<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRITON SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MISSISSIPPI 3578 64-0628980
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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522 EAST RAILROAD STREET
LONG BEACH, MS 39560
(601) 868-1317
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERNEST L. BURDETTE
PRESIDENT
TRITON SYSTEMS, INC.
522 EAST RAILROAD STREET
LONG BEACH, MS 39560
(601) 868-1317
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. RICCIO, JR., ESQUIRE JOHN A. BURGESS, ESQUIRE
THOMAS M. CAMP, ESQUIRE BRENT B. SILER, ESQUIRE
HUTCHINS, WHEELER & DITTMAR HALE AND DORR LLP
A PROFESSIONAL CORPORATION 60 STATE STREET
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 526-6000
(617) 951-6600
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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, please check the following box and list the Securities
Act registration 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
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share........................... 4,830,000 shares $13.00 $62,790,000 $19,028
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</TABLE>
(1) Includes 630,000 shares which the Underwriters have the option to purchase
from the Selling Stockholders solely to cover over-allotments, if any. See
"Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 (a) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED JANUARY 28, 1997
4,200,000 SHARES
[TRITON SYSTEMS LOGO]
COMMON STOCK
Of the 4,200,000 shares of Common Stock offered hereby, 3,750,000 shares
are being sold by Triton Systems, Inc. ("Triton" or the "Company") and 450,000
shares are being sold by certain of the Selling Stockholders. See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders.
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of factors to be considered in determining the initial public
offering price. An application has been made to have the Common Stock approved
for quotation on the Nasdaq National Market under the symbol "TRTN."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
<S> <C> <C> <C> <C>
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Per Share.............................. $ $ $ $
Total(3)............................... $ $ $ $
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</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $600,000.
(3) The Selling Stockholders have granted to the Underwriters a 30-day option to
purchase up to 630,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ , the Proceeds to Company will total $ and the
Proceeds to Selling Stockholders will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
---------------------
MONTGOMERY SECURITIES
DEAN WITTER REYNOLDS INC.
SMITH BARNEY INC.
, 1997
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." All share and per share data in this Prospectus have been
adjusted to give effect to a 1.65-for-1 stock split in the form of a stock
dividend effected on January 27, 1997, and gives effect to the conversion of the
Company's Non-Voting Common Stock into Common Stock, which will occur
automatically upon the closing of the offering.
THE COMPANY
The Company is a leading manufacturer and marketer of automated teller
machines ("ATMs") in the United States. The Company designs, manufactures,
markets and sells primarily focused-function ATMs (also known as cash
dispensers), which are intended to operate profitably at significantly lower
transaction volumes than conventional ATMs. Conventional ATMs typically dispense
cash, accept deposits, transfer funds between accounts and provide account
balances. Focused-function ATMs, such as those manufactured by the Company,
perform all of these functions, other than accepting deposits. Focused-function
ATMs are suitable for locations such as convenience stores, hotels, casinos,
grocery stores, fast food restaurants, department stores, gas stations, malls,
campuses and entertainment complexes, including movie theaters, amusement parks
and race tracks ("off-premise locations"), in addition to bank and credit union
branches ("on-premise locations"). According to The Nilson Report, the Company
shipped the third largest number of ATMs in the United States in 1995, with its
shipments accounting for 12% of all ATMs shipped in the United States in that
year. The Company also designs, manufactures, markets and sells other financial
hardware products such as scrip terminals (countertop ATMs that provide a
voucher redeemable for cash), ATM demonstration machines and card activators.
The Company continues to position itself to capitalize on emerging opportunities
in the transaction and payment processing industry.
According to industry sources, ATM shipments in the United States increased
from 8,527 in 1991 to 24,300 in 1995, for a compound annual growth rate of 30%.
Over the same five-year period, the number of installed ATMs in the United
States grew from 83,545 to 122,706, for a compound annual growth rate of 10%.
Worldwide, the number of ATMs shipped in 1995 was 117,658, and the number of
ATMs installed at the end of 1995 was 618,296.
According to The Nilson Report, focused-function ATMs represented
approximately 51% of total 1995 ATM shipments in the United States. The Company
estimates, based on industry sources, that unit sales of focused-function ATMs
in the United States grew by 16% from 1994 to 1995, while unit sales of
conventional ATMs grew by 11% over the same period. The Company believes that
the two primary reasons for the faster growth of focused-function ATMs are (i)
increased deployment of ATMs in off-premise locations and (ii) the attractive
economics of owning and operating a focused-function ATM.
The number of ATMs deployed at off-premise locations in the United States
has increased from 18,380 in 1991 to 38,039 in 1995, for a compound annual
growth rate of 19.9%, as compared to the increase of ATMs installed at
on-premise locations from 65,165 to 84,667 over the same period, for a compound
annual growth rate of 6.8%. Factors contributing to the increased deployment of
ATMs in off-premise locations include consumer demand for cash at these
locations and the competitive advantage an ATM can give a retailer through
increased customer traffic and incremental revenues. According to Convenience
Store Decisions 1995 Sales Trend Handbook, the typical ATM customer will spend
20%-25% more than a non-ATM customer in a convenience store. The Company
estimates that the potential market for focused-function ATMs includes over
700,000 off-premise locations in the United States.
Economic factors that make focused-function ATMs attractive to own and
operate include (i) retail prices and monthly operating costs which the Company
estimates are 50%-70% lower than those of conventional ATMs and (ii) incremental
revenues available from surcharge fees. Due to these attractive
3
<PAGE> 5
economics, the Company believes that the number of ATM transactions necessary to
break even with a focused-function ATM is less than half that required for a
conventional ATM.
Triton's net sales increased to $41.0 million in 1996 from $21.0 million in
1995 and $3.2 million in 1994. Income from operations increased to $14.4 million
in 1996 from $7.4 million in 1995 and $371,000 in 1994.
The Company's strategy is to strengthen its leadership position as a
supplier of focused-function ATMs, to expand its presence in the ATM and related
product markets by leveraging its core competency in the focused-function ATM
market, and to exploit new opportunities in the transaction and payment
processing industry as they develop. Key elements of this strategy are to: (i)
build upon the Company's existing distribution channels to penetrate new
domestic geographic markets; (ii) penetrate the domestic bank and credit union
ATM market; (iii) develop a presence in the international ATM market; (iv)
continue to upgrade the functionality of its products and develop new products
that capitalize on emerging opportunities; (v) continue to emphasize the
Company's cost-effective operations; and (vi) maintain short delivery schedules
and a high level of customer service.
The Company currently offers five models of focused-function ATMs targeted
at locations with lower ATM transaction volumes. The Company's operations
emphasize cost-effectiveness principally by outsourcing the manufacture of many
components used in its products, utilizing an established distribution network
instead of maintaining a large direct sales force, and locating the
manufacturing facility in an area where operating and labor costs are typically
lower than in many other regions of the United States.
On July 25, 1996, the Company completed a recapitalization (the
"Recapitalization"), pursuant to which the Company repurchased an aggregate of
approximately 55% of its then outstanding shares of Common Stock from its
founders and certain other stockholders (collectively, the "Original
Stockholders") and entered into a series of related financing transactions. See
"Certain Transactions."
The Company was incorporated in Mississippi in August 1979. The Company's
principal executive offices are located at 522 East Railroad Street, Long Beach,
Mississippi, and its telephone number is (601) 868-1317.
THE OFFERING
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<S> <C>
Common Stock offered by the Company................. 3,750,000 shares
Common Stock offered by the Selling Stockholders.... 450,000 shares
Common Stock to be outstanding after the offering... 16,158,288 shares(1)
Use of proceeds..................................... To repay bank indebtedness and for
working capital and other general
corporate purposes
Proposed Nasdaq National Market symbol.............. TRTN
</TABLE>
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(1) Excludes: (i) 433,655 shares of Common Stock issuable upon exercise of stock
options outstanding as of January 27, 1997, with a weighted average exercise
price of $3.14 per share, of which options to purchase 263,706 shares of
Common Stock were then exercisable, and (ii) 32,109 shares of Common Stock
which are reserved for issuance under a warrant issued by the Company to an
affiliate of its senior lender. An additional 1,358,052 shares of Common
Stock have been reserved for issuance under the Company's stock plans. See
"Management -- Stock Plans" and "Description of Capital Stock -- Bank
Warrant."
