable by operation of law, and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Option contrary to the provisions
hereof and the levy of any execution, attachment or similar process upon this
Option shall be null and void and without effect.
(g) Transfer to Comply with the Securities Laws.
Neither this Option nor the Option Stock or any other security
issued or issuable upon exercise of this Option may be offered or sold except in
conformity with the Act as it may be applicable.
(h) Purchase for Investment. The Company and the Optionee agree,
acknowledge and affirm that this Option is being purchased and the Option Stock
will be purchased, if at all, for investment only and not for resale or other
distribution.
(i) Applicable Law. This Option shall be governed by, and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law.
5
<PAGE>
(j) Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this agreement shall be in
writing and shall be considered as properly given or made if sent by courier
service or if transmitted by any telecommunication device (e.g. telex or
facsimile) and addressed or sent to the respective parties' addresses specified
below. Any party may change its address by giving notice in writing to the other
parties of its new address.
To the Company: PURO WATER GROUP, INC.
56-45 58th Street
Maspeth, New York 11378
Attn: Mr. Jack C. West, Co-President
Mr. Scott Levy, Co-President
Tel. (718) 326-7000
Fax. (718)894-8357
To any Optionee: c/o Peter T. Dixon
East 79th Street
New York, New York 10021-0202
Tel. (212) 737-1268
Fax. (212)737-1268
in each case with a
copy to: Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, CT 06854
Attn: Duane L. Berlin, Esquire
Tel. (203) 838-8500
Fax. (203)854-1652
(k) Jurisdiction; Service of Process. The parties hereby consent to submit
themselves to the jurisdiction of the United States District Court for the
Southern District of New York and the Courts of the State of New York in
connection with any disputes which may arise hereunder. The parties hereby
consent to service of process in the State of New York and designate the
Secretary of State of the State of New York as their agent for such service.
Such submission to
6
<PAGE>
jurisdiction and consent to service of process is nonexclusive of any other
jurisdiction or manner of service in which or by which personal jurisdiction
over the parties may be obtained.
PURO WATER GROUP, INC.
By:/s/ Jack C. West
-----------------------------
Jack C. West
Its President
PURO WATER GROUP, INC
By: /s/ Scott Levy
-----------------------------
Scott Levy
Its Chief Executive Officer
OPTIONEE
EDBERG ASSOCIATES LIMITED
PARTNERSHIP
By: /s/ Stephen Charles Edberg
-----------------------------
Stephen C. Edberg, Duly Authorized
Dated: November 9, 1996
7
<PAGE>
EX-10.42
THE SECURITIES REPRESENTED BY THIS OPTION MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT MADE UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR PURSUANT TO AN EXEMPTION FROM THE ACT
VOID AFTER 3:30 P.M., NEW YORK TIME, ON
THE FACE EXPIRATION DATE, AS DEFINED HEREINBELOW,
OR SUCH LATER DATE AS MAY BE SPECIFIED HEREIN
Option to Purchase
Shares of Common Stock
.003125 Par Value (Subject to Adjustment)
OPTION TO PURCHASE COMMON STOCK
PURO WATER GROUP, INC.
This is to Certify That, FOR TEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR
THE BENEFIT OF PALMER DIXON c/o Peter T. Dixon of East 79th Street, New York,
New York 10021-0202 ("Palmer Trust"), THE TRUST UNDER ARTICLE 16 OF THE WILL OF
W. PALMER DIXON, FOR THE BENEFIT OF PETER T. DIXON, c/o Peter T. Dixon of 79
East 79th Street, New York, New York 10021-0202 ("Peter Trust") and PETER T.