4
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
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<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales...................................................... $3,236 $21,008 $40,968
Gross profit................................................... 1,288 11,761 19,618
Income from operations......................................... 371 7,418 14,382
Net income applicable to common stockholders(1)................ 233 4,714 10,582
Net income applicable to common stockholders -- per common
share........................................................ $ 0.01 $ 0.24
Pro forma net income applicable to common stockholders(2)...... 8,217
Pro forma net income applicable to common stockholders -- per
common share(2).............................................. $ 0.50
Weighted average shares outstanding(3)......................... 19,564 19,564 16,569
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(4) ADJUSTED(4)(5)
-------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Working capital............................................. $ 9,340 $ 8,813 $ 20,245
Total assets................................................ 13,676 13,149 24,581
Revolving credit facility................................... 8,000 29,818 --
Mandatorily redeemable preferred stock...................... 22,094 -- --
Total stockholders' equity (deficit)........................ (19,819) (20,070) 21,180
</TABLE>
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(1) From January 1, 1996 through July 25, 1996, the Company elected to be taxed
as a Subchapter S corporation for federal (and certain state) income tax
purposes and, accordingly, the Company was not subject to corporate income
taxes for that period.
(2) Gives effect to: (i) additional interest expense (net of taxes), as if the
additional $21.8 million borrowed under the Company's existing senior credit
facility on January 24, 1997 to fund in part the redemption of the Company's
Series A Preferred Stock and Series B Preferred Stock (the "Redeemable
Preferred Stock") had been incurred on July 25, 1996, the date of the
Recapitalization; (ii) the elimination of the accretion of $965,000 of
dividends and redemption value on the Redeemable Preferred Stock to reflect
such redemption; and (iii) additional income tax expense of $2.85 million,
as if the Company had been subject to federal and state income taxes during
the period January 1, 1996 through July 25, 1996.
(3) See Notes 1 and 13 to Financial Statements for an explanation of the
determination of the number of shares used in computing per share amounts.
(4) Gives effect to the following transactions as if they had occurred on
December 31, 1996: (i) the redemption of the Redeemable Preferred Stock;
(ii) the related incurrence of an additional $21.8 million of borrowings
under the Company's existing senior credit facility; and (iii) the
recognition of a non-recurring non-cash charge of $251,000 associated with
the unamortized portion of the excess of the face amount of the Series A
Preferred Stock over the fair market value of the Series A Preferred Stock
as determined by a third-party appraisal.
(5) As adjusted to give effect to the sale by the Company of the 3,750,000
shares of Common Stock offered by it hereby at the assumed initial public
offering price of $12.00 per share, after deducting the estimated
underwriting discount and expenses, and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of the Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON SINGLE, RECENTLY INTRODUCED PRODUCT LINE
Substantially all of the Company's revenues are derived, and are expected
to continue to be derived, from sales of the Company's focused-function ATMs, a
product line which was first introduced by the Company in 1994. There can be no
assurance that the Company's ATM products will achieve widespread and lasting
market acceptance. Because of this product concentration, a decline in demand
for these products, or an increase in competition, could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company's future financial performance will depend in part on the successful
development, introduction and customer acceptance of new ATM products and other
products. There can be no assurance that the Company will be successful in
designing, manufacturing, marketing and selling any new products. Accordingly,
the Company's future success will continue to depend in large part on the sale
of its focused-function ATMs. See "Business -- Products."
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's recent growth in revenues and profits should not be
considered indicative of future results. There can be no assurance that any of
the Company's business strategies will be successful or that the Company will be
able to sustain growth on a quarterly or annual basis. The Company's quarterly
and annual operating results may vary significantly from period to period
depending on factors such as the volume and timing of orders received during the
period, the timing of new product introductions by the Company and its
competitors, the impact of price competition on the Company's selling prices,
the availability and pricing of components for the Company's products, changes
in product or distribution channel mix, changes in operating expenses, changes
in the Company's strategy, personnel changes and general economic factors. Many
of these factors are beyond the Company's control. The volume and timing of
orders received during a particular period is difficult to forecast. Customers
generally order the Company's products on an as-needed basis, and accordingly
the Company has historically operated with a relatively small backlog. In
addition, a significant portion of the Company's sales are derived from a
limited number of distributors, the loss of one or more of which could have a
materially adverse effect on the Company's business, results of operations and
financial condition. Notwithstanding the difficulty in forecasting future sales
and the relatively small level of backlog at any given time, the Company
generally must plan production, order components and undertake its development,
sales and marketing activities and other commitments months in advance.
Accordingly, any shortfall in sales in a given period may adversely impact the
Company's results of operations due to an inability to adjust expenses or
inventory during the period to match the level of sales for the period. Due to
the foregoing factors, it is likely that in some future period the Company's
sales or operating results will be below the expectations of securities analysts
and investors. In such event, the trading price of the Company's Common Stock in
the public markets could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EFFECTS OF POTENTIAL LIMITATIONS ON SURCHARGING BY ATM OWNERS
The growth in the market and in the Company's sales of ATMs has been due,
in part, to the ability of ATM owners to charge consumers a surcharge fee for
the use of the ATM, which has resulted from the recent elimination by the Cirrus
and Plus national ATM networks of their policies against the imposition of
surcharges on ATM transactions. ATM owners are subject to federal and state
regulations governing consumers' rights with respect to ATM transactions and, in
response to the recent growth in the practice of surcharging, legislation has
been introduced in several states and in Congress that would limit or eliminate
6
<PAGE> 8
these fees. There can be no assurance that such legislation will not be enacted
in the future or that existing regulations or consumer protection laws will not
be expanded to apply to fees charged in connection with ATM transactions. In
addition, there can be no assurance that one or more of the national ATM
networks will not reinstate their former policies prohibiting surcharging. The
adoption of any such regulations, legislation or industry policies limiting or
prohibiting ATM surcharges could decrease demand for the Company's products,
which would have a material adverse effect on the Company's business, results of
operations and financial condition.
DEPENDENCE ON KEY SUPPLIERS
The Company outsources the manufacture of most of its components as part of
its low-cost manufacturing strategy. Component level parts, both mechanical and
electronic, and some complete subsystems are purchased through outside vendors.
Certain parts are custom-manufactured by these outside vendors according to the
Company's specifications. Several important components used in the Company's
focused-function ATM, including the single cassette and multi-cassette cash
dispensing subassemblies, the display screens and key pads, the business hour
service cabinets and the safe-type cabinets, are obtained from single suppliers.
The Company has identified alternative suppliers for its single cassette cash
dispenser, display screen and both styles of cabinets, and is currently in the
process of identifying potential alternative suppliers of multi-cassette cash
dispensing subassemblies and key pads. Certain of the alternative suppliers
identified by the Company currently supply other components to the Company. In
the event the Company is required to obtain components from the alternative
suppliers it has identified, there can be no assurance that the unit costs
currently paid by the Company for these components would not increase. Moreover,
the inability of the Company to obtain sufficient quantities of, or the failure
of suppliers to deliver, the cash dispensing subassemblies, key pads, display
screens or cabinets used in its focused-function ATMs would require the Company
to change the design of the products in order to use an alternative component,
which could increase the cost or delay the shipment of the Company's
focused-function ATMs, which in turn would have a material adverse effect on the
Company's business, results of operations and financial condition. There can be
no assurance that alternative sources of supply would be available on reasonably
acceptable terms, on a timely basis, or at all. The Company does not maintain
long-term agreements with any of its component suppliers. Because the purchase
of key components involves long lead times, in the event of unanticipated
increases in demand for the Company's products, the Company could be unable to
manufacture certain products in a quantity sufficient to meet demand. Any
inability to obtain adequate deliveries of any of the components or any other
circumstance that would require the Company to seek alternative sources of
supply could affect the Company's ability to ship its products on a timely basis
or result in increased component costs, each of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. In order to attempt to mitigate the risk of component shortages, the
Company maintains a limited inventory of components for which the Company is
dependent upon sole or limited source suppliers. There can be no assurance,
however, that these inventories will be sufficient, and any deficiency could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business -- Suppliers."
COMPETITION
The markets for the Company's products are characterized by intense
competition. The Company has a number of direct competitors for ATMs, the most
significant of which are Diebold Incorporated (including Interbold, a joint
venture between Diebold Incorporated and IBM), NCR Corporation, Fujitsu
Corporation and the Tidel Division of American Medical Technologies, Inc. Many
of the Company's current competitors have longer operating histories, are
substantially larger, and have substantially greater financial, technical,
manufacturing, marketing and other resources than the Company. As a result of
their greater resources, many of such competitors are better positioned than the
Company to withstand significant price competition or downturns in the economy.
A number of these competitors also have substantially greater name recognition
and a significantly larger installed base of products than the Company, which
could provide leverage to such companies in their competition with the Company.
Many competitors also offer products with more functionality and features than
those offered by the Company. The Company expects competition to increase and
anticipates that new competitors may enter the ATM market, particularly the
focused-function ATM
7
<PAGE> 9
segment. Such increased competition may result in price reductions, reduced
gross margins and loss of market share, any of which could materially adversely
affect the Company's business, results of operations and financial condition.
See "Business -- Competition."
DEPENDENCE UPON PRINCIPAL DISTRIBUTORS
A significant portion of the Company's net sales has been derived from a
limited number of distributors. For the year ended December 31, 1996, two of the
Company's distributors, Access Cash International and Card Capture Services,
accounted for approximately 22% and 19%, respectively, of the Company's net
sales. In addition, the Company's five largest distributors, in the aggregate,
accounted for approximately 62% of the Company's net sales in 1996. The Company
expects that it will continue to be dependent upon a limited number of
distributors for a significant portion of its net sales in future periods. None
of the Company's distributors are contractually obligated to purchase additional
products from the Company or is prohibited from distributing competitive
products. As a result of this distributor concentration, the Company's business,
results of operations and financial condition could be materially adversely
affected by the failure of anticipated orders from key distributors to
materialize or by deferrals or cancellations of orders by these distributors. In
addition, there can be no assurance that sales from distributors that have
accounted for significant sales in past periods, individually or as a group,
will continue or, if continued, will reach or exceed historical levels in any
future period. See "Business -- Distribution, Sales and Marketing."
RELIANCE ON THIRD-PARTY DISTRIBUTION CHANNELS FOR PRODUCT SALES AND SERVICE
The Company markets and sells its products primarily through third-party
distributors, none of which are under the direct control of the Company. The
Company has a limited domestic sales and marketing organization, and is
therefore dependent on the sales efforts of its distributors. The Company also
relies primarily on distributors to provide service and support to end users of
the ATMs manufactured by the Company. A reduction in the sales efforts by the
Company's current distributors or a termination of their relationships with the
Company could have a material adverse effect on the Company's business, results
of operations and financial condition. There can be no assurance that the
Company will be able to retain its current distributors or expand its
distribution channels by entering into arrangements with new distributors. There
also can be no assurance that the Company's current distributors will continue
to provide an adequate level of service and support for the Company's products,
or that the Company could find alternative providers of service and support on a
cost-effective basis. See "Business -- Distribution, Sales and Marketing" and
"Business -- Product Service and Support."
MANAGEMENT OF EXPANDING OPERATIONS
Future growth in the Company's business could place a significant strain on
the Company's limited personnel, management, financial controls and other
resources. The Company's ability to manage any future expansion effectively will
require it to attract, train, motivate and manage new employees successfully, to
integrate new management and employees into its overall operations and to
continue to improve its operational, financial and management systems and
controls and facilities. Certain members of the Company's senior management have
no experience in the management or operation of a public company. The Company's
failure to manage any expansion effectively, including any failure to integrate
new management controls, systems and procedures, could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company is currently in the process of acquiring a new management
information system to handle the Company's financial, accounting and production
planning and control functions. No assurance can be given that the
implementation of this system will not result in disruptions to the Company's
business, such as the loss of data while converting systems, errors in planning
production requirements, delays in the Company's ability to timely effect
periodic closings of its accounting records and other similar problems. Any such
disruptions or any failure to successfully implement this new management
information system in a timely manner could have a material adverse effect on
the Company's business, results of operations and financial condition.
8
<PAGE> 10
TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The Company's future growth will depend, in part, upon its ability to
continue to manufacture, market and sell ATMs with cost-effective
characteristics, develop and penetrate new market segments and enter and develop
new markets. To achieve its objectives for continued growth, the Company must
design and introduce new products with enhanced features, develop close
relationships with the leading market participants and establish new
distribution channels in each new market or market segment. The Company is
currently beta testing a new focused-function ATM model, targeted at banks and
credit unions, that conforms with the industry standard communications protocol
used by most banks and credit unions to communicate with their ATMs. There can
be no assurance that the Company will be successful in the development of this
product, or that, if developed, it will gain acceptance in the bank and credit
union segment of the ATM market. Some of the transactions currently initiated
through ATMs could be accomplished in the future using emerging payment
technologies, such as point-of-sale and smart-cards, which the Company does not
currently support. There can be no assurance that the Company can develop
products supporting these technologies or that, if developed, such products will
gain market acceptance. The failure of the Company to successfully offer
products supporting these emerging technologies could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Business -- Product Development."
RELIANCE ON CENTRALIZED MANUFACTURING; EXPOSURE TO NATURAL DISASTERS
All of the Company's manufacturing occurs at its headquarters facility in
Long Beach, Mississippi. The Company's manufacturing operations utilize certain
equipment which, if damaged or otherwise rendered inoperable, would result in
the disruption of the Company's manufacturing operations. The Company does not
presently have business interruption insurance or flood insurance, although it
is currently in the process of obtaining such insurance coverage. There can be
no assurance that the Company will be successful in obtaining such insurance on
reasonable terms, or at all, or that such insurance will continue to be
available. Any extended interruption of the operations at the Company's
headquarters facility would have a material adverse effect on the Company's
business, results of operations and financial condition. The Company's
headquarters are also exposed to risks associated with the occurrence of natural
disasters, such as hurricanes, floods and heavy rains. There can be no assurance
that the Company's facilities will not be damaged by the occurrence of such a
natural disaster. If such a natural disaster occurs, the Company's business,
results of operations and financial condition could be materially adversely
affected. See "Business -- Manufacturing".
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
As part of the Company's growth strategy, the Company is seeking
opportunities to expand its products into international markets. In marketing
its products internationally, however, the Company will face new competitors,
some of whom may have established strong presence in the local market. In
addition, the ability of the Company to market its products in foreign countries
will be dependent on the Company's ability to establish distribution
relationships with distributors in those countries, to adapt its products to
operate in foreign languages and to provide the functionality desired by end
users in those countries. To date, the Company has limited experience in
marketing and distributing its products internationally and has not derived any
sales of focused-function ATMs from international operations. There can be no
assurance that the Company will be successful in marketing or distributing its
products internationally. There also can be no assurance that the Company will
be successful in adapting its products to different languages and functionality
needs. In order for the Company to expand into certain foreign markets,
including member countries of the European Union, the Company will be required
to obtain certification under ISO 9000, the recognized international quality
standard. The Company does not currently have ISO 9000 certification and the
Company will need to expend time and financial resources in order to obtain such
certification. There can be no assurance that the Company will be able to obtain
such certification. In addition to the uncertainty as to the Company's ability
to establish an international presence, there are certain difficulties and risks
inherent in doing business on an international level, such as compliance with
regulatory requirements and changes in these requirements, export restrictions,
tariffs and other trade barriers, limited protection of intellectual property
rights, difficulties in staffing and managing international operations, longer
payment cycles, problems in
9
<PAGE> 11
collecting accounts receivable, political instability, fluctuations in currency
exchange rates and potentially adverse tax consequences. There can be no
assurance that one or more of these factors will not have a material adverse
effect on any international operations established by the Company, and
consequently, on the Company's business, results of operations and financial
condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RELIANCE ON THIRD PARTY LICENSES
The Company does not own any issued patent, and relies primarily on
trademark, copyright and trade secret law to protect its intellectual property
in the United States and abroad. These laws afford only limited protection and
there can be no assurances that the steps taken by the Company will prevent
misappropriation of its technology. There can be no assurance that any trademark
or copyright owned by the Company, or any patent, trademark or copyright
obtained by the Company in the future, will not be invalidated, circumvented or
challenged or that the rights granted thereunder will provide competitive
advantages to the Company. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights as fully as do the laws of the
United States. Thus, effective intellectual property protection may be
unavailable or limited in certain foreign countries. There can be no assurance
that competitors will not independently develop technologies that are similar or
superior to the Company's technology, duplicate the Company's technology or
design around any technology of the Company. Moreover, litigation may be
necessary in the future to enforce the Company's intellectual property rights,
to determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of management time and resources and
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Intellectual Property."