DIXON, 79 East 79th Street, New York, New York 10021-0202 (collectively referred
to as "Optionee" unless the context requires otherwise), is entitled to
purchase, subject to the provisions of this Option, from PURO WATER GROUP, INC.,
a corporation duly organized under the laws of the State of Delaware and having
a principal place of business at 56-45 58th Street, Maspeth, New York 11378 (the
"Company"), at any time on or after the date hereof and not later than the date
which is Four (4) years and six (6) months following the date hereof
<PAGE>
(hereinafter the "Face Expiration Date") (or such later date as may be specified
herein), that number of shares of common voting stock of the Company, $.003125
par value (unless the Reverse Split (defined below) is implemented, in which
case the par value shall be $.0063) ("Common Stock"), as set forth in Section
(d) hereinbelow, at a total and aggregate purchase price per share equal to the
price at which the shares of Common Stock are offered at an initial public
offering less the underwriter's discount or commission with respect thereto
(hereinafter the "IPO Price"). The number of shares of Common Stock to be
received upon the exercise of this Option may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, as adjusted from time to time, are hereinafter sometimes referred to
as "Shares" or "Option Stock" and the exercise price of this Option is
hereinafter sometimes referred to as the "Exercise Price".
(a) Exercise of Option. This Option may be exercised within the
limitations set forth in this paragraph at any time or from time to time on or
after the date hereof, provided, however, that this Option may not be exercised
later than the Face Expiration Date (or such later date as may be specified
hereinafter). This Option may be exercised by presentation and surrender hereof
to the Company at the address set forth hereinbelow and accompanied by payment
of the Exercise Price, together with all federal or state taxes applicable upon
such exercise. After the Face Expiration Date (or such later date as may be
specified herein), this Option shall be null, void and of no further force or
effect. Upon receipt by the Company of this Option in proper form for exercise,
the Optionee shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise notwithstanding that the stock transfer books
of the
2
<PAGE>
Company shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Optionee.
(b) Loss or Destruction of Option. The term "Option" as used herein
includes any Options issued in substitution for or replacement of this Option,
or into which this Option may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification and upon surrender and cancellation of
this Option, if mutilated, the Company will execute and deliver a new Option of
like tenor and date. Any such new Option executed and delivered shall constitute
the same contractual obligation on the part of the Company, whether or not this
Option so lost, stolen, destroyed, or mutilated shall be at any time enforceable
by anyone.
(c) Rights of the Optionee. The Optionee shall not, solely by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Optionee hereunder are limited to those
expressed in this Option and are not enforceable against the Company except to
the extent set forth herein.
(d) Shares Available Hereunder.
(1) Number Shares Pursuant to Option. The Optionee shall be entitled
to receive Fifty Thousand (50,000) shares of the issued and outstanding Common
Stock of the Company (herein referred to as the "Face Amount" of this Option)
provided, however, that in the event that the Company implements a reverse stock
split (the "Reverse Split") pursuant to which holders of the Common Stock would
own .4928 shares for each share owned prior to the Reverse Split, then
3
<PAGE>
optionee shall be entitled to receive 24,642 shares. In such event, the
exercise price shall remain unchanged, i.e. shall be equal to the IPO Price.
(2) Determination of Date of Issue. in case the Company shall make a
record of any holder of any Common Stock for the purpose of entitling such
holder (i) to receive a dividend or other distribution payable in Common Stock
or in other securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being hereinafter referred to as
"Convertible Securities"), or (ii) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(e) Reclassification. Reorganization or Merger.
In the case of any reclassification, or capital reorganization
(other than a change in par value, or as a result of an issuance of Common Stock
by way of stock dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or capital reorganization) or in case of any sale or conveyance
to another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company shall cause effective provision to be
made so that the Optionee shall have the right thereafter, by exercising this
Option, to purchase the kind and amount of shares of stock and
4
<PAGE>
other securities and property receivable upon such reclassification, capital
reorganization, consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Option. The foregoing
provisions of this Section (e)(1) shall similarly apply to successive
reclassifications, capital reorganizations and exchanges of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances. In the
event that in any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for or of a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock covered by the provisions of
subsection (d)(1) hereof.
(f) Nontransferability. This Option may not be assigned, transferred
(except as provided above), pledged or hypothecated in any way, shall not be
assignable by operation of law, and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Option contrary to the provisions
hereof and the levy of any execution, attachment or similar process upon this
Option shall be null and void and without effect.