DEPENDENCE ON KEY PERSONNEL AND EMPLOYEES
The Company is highly dependent on the continued service of, and on its
ability to attract and retain, qualified technical, marketing, sales and
managerial personnel, including several members of management. The competition
for such personnel is intense, and the loss of any such persons, as well as the
failure to recruit additional key technical and sales personnel in a timely
manner, could have a material adverse effect on the Company's business, results
of operations and financial condition. There can be no assurance that the
Company will be able to continue to attract and retain the qualified personnel
necessary for the development of its business. None of the Company's employees
are parties to a collective bargaining agreement, and the Company is not aware
of any union organizational activities with respect to its employees. There can
be no assurance, however, that current conditions will continue with respect to
the prevailing wage scales and labor conditions in the area from which the
Company draws its labor pool or that efforts will not be made to unionize the
Company's work force. Because of the Company's emphasis on cost-effectiveness,
an increase in labor costs could have a material adverse effect on the Company's
business, results of operations and financial condition.
WARRANTY CLAIMS; PRODUCT LIABILITY
The Company provides a limited warranty on each of its products covering
manufacturing defects and premature failure. While the Company believes that its
reserves for warranty claims are adequate, there can be no assurance that the
Company will not experience increased warranty claims. An increase in warranty
claims could have a material adverse effect on the Company's business, results
of operations and financial condition. For example, in the first quarter of
1996, product and warranty claims adversely affected the Company's gross
margins. The Company's products may contain undetected defects which could
result in the improper dispensation of cash or other items. Although the Company
has experienced only a limited number of claims of this nature to date, there
can be no assurance that such defects will not occur in the future and that
losses will not be suffered as a consequence. In addition, there can be no
assurance that the Company will not be held liable for any losses incurred by
end users as a result of criminal activity which the Company's products were
intended, but unable, to prevent, or for any damages suffered by end users as a
result of malfunctioning or damaged components. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and "Business --
Product Service and Support."
10
<PAGE> 12
NEED FOR ADDITIONAL CAPITAL
The Company believes that in order to remain competitive it may require
additional financial resources over the next several years for working capital,
expansion of facilities and acquisition of complementary businesses, products
and technologies. There can be no assurance that the Company will be able to
obtain additional financing as needed on acceptable terms or at all. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
CONTROL BY EXISTING STOCKHOLDERS
Following this offering, Summit Ventures IV, L.P. ("Summit Ventures IV"),
Summit Investors III, L.P. ("Summit Investors") and Summit Subordinated Debt
Fund, L.P. ("Summit Debt Fund" and, together with Summit Ventures IV and Summit
Investors, the "Summit Entities") and the Company's executive officers, in the
aggregate, will beneficially own approximately 73.2% of the Company's
outstanding Common Stock (69.4% if the Underwriters' over-allotment option is
exercised in full). As a result, these stockholders, if acting together, would
be able to exert substantial influence over the Company and to control matters
requiring approval by the stockholders of the Company, including the election of
directors, the approval of amendments to the Company's Articles of
Incorporation, and the approval of a merger, consolidation or sale of
substantially all of the Company's assets. The voting power of these
stockholders could have the effect of delaying or preventing a change in control
of the Company. See "Principal and Selling Stockholders."
BENEFITS OF OFFERING TO CERTAIN STOCKHOLDERS
The existing stockholders of the Company will benefit from the creation of
a public market for the Common Stock held by them after the closing of the
offering. In addition, the Selling Stockholders will receive $5.0 million from
the sale of 450,000 shares of Common Stock offered by them hereby at an assumed
initial public offering price of $12.00 per share (approximately $12.1 million
if the Underwriters' over-allotment option is exercised in full). In connection
with the Recapitalization, (i) the Summit Entities acquired shares of Series A
Preferred Stock for an aggregate of $11.4 million in cash, shares of Common
Stock for an aggregate of $100,000 in cash and subordinated debentures for an
aggregate of $5.5 million in cash, and (ii) the Company repurchased an aggregate
of approximately 55% of the then outstanding shares of Common Stock from the
Original Stockholders for an aggregate consideration of $16.7 million in cash
and $6.0 million in subordinated promissory notes. Immediately prior to the
Recapitalization, the Company made a dividend distribution to the Original
Stockholders in the form of shares of Series B Preferred Stock with an aggregate
redemption value of $10.0 million. On September 26, 1996, the subordinated
debentures and subordinated promissory notes issued to the Original Stockholders
and the Summit Entities in the aggregate amount of $11.7 million (including
accrued interest of $206,000) were repaid in full with the proceeds of borrowing
under a credit facility provided by The First National Bank of Boston. In
January 1997, this facility was amended to increase the credit line from $15.0
million to $30.0 million, with the proceeds used to redeem all of the
outstanding Series A Preferred Stock for an aggregate redemption price of $12.0
million (including accrued dividends of $580,000), and all of the outstanding
Series B Preferred Stock for an aggregate redemption price of $10.5 million
(including accrued dividends of $508,000). A portion of the net proceeds of the
shares offered by the Company in this offering will be used to repay amounts
outstanding under the Company's credit facility. Following the closing of this
offering, the Summit Entities will hold shares of Common Stock having an
aggregate value equal to $77.0 million and the Original Stockholders will hold
shares of Common Stock having an aggregate value equal to $66.5 million, based
on an assumed public offering price of $12.00 per share. See "Use of Proceeds,"
"Certain Transactions" and "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Sale of substantial amounts of shares in the public market or the prospect
of such sales could adversely affect the market price of the Company's Common
Stock. Upon completion of this offering, the Company will have outstanding
16,158,288 shares of Common Stock. With the exception of the 4,200,000 shares
offered hereby, all shares of Common Stock held by current stockholders are
subject to lock-up agreements under
11
<PAGE> 13
which the holders of such shares have agreed not to sell or otherwise dispose of
any of their shares for a period of 180 days after the date of this Prospectus
without the prior written consent of Montgomery Securities. Of these shares,
132,292 would otherwise be eligible for sale in the public market immediately
after this offering pursuant to Rule 144(k) under the Securities Act, and
5,411,997 would otherwise be eligible for resale commencing 90 days after the
effective date of this offering pursuant to Rule 144 under the Securities Act.
Montgomery Securities may, in its sole discretion, and at any time without
notice, release all or any portion of the securities subject to these lock-up
agreements. The remaining 6,413,999 shares held by existing stockholders will
become eligible for sale from time to time in the future under Rule 144. In
addition, the Company intends to file a registration statement under the
Securities Act, upon the effectiveness of this offering or shortly thereafter,
covering the sale of shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan and 1997 Employee Stock Purchase Plan. As of
January 27, 1997, there were options outstanding to purchase a total of 433,655
shares of the Company's Common Stock, of which 362,706 shares are subject to
180-day lock-up agreements. An additional 1,358,052 shares are reserved for
future option grants. The Summit Entities and the executive officers, who hold
an aggregate of 11,825,996 shares of Common Stock, will be entitled to
registration rights with respect to their shares of Common Stock after the
offering. In addition, an affiliate of the Company's senior lender is entitled
to registration rights with respect to the shares subject to a warrant to
purchase 32,109 shares of Common Stock at $11.00 per share which is currently
exercisable. See "Shares Eligible for Future Sale" and "Underwriting."
NO PRIOR TRADING MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after the offering. The initial public offering price will be
determined through negotiations between the Company and the Representatives of
the Underwriters based on several factors and may not be indicative of the
market price of the Common Stock after the offering. The market price of the
shares of Common Stock may be highly volatile and may be significantly affected
by factors such as actual or anticipated fluctuations in the Company's operating
results, change in estimates or recommendations by securities analysts,
announcements of technical innovations, new products or new contracts by the
Company or its competitors, general market conditions and other factors, certain
of which could be unrelated to, or outside the control of, the Company. The
stock market has from time to time experienced significant price and volume
fluctuations that have often been unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Common Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of Mississippi law may make a change in control of the
Company more difficult to effect, even if a change in control were in the
interest of stockholders. Further, certain provisions of the Company's Articles
of Incorporation and By-laws, including provisions that provide that members of
the Board of Directors may be removed by stockholders only for cause, may have
the effect of delaying or preventing a change in control of the Company, which
could adversely affect the market price of the Company's Common Stock. See
"Description of Capital Stock." In addition, effective upon the closing of the
offering, the Company's Board of Directors will have the authority, without
further stockholder approval, to issue up to 5,000,000 shares of Preferred Stock
in one or more series and to determine the price, rights, preferences and
privileges of those shares. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of shares of
Preferred Stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company. See
"Description of Capital Stock -- Preferred Stock."
DILUTION
Purchasers in this offering will suffer an immediate and substantial
dilution in the pro forma net tangible book value of the Common Stock from the
initial public offering price. Additional dilution is likely to occur upon
exercise of outstanding stock options and warrants. See "Dilution."
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,750,000 shares of
Common Stock offered by it hereby are estimated to be $41,250,000 million,
assuming an initial public offering price of $12.00 per share and after
deducting the estimated underwriting discount and offering expenses. The Company
will not receive any proceeds from the sale of shares of Common Stock by the
Selling Stockholders.
The Company intends to use a portion of the net proceeds of this offering
to repay indebtedness under its existing bank credit facility with The First
National Bank of Boston (the "Bank Credit Facility"), which had an outstanding
balance of $29.8 million at January 27, 1997. The Bank Credit Facility bears
interest at a floating rate, which was at an effective interest rate of 7.25% as
of December 31, 1996, and matures on September 26, 2001. The Bank Credit
Facility was established in September 1996, and amended in January 1997 to
increase the maximum borrowing amount thereunder from $15.0 million to $30.0
million. The proceeds of the Bank Credit Facility were used as follows: (i) an
aggregate of $11.7 million was used in September 1996 to repay subordinated
notes issued to certain of the Summit Entities and the Original Stockholders in
the Recapitalization; (ii) an aggregate of approximately $12.0 million was used
in January 1997 to redeem all of the outstanding shares of Series A Preferred
Stock held by certain of the Summit Entities (including accrued dividends of
$580,000); and (iii) an aggregate of $10.5 million was used in January 1997 to
redeem all of the outstanding shares of Series B Preferred Stock held by the
Original Stockholders (including accrued dividends of $508,000).
The remaining net proceeds will be used for working capital and general
corporate purposes, which may include expansion of the Company's facilities and
the acquisition of complementary businesses, products and technologies. The
Company has no present agreement or commitment with respect to any acquisition,
nor are any negotiations regarding any acquisition currently ongoing. Pending
such uses, the Company intends to invest the net proceeds of this offering in
investment-grade, short-term, interest-bearing securities.
DIVIDEND POLICY
Subsequent to this offering, the Company anticipates that it will retain
all available funds for use in the operation and expansion of its business and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. From January 1, 1996 until July 25, 1996, the Company was a
Subchapter S corporation for federal and state income tax purposes. As a result,
during such period it was the Company's policy to distribute substantially all
of its earnings to its stockholders. Cash dividends of $3.5 million were
declared and paid during 1996. In connection with the redemption of the
Redeemable Preferred Stock in January 1997, the Company paid an aggregate of
$1.1 million of accrued dividends thereon. Under the terms of the Bank Credit
Facility, no dividends may be paid on the Company's Common Stock.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 on an actual, pro forma and as-adjusted basis. This table
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
-------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt -- revolving line of credit......... $ 8,000 $ 29,818 $ --
Mandatorily redeemable Series A Preferred Stock,
$.01 par value; 114,000 shares authorized, issued
and outstanding with a redemption value of $100
per share, plus accrued dividends, actual; none
authorized, issued or outstanding, pro forma and
pro forma as adjusted............................ 11,652 -- --
Mandatorily redeemable Series B Preferred Stock,
$.01 par value; 100,000 shares authorized, issued
and outstanding with a redemption value of $100
per share, plus accrued dividends, actual; none
authorized, issued or outstanding, pro forma and
pro forma as adjusted............................ 10,442 -- --
Stockholders' equity (deficit):
Preferred Stock, $.01 par value; 5,000,000 shares
authorized, none issued or outstanding,
actual, pro forma or pro forma as
adjusted(3)................................... -- -- --
Common Stock, $.01 par value; 40,000,000 shares
authorized; 12,408,288 issued and outstanding,
actual and pro forma; and 16,158,288 shares
issued and outstanding, pro forma as
adjusted(3)(4)................................ 124 124 162
Additional paid in capital....................... 303 303 41,515
Distributions in excess of basis................. (23,177) (23,177) (23,177)
Retained earnings................................ 2,931 2,680 2,680
-------- -------- --------
Total stockholders' equity (deficit)........ (19,819) (20,070) 21,180
-------- -------- --------
Total capitalization..................... $ 10,275 $ 9,748 $ 21,180
======== ======== ========
</TABLE>
- ---------------
(1) Gives effect to the redemption of all outstanding shares of Redeemable
Preferred Stock as if such transaction had occurred on December 31, 1996 and
the related incurrence of an additional $21.8 million of borrowings under
the Bank Credit Facility, and the recognition of a non-recurring non-cash
charge of $251,000 associated with the unamortized portion of the excess of
the face amount of the Series A Preferred Stock over the fair market value
of the Series A Preferred Stock as determined by a third-party appraisal.
(2) Adjusted to give effect to the sale of 3,750,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$12.00 per share, after deducting the estimated underwriting discount and
offering expenses, and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds."
(3) On January 27, 1997, the Company's Articles of Incorporation were amended to
increase the number of authorized shares of Common Stock from 10,000,000 to
40,000,000 and to set the number of authorized shares of undesignated
Preferred Stock at 5,000,000. See "Description of Capital Stock."
(4) Excludes: (i) 433,655 shares of Common Stock issuable upon exercise of stock
options outstanding as of January 27, 1997 with a weighted average exercise
price of $3.14 per share, of which options to purchase 263,706 shares of
Common Stock were then exercisable, and (ii) 32,109 shares of Common Stock
which are reserved for issuance under a warrant issued by the Company to an
affiliate of its senior lender. An additional 1,358,052 shares of Common
Stock have been reserved for issuance under the Company's stock plans. See
"Management -- Stock Plans" and "Description of Capital Stock -- Bank
Warrant."
14
<PAGE> 16
DILUTION
At December 31, 1996, the deficit in pro forma net tangible book value of
the Company was ($20,126,591), or ($1.62) per share. Pro forma net tangible book
value per share is equal to the Company's total tangible assets (before the
offering) less total liabilities divided by the total number of shares of Common
Stock outstanding on a pro forma basis, giving effect to the redemption of all
outstanding shares of Redeemable Preferred Stock as of December 31, 1996 and the
related incurrence of an additional $21.8 million of borrowings under the Bank
Credit Facility. After giving effect to the sale of the 3,750,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $12.00 per share and after deducting the estimated
underwriting discount and offering expenses, and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value of the
Company at December 31, 1996 would have been $21,123,409, or $1.31 per share.
This represents an immediate increase in the pro forma net tangible book value
of $2.93 per share to existing stockholders and an immediate dilution of $10.69
per share to purchasers in this offering. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.............................. $12.00
Deficit in pro forma net tangible book value per share before the
offering...................................................... $(1.62)
Increase in pro forma net tangible book value per share
attributable to new investors................................. 2.93
------
Pro forma net tangible book value per share after the offering..... 1.31
------
Pro forma net tangible book value dilution per share to new
investors........................................................ $10.69
======
</TABLE>
The following table summarizes, as of December 31, 1996, the number of
shares of Common Stock purchased from the Company, the total cash consideration
paid to the Company and the average price per share paid by existing
stockholders and by new investors in this offering based on an assumed initial
public offering price of $12.00 per share but before deducting the estimated
underwriting discount and offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... 12,408,288 76.8% $ 110,138 0.2% $ 0.01
New investors(1)........... 3,750,000 23.2 45,000,000 99.8 $ 12.00
---------- ----- ---------- ------
Total............ 16,158,288 100.0% $45,110,138 100.0%
========== ===== ========== ======
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this offering will cause the number of
shares held by the existing stockholders to be reduced to 11,958,288, or
74.0% of the total number of shares of Common Stock to be outstanding after
this offering, and will increase the number of shares to be purchased by new
stockholders to 4,200,000, or 26.0% of the total number shares of Common
Stock to be outstanding after the offering. Assuming full exercise of the
Underwriters' over-allotment option, the number of shares held by existing
stockholders would be reduced to 11,328,288 shares, or 70.1% of the total
number of shares of Common Stock to be outstanding after this offering, and
the number of shares held by new stockholders would be increased to
4,830,000 shares, or 29.9% of the total number of shares of Common Stock to
be outstanding after this offering. See "Principal and Selling
Stockholders."