(g) Transfer to Comply with the Securities Laws.
Neither this Option nor the Option Stock or any other security
issued or issuable upon exercise of this Option may be offered or sold except in
conformity with the Act as it may be applicable.
5
<PAGE>
Purchase for Investment. The Company and the Optionee agree, acknowledge
and affirm that this Option is being purchased and the Option Stock will be
purchased, if at all for investment only and not for resale or other
distribution.
(i) Applicable Law. This Option shall be governed by, and construed in
accordance with the laws of the State of New York without giving effect to
the principles of conflicts of law.
(j) Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this agreement shall be in
writing and shall be considered as properly given or made if sent by courier
service or if transmitted by any telecommunication device (e.g. telex or
facsimile) and addressed or sent to the respective parties' addresses specified
below. Any party may change its address by giving notice in writing to the other
parties of its new address.
To the Company: PURO WATER GROUP, INC.
56-45 58th Street
Maspeth, New York 11378
Attn: Mr. Jack C. West, Co-President
Mr. Scott Levy, Co-President
Tel. (718) 326-7000
Fax. (718)894-8357
To any Optionee: c/o Peter T. Dixon
East 79th Street
New York, New York 10021-0202
Tel. (212) 737-1268
Fax. (212) 737-1268
in each case with
a copy to: Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, CT 06854
Attn: Duane L. Berlin, Esquire
Tel. (203) 838-8500
Fax. (203) 854-1652
6
<PAGE>
(k) Jurisdiction: Service of Process. The parties hereby consent to submit
themselves to the jurisdiction of the United States District Court for the
Southern District of New York and the Courts of the State of New York in
connection with any disputes which may arise hereunder. The parties hereby
consent to service of process in the State of New York and designate the
Secretary of State of the State of New York as their agent for such service.
Such submission to jurisdiction and consent to service of process is
nonexclusive of any other jurisdiction or manner of service in which or by which
personal jurisdiction over the parties may be obtained.
PURO WATER GROUP, INC
By: /s/ Jack C. West
----------------------------
Jack C. West
Its President
PURO WATER GROUP, INC
By: /s/ Scott Levy
----------------------------
Scott Levy
Its Chief Executive Officer
OPTIONEE
THE TRUST UNDER ARTICLE 16 OF
THE WILL OF W. PALMER DIXON,
FOR THE BENEFIT OF PALMER DIXON
By: /s/ Peter T Dixon
----------------------------
Peter T. Dixon Duly Authorized
7
<PAGE>
THE TRUST UNDER ARTICLE 16 OF
THE WILL OF W. PALMER DIXON FOR
THE BENEFIT OF PETER T. DIXON
By: /s/ Peter T. Dixon
----------------------------
Peter T. Dixon, Duly Authorized
/s/ Peter T. Dixon
--------------------------------
Peter T. Dixon
Dated: November 9, 1996
8
<PAGE>
EX-10.43
THE SECURITIES REPRESENTED BY THIS OPTION MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT MADE UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR PURSUANT TO AN EXEMPTION FROM THE ACT.
VOID AFTER 3:30 P.M., NEW YORK TIME, ON
THE FACE EXPIRATION DATE, AS DEFINED HEREINBELOW,
OR SUCH LATER DATE AS MAY BE SPECIFIED HEREIN
Option to Purchase
Shares of Common Stock
.003125 Par Value (Subject to Adjustment)
OPTION TO PURCHASE COMMON STOCK
PURO WATER GROUP, INC.
This is to Certify That, FOR TEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE TRUST UNDER ARTICLE 16 OF THE WILL OF W. PALMER DIXON, FOR
THE BENEFIT OF PALMER DIXON c/o Peter T. Dixon of East 79th Street, New York,
New York 10021-0202 ("Palmer Trust"), THE TRUST UNDER ARTICLE 16 OF THE WILL OF
W. PALMER DIXON, FOR THE BENEFIT OF PETER T. DIXON, c/o Peter T. Dixon of 79
East 79th Street, New York, New York 10021-0202 ("Peter Trust") and PETER T.