The foregoing tables assume no exercise of the Underwriters' over-allotment
option or of options to purchase an aggregate of 433,655 shares of Common Stock
that were outstanding at January 27, 1997, with a weighted average exercise
price of $3.14 per share, or the warrant to purchase 32,109 shares outstanding
at January 27, 1997, at an exercise price of $11.00 per share. To the extent
that the Underwriters' over-allotment option, other options or the warrant are
exercised in the future, there will be further dilution to new investors. See
"Management -- Stock Plans."
15
<PAGE> 17
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the Financial Statements and Notes thereto included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected statement of operations data for the years
ended December 31, 1994, 1995 and 1996 and the selected balance sheet data at
December 31, 1995 and 1996, have been derived from the Company's financial
statements, which have been audited by Deloitte and Touche LLP and are included
elsewhere in this Prospectus. The selected balance sheet data at December 31,
1994 has been derived from the Company's financial statements, which have been
audited by Deloitte and Touche LLP but are not included in this Prospectus. The
selected financial data for the years ended December 31, 1992 and 1993 have been
derived from the Company's unaudited financial statements, which, in the opinion
of the Company's management, have been prepared on the same basis as the audited
financial statements. Historical results are not necessarily indicative of
results to be expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $ 955 $2,630 $3,236 $21,008 $40,968
Cost of sales....................................... 737 1,619 1,948 9,247 21,350
---- ------ ------ ------- -------
Gross profit...................................... 218 1,011 1,288 11,761 19,618
Operating expenses.................................. 315 671 917 4,343 5,236
---- ------ ------ ------- -------
Income (loss) from operations..................... (97) 340 371 7,418 14,382
Interest income (expense), net...................... 6 (1) 7 111 (185)
---- ------ ------ ------- -------
Income before income taxes........................ (91) 339 378 7,529 14,197
Income taxes (credit)............................... (30) 125 145 2,815 2,650
---- ------ ------ ------- -------
Net income (loss)................................. (61) 214 233 4,714 11,547
Accretion of preferred stock dividends
and redemption value.............................. -- -- -- -- 965
---- ------ ------ ------- -------
Net income (loss) applicable to common
stockholders................................... $ (61) $ 214 $ 233 $ 4,714 $10,582
==== ====== ====== ======= =======
Net income applicable to common
stockholders -- per common share............... $(0.00) $ 0.01 $ 0.01 $ 0.24
==== ====== ====== =======
Pro Forma Information:
Historical net income applicable to common
stockholders................................... $10,582
Adjustment to reflect income tax expense(1)....... (2,850)
Adjustment for assumed replacement of preferred
stock with debt(2)............................. 485
-------
Pro forma net income applicable to common
stockholders(1)(2)............................. $ 8,217
=======
Pro forma net income applicable to common
stockholders -- per common share............... $ 0.50
=======
Weighted average shares outstanding(3).............. 19,564 19,564 19,564 19,564 16,569
==== ====== ====== ======= =======
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1996
------------------------------------
PRO FORMA
PRO AS
1992 1993 1994 1995 ACTUAL FORMA(4) ADJUSTED(4)(5)
---- ---- ------ ------ -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................ $208 $446 $ 661 $5,294 $ 9,340 $ 8,813 $ 20,245
Total assets................... 386 886 1,324 9,273 13,676 13,149 24,581
Long-term revolving credit
facility.................... -- -- -- -- 8,000 29,818 --
Mandatorily redeemable
preferred stock............. -- -- -- -- 22,094 -- --
Total stockholders' equity
(deficit)................... 283 497 730 5,444 (19,819) (20,070) 21,180
</TABLE>
- ---------------
(1) From January 1, 1996 through July 25, 1996, the Company elected to be taxed
as a Subchapter S corporation for federal (and certain state) income tax
purposes and, accordingly, the Company was not subject to corporate income
taxes for that period. Gives effect to additional income tax expense of
$2.85 million, as if the Company had been subject to federal and state
income taxes during the period January 1, 1996 through July 25, 1996.
(2) Gives effect to (i) additional interest expense (net of taxes), as if the
additional $21.8 million borrowed under the Bank Credit Facility on January
24, 1997 to fund in part the redemption of the Redeemable Preferred Stock
had been incurred on July 25, 1996, the date of the Recapitalization, and
(ii) the elimination of the accretion of $965,000 of dividends and
redemption value on the Redeemable Preferred Stock.
(3) See Notes 1 and 13 to Financial Statements for an explanation of the
determination of the number of shares used in computing per share amounts.
(4) Gives effect to the following transactions as if they had occurred on
December 31, 1996: (i) the redemption of the Redeemable Preferred Stock;
(ii) the related incurrence of an additional $21.8 million of borrowings
under the Bank Credit Facility; and (iii) the recognition of a
non-recurring non-cash charge of $251,000 associated with the unamortized
portion of the excess of the face amount of the Series A Preferred Stock
over the fair market value of the Series A Preferred Stock as determined by
a third-party appraisal.
(5) As adjusted to give effect to the sale by the Company of the 3,750,000
shares of Common Stock offered by it hereby at the assumed initial public
offering price of $12.00 per share, after deducting the estimated
underwriting discount and expenses, and the application of the estimated
net proceeds therefrom. See "Use of Proceeds."
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such a difference include,
but are not limited to, those discussed in "Risk Factors."
OVERVIEW
Triton is a leading manufacturer and marketer of ATMs in the United States.
The Company designs, manufactures, markets and sells primarily focused-function
ATMs (also known as cash dispensers), which are intended to operate profitably
at significantly lower transaction volumes than conventional ATMs. The Company
also designs, manufactures, markets and sells other financial hardware products
such as scrip terminals (countertop ATMs that provide a voucher redeemable for
cash), ATM demonstration machines and card encoding devices. The Company
continues to position itself to capitalize on emerging opportunities in the
transaction and payment processing industry.
The Company was founded in 1979 by Ernest L. Burdette, Robert E. Sandoz and
Frank J. Wilem, Jr. to provide programming services on a contract basis. In
1985, the Company introduced its first product line to the banking industry,
which consisted of a portable ATM demonstration unit, the ATMjr Demonstrator. In
1992, the Company began producing miniATM Scrip Terminals suitable for use in
retail locations where customers obtain a voucher, or scrip, from the machine,
which may be redeemed for cash at the point of sale. In the fourth quarter of
1994, the Company introduced its focused-function ATM product line, which has
become the primary source of the Company's revenues and revenue growth. Since
introducing its first focused-function ATM, the Company has added a number of
new models with enhanced features, including a multi-cassette ATM, a rear-access
ATM and a heavy duty safe style ATM.
The Company's net sales increased to $41.0 million in 1996 from $21.0
million in 1995 and $3.2 million in 1994, principally due to strong sales of
focused-function ATMs, which accounted for 96% of net sales in 1996, compared to
89% and 19%, respectively, in 1995 and 1994. The Company recognizes that sales
growth and profit margins may come under pressure as competition in the
focused-function ATM market segment increases. See "Risk Factors -- Dependence
on Single, Recently Introduced Product Line" and
" -- Competition."
The Company's gross margin is affected by a number of factors, including
product mix, product pricing, and manufacturing and component costs. The
Company's gross margins were lower in 1996 compared to 1995 and, in light of
competitive pricing pressures, the Company anticipates that gross margins may
decline in the future. The Company seeks to mitigate the effects of declining
prices by focusing on reducing costs, primarily manufacturing and component
costs. See "Risk Factors -- Potential Fluctuations in Operating Results" and
"-- Competition."
The Company recognizes its revenues when products are shipped to customers.
The Company's cost of sales consists primarily of costs associated with
components, outsourced manufacture of certain subassemblies, and in-house labor
associated with assembly, testing, shipping and quality assurance. The Company's
operating expenses include personnel and other costs relating to engineering
support, sales, marketing, research and development, finance, human resources
and general administration functions.
The Company's operations emphasize cost-effectiveness principally by
outsourcing the manufacture of many components used in its products, selling its
products through a network of independent distributors, and operating its
manufacturing facility in a geographic area where operating and labor costs are
typically lower than many other regions of the United States.
On July 25, 1996, the Company completed the Recapitalization, pursuant to
which the Company repurchased an aggregate of approximately 55% of its then
outstanding shares of Common Stock from the Original Stockholders for total
consideration of $16.7 million in cash and $6.0 million in subordinated
18
<PAGE> 20
promissory notes. Immediately prior to the Recapitalization, the Company
distributed to the Original Stockholders, in the form of a dividend, shares of
Series B Preferred Stock with an aggregate redemption value of $10.0 million. In
order to finance the Recapitalization, the Company sold to the Summit Entities
(i) 114,000 shares of Series A Preferred Stock for an aggregate of $11.4
million, and (ii) $5.5 million in principal amount of subordinated debentures.
After the foregoing transactions, the Company issued and sold an aggregate of
6,863,999 shares of Common Stock to the Summit Entities for an aggregate of
$100,000. The entire $11.5 million outstanding under the subordinated debentures
and subordinated promissory notes issued to the Summit Entities and the Original
Stockholders (plus accrued interest of $206,000) was repaid on September 26,
1996 from borrowings under the Bank Credit Facility. All outstanding shares of
Series A Preferred Stock and Series B Preferred Stock were redeemed on January
24, 1997, for an aggregate of $21.4 million plus accrued dividends of $1.1
million with additional borrowings under the Bank Credit Facility of $21.8
million and available cash of $670,000. The Company intends to apply a portion
of the net proceeds from this offering to pay in full all outstanding
indebtedness under the Bank Credit Facility. See "Use of Proceeds" and "Certain
Transactions."
In connection with the redemption of the Series A Preferred Stock in
January 1997, the Company will be required to recognize a non-recurring non-cash
charge of approximately $251,000 during the first quarter of 1997, attributable
to the unamortized portion of the excess of the face amount of the Series A
Preferred Stock over the fair market value of the Series A Preferred Stock, as
determined by a third party appraisal.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net sales represented by each line item in the Company's statements of
operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net sales......................................................... 100.0% 100.0% 100.0%
Cost of sales..................................................... 60.2 44.0 52.1
----- ----- -----
Gross profit.................................................... 39.8 56.0 47.9
Operating expenses................................................ 28.3 20.7 12.8
----- ----- -----
Income from operations.......................................... 11.5 35.3 35.1
Interest income (expense), net.................................... 0.2 0.5 (0.4)
----- ----- -----
Income before income taxes...................................... 11.7 35.8 34.7
Income taxes...................................................... 4.5 13.4 6.5
----- ----- -----
Net income...................................................... 7.2 22.4 28.2
Accretion of preferred stock dividends and redemption value....... -- -- 2.4
----- ----- -----
Net income applicable to common stockholders.................... 7.2% 22.4% 25.8%
===== ===== =====
</TABLE>
COMPARISON OF 1996, 1995 AND 1994 RESULTS OF OPERATIONS
NET SALES
Net sales increased to $41.0 million in 1996 from $21.0 million in 1995 and
$3.2 million in 1994. The increase in net sales over the three year period was
primarily due to unit sales growth of focused-function ATMs. In 1996, this
increase in unit sales was offset in part by a decline in the price of the
Company's ATMs due to competitive pricing pressure.
GROSS PROFIT
Gross profit increased to $19.6 million in 1996 from $11.8 million in 1995
and $1.3 million in 1994, reflecting the year-to-year growth in the Company's
sales of focused-function ATMs. Gross margin declined to 47.9% in 1996 from
56.0% in 1995, primarily due to lower product prices in response to competitive
pressures relating to the Company's focused-function ATMs, higher warranty
reserves as a result of the extension of the Company's parts warranty from three
to 12 months in the first quarter of 1996, and product warranty claims in the
first quarter of 1996 relating to the Company's ATM units shipped in 1995. The
decline in gross margin in 1996 was offset in part by reduced manufacturing
costs primarily due to modifications of
19
<PAGE> 21
product designs to reduce component costs. Gross margin increased to 56.0% in
1995 from 39.8% in 1994, primarily due to a shift in product mix from mostly ATM
demonstrators and ATM scrip terminals in 1994 to mostly focused-function ATMs in
1995. The Company seeks to mitigate the effects of declining prices by focusing
on reducing costs, primarily manufacturing and component costs.
INCOME FROM OPERATIONS
Operating expenses increased to $5.2 million in 1996 from $4.3 million in
1995 and $917,000 in 1994, primarily due to increases in support personnel and
expansion of overhead costs associated with increased sales. Operating expenses
in the fourth quarter of 1995 included one-time year-end bonuses aggregating
$1.9 million. Operating expenses as a percentage of net sales decreased to 12.8%
in 1996 from 20.7% in 1995 and 28.3% in 1994, primarily due to economies of
scale resulting from the Company's higher unit sales of focused-function ATMs.
The Company does not anticipate that operating expenses as a percentage of net
sales will decrease at the same rate in future periods.
INTEREST INCOME (EXPENSE)
The Company had net interest expense in 1996 of $185,000, compared with net
interest income of $110,000 and $7,000 in 1995 and 1994, respectively. The net
interest expense in 1996 was due to the indebtedness incurred pursuant to the
Recapitalization and borrowings under the Bank Credit Facility.
INCOME TAXES
The Company's effective tax rates were 18.7%, 37.4% and 38.4% for 1996,
1995 and 1994 respectively. The lower effective tax rate for 1996 was due to the
Company's election to be taxed as a Subchapter S corporation during the period
January 1996 to July 1996. Accordingly, during such period, there was no
provision for current federal or state income taxes on the Company's income
except for $75,000 of income taxes relating to unrealized gains on certain
inventory items resulting from the termination of the Company's status as a
Subchapter S corporation in connection with the Recapitalization. The Company's
election to be taxed as a Subchapter S corporation was terminated upon
consummation of the Recapitalization on July 25, 1996, and earnings for the
remainder of 1996 were subject to tax at an effective rate of 37.5%. Excluding
the effect of being a Subchapter S corporation during part of 1996, the
Company's effective tax rate would have been 38.7%.
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
Net income applicable to common stockholders increased to $10.6 million in
1996 from $4.7 million in 1995 and $233,000 in 1994, primarily due to higher net
sales and lower operating expenses as a percentage of net sales. From January 1,
1996 through July 25, 1996, the Company elected to be taxed as a Subchapter S
corporation for federal and certain state income tax purposes and, consequently,
the Company was not subject to corporate income taxes for that period. If the
Company had been subject to federal or state income taxes for all of 1996, the
Company's net income applicable to common stockholders would have been $7.7
million.