DIXON, 79 East 79th Street, New York, New York 10021-0202 (collectively referred
to as "Optionee" unless the context requires otherwise), is entitled to
purchase, subject to the provisions of this Option, from PURO WATER GROUP, INC.,
a corporation duly organized under the laws of the State of Delaware and having
a principal place of business at 56-45 58th Street, Maspeth, New York 11378 (the
"Company"), at any time on or after the date hereof and not later than the date
which is Four (4) years and nine (9) months following the date hereof
<PAGE>
(hereinafter the "Face Expiration Date") (or such later date as may be
specified herein), that number of shares of common voting stock of the Company,
$.003125 par value (unless the Reverse Split (defined below) is implemented, in
which case the par value shall be $.0063) ("Common Stock"), as set forth in
Section (d) hereinbelow, at a total and aggregate purchase price per share equal
to the price at which the shares of Common Stock are offered at an initial
public offering less the underwriter's discount or commission with respect
thereto (hereinafter the "IPO Price"). The number of shares of Common Stock to
be received upon the exercise of this Option may be adjusted from time to time
as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, as adjusted from time to time, are hereinafter sometimes referred to
as "Shares" or "Option Stock" and the exercise price of this Option is
hereinafter sometimes referred to as the "Exercise Price".
(a) Exercise of Option. This Option may be exercised within the
limitations set forth in this paragraph at any time or from time to time on or
after the date hereof; provided, however, that this Option may not be exercised
later than the Face Expiration Date (or such later date as may be specified
hereinafter). This Option may be exercised by presentation and surrender hereof
to the Company at the address set forth hereinbelow and accompanied by payment
of the Exercise Price, together with all federal or state taxes applicable upon
such exercise. After the Face Expiration Date (or such later date as may be
specified herein), this Option shall be null, void and of no further force or
effect. Upon receipt by the Company of this Option in proper form for exercise,
the Optionee shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise notwithstanding that the stock transfer books
of the
2
<PAGE>
Company shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Optionee.
(b) Loss or Destruction of Option. The term "Option" as used herein
includes any Options issued in substitution for or replacement of this Option,
or into which this Option may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification and upon surrender and cancellation of
this Option, if mutilated, the Company will execute and deliver a new Option of
like tenor and date. Any such new Option executed and delivered shall constitute
the same contractual obligation on the part of the Company, whether or not this
Option so lost, stolen, destroyed, or mutilated shall be at any time enforceable
by anyone.
(c) Rights of the Optionee. The Optionee shall not, solely by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Optionee hereunder are limited to those
expressed in this Option and are not enforceable against the Company except to
the extent set forth herein.
(d) Shares Available Hereunder.
(1) Number Shares Pursuant to Option. The Optionee shall be entitled
to receive One Hundred Thousand (100,000) shares of the issued and outstanding
Common Stock of the Company (herein referred to as the "Face Amount" of this
Option) provided, however, that in the event that the Company implements a
reverse stock split (the "Reverse Split") pursuant to which holders of the
Common Stock would own .4928 shares for each share owned prior to the Reverse
3
<PAGE>
Split, then optionee shall be entitled to receive 49,284 shares. In such event,
the exercise price shall remain unchanged, i.e. shall be equal to the IPO Price.
(2) Determination of Date of Issue. In case the Company shall make a
record of any holder of any Common Stock for the purpose of entitling such
holder (i) to receive a dividend or other distribution payable in Common Stock
or in other securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being hereinafter referred to as
"Convertible Securities"), or (ii) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(e) Reclassification, Reorganization or Merger.
In the case of any reclassification, or capital reorganization (other
than a change in par value, or as a result of an issuance of Common Stock by way
of stock dividend or other distribution or of a subdivision or combination), or
in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the Company
is the continuing corporation and which does not result in any reclassification
or capital reorganization) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company shall cause effective provision to be made so that the
Optionee shall have the right thereafter, by exercising this Option, to purchase
the kind and amount of shares of stock and
4
<PAGE>
other securities and property receivable upon such reclassification, capital
reorganization, consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Option. The foregoing
provisions of this Section (e)(l) shall similarly apply to successive
reclassifications, capital reorganizations and exchanges of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances. In the
event that in any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for or of a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock covered by the provisions of
subsection (d)(1) hereof.
(f) Nontransferability. This Option may not be assigned, transferred
(except as provided above), pledged, or hypothecated in any way, shall not be
assignable by operation of law, and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Option contrary to the provisions
hereof and the levy of any execution, attachment or similar process upon this
Option shall be null and void and without effect.
(g) Transfer to Comply with the Securities Laws.
Neither this Option nor the Option Stock or any other security issued
or issuable upon exercise of this Option may be offered or sold except in
conformity with the Act as it may be applicable.
5
<PAGE>
(h) Purchase for Investment. The Company and the Optionee agree,
acknowledge and affirm that this Option is being purchased and the Option Stock
will be purchased, if at all, for investment only and not for resale or other
distribution.
(i) Applicable Law. This Option shall be governed by, and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law.
(j) Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this agreement shall be in
writing and shall be considered as properly given or made if sent by courier
service or if transmitted by any telecommunication device (e.g. telex or
facsimile) and addressed or sent to the respective parties' addresses specified
below. Any party may change its address by giving notice in writing to the other
parties of its new address.
To the Company: PURO WATER GROUP, INC.
56-45 58th Street
Maspeth, New York 11378
Attn: Mr. Jack C. West, Co-President
Mr. Scott Levy, Co-President
Tel. (718) 326-7000
Fax. (718) 894-8357
To any Optionee: c/o Peter T. Dixon
East 79th Street
New York, New York 10021-0202
Tel. (212) 737-1268
Fax.(212)737-1268
Lev, Berlin & Dale, P.C.
in each case with 535 Connecticut Avenue
a copy to: Norwalk, CT 06854
Attn: Duane L. Berlin, Esquire
Tel. (203) 838-8500
Fax. (203) 854-1652
6
<PAGE>
(k) Jurisdiction: Service of Process. The parties hereby consent to submit
themselves to the jurisdiction of the United States District Court for the
Southern District of New York and the Courts of the State of New York in
connection with any disputes which may arise hereunder. The parties hereby
consent to service of process in the State of New York and designate the
Secretary of State of the State of New York as their agent for such service.
Such submission to jurisdiction and consent to service of process is
nonexclusive of any other jurisdiction or manner of service in which or by which
personal jurisdiction over the parties may be obtained.
PURO WATER GROUP, INC.
By: /s/ Jack C. West
-------------------------------
Jack C. West
Its President
PURO WATER GROUP, INC.
By: /s/ Scott Levy
-------------------------------
Scott levy
Its Chief Executive Officer
OPTIONEE
THE TRUST UNDER ARTICLE 16 OF
THE WILL OF W. PALMER DIXON,
FOR THE BENEFIT OF PALMER DIXON
By: /s/ Peter T. Dixon
-------------------------------
Peter T. Dixon, Duly Authorized
<PAGE>
THE TRUST UNDER ARTICLE 16 OF
THE WILL OF W. PALMER DIXON, FOR
THE BENEFIT OF PETER T DIXON
By /s/ Peter T. Dixon
--------------------------------
Peter T. Dixon, Duly Authorized
/s/ Peter T. Dixon
--------------------------------
Peter T. Dixon
Dated: November 9, 1996
8
<PAGE>
EX-11.1
PURO WATER GROUP, INC.
SUPPLEMENTAL EARNINGS
PER SHARE COMPUTATION
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, 1996
------------------
<S> <C>
(UNAUDITED)
CALCULATION OF SUPPLEMENTAL SHARES OUTSTANDING:
Debt to be repaid by offering proceeds........................................................ $ 5,500,000
Proceeds per share............................................................................ 6.00
------------------
Additional shares assumed outstanding......................................................... 916,667
------------------
Additional weighted average common shares outstanding......................................... 586,359
Weighted average common shares outstanding.................................................... 2,194,151
------------------
Supplemental weighted average common shares outstanding....................................... 2,780,510
------------------
------------------
SUPPLEMENTAL EARNINGS PER SHARE:
Net income.................................................................................... $ 514,789
Pro forma impact of use of proceeds on interest expense....................................... 299,190
------------------
Supplemental net income....................................................................... 813,979
Supplemental weighted average common shares outstanding....................................... 2,780,510
------------------
Supplemental earnings per share............................................................... $ 0.29
------------------
------------------
</TABLE>
<PAGE>
EX-23.2
After the reverse stock split discussed in Note 13 to the Puro Water Group,
Inc.'s financial statements is effected, we expect to be in a position to render
the following consent.
Arthur Andersen LLP
November 13, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated May 1, 1996 (except for the matters described in Note 13, as to
which the date is , 1996) and May 1, 1996 and to all references to
our Firm included in or made a part of this registration statement.
New York, New York
, 1996
<PAGE>
EX-23.3
November 14, 1996
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Gentlemen:
I hereby consent to your referencing me in the "Management" section of your Form
SB-2 Registration Statement as an individual who will become a director upon
completion of the offering.
Very truly yours,
/s/ Dr. Stephen C. Edberg
Dr. Stephen C. Edberg
<PAGE>
EX-23.4
November 14, 1996
Puro Water Group, Inc.
56-45 58th Street
Maspeth, New York 11378
Gentlemen:
I hereby consent to your referencing me in the "Management" section of your Form
SB-2 Registration Statement as an individual who will become a director upon
completion of the offering.
Very truly yours,
/s/ Leonard Rosinski
Leonard Rosinski
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STMTS. OF PURO WATER GROUP, INC. AS OF 12-31-95 AND 1994 AND FOR THE
YEAR ENDED 12-31-95 AND FOR THE PERIOD FROM INCEPTION (2-1-94) TO 12-31-94 AND
FROM THE UNAUDITED FINANCIAL STMTS. AS OF AND FOR THE NINE MONTHS ENDED 9-30-96
AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REF. TO SUCH FINANCIAL STMTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 11-MOS YEAR 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1995 DEC-31-1996
<PERIOD-START> FEB-01-1994 JAN-01-1995 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 SEP-30-1995 SEP-30-1996
<CASH> 0 689 0 326
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 1345 0 2652
<ALLOWANCES> 0 196 0 157
<INVENTORY> 0 349 0 443
<CURRENT-ASSETS> 0 2277 0 3578
<PP&E> 0 3739 0 6387
<DEPRECIATION> 0 385 0 735
<TOTAL-ASSETS> 0 8350 0 17253
<CURRENT-LIABILITIES> 0 1228 0 3826
<BONDS> 0 2823 0 7922
0 0 0 0
0 0 0 0
<COMMON> 0 12 0 13
<OTHER-SE> 0 3502 0 4517
<TOTAL-LIABILITY-AND-EQUITY> 0 8350 0 8350
<SALES> 2919 4175 3121 6384
<TOTAL-REVENUES> 4054 5501 4113 8068
<CGS> 1147 1615 1263 2293
<TOTAL-COSTS> 1253 1853 1393 2629
<OTHER-EXPENSES> 2258 2829 2080 3838
<LOSS-PROVISION> 87 (11) 21 (39)
<INTEREST-EXPENSE> 130 303 221 541
<INCOME-PRETAX> 460 635 527 804
<INCOME-TAX> 204 231 190 290
<INCOME-CONTINUING> 256 404 337 515
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 256 404 337 515
<EPS-PRIMARY> 0.15 0.22 0.19 0.23
<EPS-DILUTED> 0.15 0.22 0.19 0.23
</TABLE>