20
<PAGE> 22
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth certain unaudited quarterly financial data
for each of the eight quarters ending with the quarter ended December 31, 1996,
and such data expressed as a percentage of net sales. In the opinion of the
Company's management, this unaudited information has been prepared on the same
basis as the audited financial statements and includes all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
results of operations in the quarterly periods indicated below. The operating
results for any quarter are not necessarily indicative of results for any
subsequent quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31 JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30 DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $2,429 $4,533 $ 7,253 $6,793 $8,424 $9,672 $11,529 $11,343
Cost of sales........................... 999 1,935 3,146 3,167 4,624 5,135 5,900 5,691
------ ------ ------ ------ ------ ------ ------- -------
Gross profit.......................... 1,430 2,598 4,107 3,626 3,800 4,537 5,629 5,652
Operating expenses...................... 400 660 671 2,612 700 785 1,941 1,810
------ ------ ------ ------ ------ ------ ------- -------
Income from operations................ 1,030 1,938 3,436 1,014 3,100 3,752 3,688 3,842
Interest income (expense), net.......... 3 13 35 59 22 23 (80) (150)
------ ------ ------ ------ ------ ------ ------- -------
Income before income taxes............ 1,033 1,951 3,471 1,073 3,122 3,775 3,608 3,692
Income taxes(1)......................... 386 730 1,298 401 72 88 1,110 1,380
------ ------ ------ ------ ------ ------ ------- -------
Net income............................ 647 1,221 2,173 672 3,050 3,687 2,498 2,312
Accretion of preferred stock dividends
and redemption value.................. -- -- -- -- -- -- 420 545
------ ------ ------ ------ ------ ------ ------- -------
Net income applicable to common
stockholders........................ $ 647 $1,221 $ 2,173 $ 672 $3,050 $3,687 $ 2,078 $ 1,767
====== ====== ====== ====== ====== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
(AS A PERCENTAGE OF NET SALES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 41.1 42.7 43.4 46.6 54.9 53.1 51.2 50.2
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.......................... 58.9 57.3 56.6 53.4 45.1 46.9 48.8 49.8
Operating expenses...................... 16.5 14.5 9.3 38.5 8.3 8.1 16.8 16.0
----- ----- ----- ----- ----- ----- ----- -----
Income from operations................ 42.4 42.8 47.3 14.9 36.8 38.8 32.0 33.9
Interest income (expense), net.......... 0.1 0.2 0.6 0.9 0.3 0.2 (0.7) (1.3)
----- ----- ----- ----- ----- ----- ----- -----
Income before income taxes............ 42.5 43.0 47.9 15.8 37.1 39.0 31.3 32.6
Income taxes(1)......................... 15.8 16.1 17.9 5.9 0.9 0.9 9.6 12.2
----- ----- ----- ----- ----- ----- ----- -----
Net income............................ 26.7 26.9 30.0 9.9 36.2 38.1 21.7 20.4
Accretion of preferred stock dividends
and redemption value.................. -- -- -- -- -- -- 3.7 4.8
----- ----- ----- ----- ----- ----- ----- -----
Net income applicable to common
stockholders........................ 26.7% 26.9% 30.0% 9.9% 36.2% 38.1% 18.0% 15.6%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) The Company was taxed as a Subchapter S corporation for all or a portion of
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996. If
the Company had been subject to corporate income taxes for all of these
periods, an additional tax of $1.2 million, $1.4 million and $0.3 million,
would have been accrued for the quarters ending March 31, 1996, June 30,
1996 and September 30, 1996, respectively, which would have resulted in
additional income taxes as a percentage of net sales of 14.6%, 15.4% and
12.2%, respectively.
Due to industry seasonality, demand for the Company's products has
historically been weakest during the first quarter and strongest in the second
half of the year, particularly during the third quarter. The Company believes
that this seasonal fluctuation in demand is primarily attributable to the
emphasis by the Company's distributors during the second half of the year on
achieving their internal sales targets before the end of the calendar year, and
to decreased ordering activity during the year-end holiday season leading to
lower order fulfillment during the first quarter.
The Company's quarterly operating results may vary significantly from
period to period depending on factors such as the volume and timing of orders
received during the period, the timing of new product introductions by the
Company and its competitors, the impact of price competition on the Company's
selling prices, the availability and pricing of components for the Company's
products, changes in product or distribution channel mix, changes in operating
expenses, changes in the Company's strategy, personnel changes and general
economic factors. Many of these factors are beyond the Company's control. The
volume
21
<PAGE> 23
and timing of orders received during a quarter is difficult to forecast.
Customers generally order on an as-needed basis, and accordingly the Company has
historically operated with a relatively small backlog. In addition, a
significant portion of the Company's sales are derived from a limited number of
distributors, the loss of one or more of which could have a materially adverse
effect on the Company's business, results of operations and financial condition.
Notwithstanding the difficulty in forecasting future sales and the relatively
small level of backlog at any given time, the Company generally must plan
production, order components and undertake its development, sales and marketing
activities and other commitments months in advance. Accordingly, any shortfall
in sales in a given quarter may adversely impact the Company's results of
operations due to an inability to adjust expenses or inventory during the
quarter to match the level of sales for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through cash flows from
operating activities. The Company's operating activities generated cash of $9.6
million in 1996, $2.1 million in 1995 and $403,000 in 1994. During 1996, net
changes in operating assets and liabilities used $1.4 million of cash as the
decrease in accounts receivable of $176,000, the increase in accounts payable of
$1.3 million and the increase in accrued expenses of $715,000 was offset by the
growth in inventory of $1.2 million and the decrease of income taxes payable of
$2.4 million.
Investing activities used $847,000 of cash in 1996, which included $631,000
of cash used to acquire the Company's manufacturing facility and telephone
system in Long Beach, Mississippi, from a related party. Financing activities
used $6.7 million of cash in 1996, consisting primarily of financings and
payments made in connection with the Recapitalization. See "Certain
Transactions."
At December 31, 1996, the Company had $4.5 million of cash and cash
equivalents and $8.0 million in outstanding borrowings under the Bank Credit
Facility. On January 24, 1997, the Company increased its availability under the
Bank Credit Facility from $15.0 million to $30.0 million and borrowed an
additional $21.8 million in order to provide a portion of the funds used to
redeem all outstanding shares of the Redeemable Preferred Stock. The Company
intends to use a portion of the net proceeds from this offering to repay all
amounts outstanding under the Bank Credit Facility. After this offering, the
maximum amount the Company will be permitted to borrow under the Bank Credit
Facility will be $30.0 million. The maximum borrowing amount automatically
decreases annually by $2.0 million on each September 26, commencing September
26, 1997, until this facility expires on September 26, 2001. The maximum
borrowing amount also is subject to reduction based upon a specified percentage
of the Company's excess cash flow (as defined) for each year. Under the Bank
Credit Facility, the Company is required to comply with certain restrictive
covenants, including minimum net income, total debt service coverage, leverage
ratio, and capital expenditures. The interest rate for the Bank Credit Facility
is the bank's adjusted base rate or an adjusted LIBOR. At December 31, 1996, the
Company's borrowings were at an effective interest rate of 7.25%.
The Company believes that the net proceeds from this offering, together
with cash flow from operations, existing cash balances and available borrowings
under the Bank Credit Facility, will be sufficient to meet its working capital
requirements for at least the next 12 months. The Company intends to invest its
remaining cash in excess of current operating requirements in short-term,
investment-grade securities.
22
<PAGE> 24
BUSINESS
OVERVIEW
Triton Systems, Inc. is a leading manufacturer and marketer of automated
teller machines ("ATMs") in the United States. The Company designs,
manufactures, markets and sells primarily focused-function ATMs, which are
intended to operate profitably at significantly lower transaction volumes than
conventional ATMs. Focused-function ATMs are suitable for locations such as
convenience stores, hotels, casinos, grocery stores, fast food restaurants,
department stores, gas stations, malls, campuses and entertainment complexes,
including movie theaters, amusement parks and race tracks ("off-premise
locations"), in addition to bank and credit union branches ("on-premise
locations"). According to The Nilson Report, the Company shipped the third
largest number of ATMs in the United States in 1995, with its shipments
accounting for 12% of all ATMs shipped in the United States in that year. The
Company also designs, manufactures, markets and sells other financial hardware
products such as scrip terminals (countertop ATMs that provide a voucher
redeemable for cash), ATM demonstration machines and card activators. The
Company continues to position itself to capitalize on emerging opportunities in
the transaction and payment processing industry.
INDUSTRY BACKGROUND
An ATM is a stand-alone electronic device with which consumers can withdraw
cash and complete other transactions. Conventional ATMs typically dispense cash,
accept deposits, transfer funds between accounts and provide account balances.
Focused-function ATMs (also known as cash dispensers), such as those
manufactured by the Company, perform all of these functions other than accepting
deposits. According to The Forrester Report, ATMs in an On-line World, dated
January 1996, approximately 80%-90% of all transactions initiated through an ATM
were cash withdrawals.
According to industry sources, ATM shipments in the United States increased
from 8,527 in 1991 to 24,300 in 1995, for a compound annual growth rate of 30%.
Over the same five-year period, the number of installed ATMs in the United
States grew from 83,545 to 122,706, for a compound annual growth rate of 10%.
Due in part to increasing consumer acceptance of ATMs as well as an increased
number of deployed ATMs, the total number of ATM transactions has grown
substantially, from an average of 534.9 million transactions per month in 1991
to an average of 807.4 million transactions per month in 1995, for a compound
annual growth rate of 11%. Worldwide, the number of ATMs shipped in 1995 was
117,658, and the number of ATMs installed at the end of 1995 was 618,296.
The Company estimates, based on industry sources, that unit sales of
focused-function ATMs grew by 16% from 1994 to 1995, while unit sales of
conventional ATMs grew by 11% over the same period. The Company believes that
the two primary reasons for the faster growth of focused-function ATMs are (i)
increased deployment of ATMs in off-premise locations and (ii) the attractive
economics of owning and operating a focused-function ATM. The Company believes
that factors contributing to the increased deployment of ATMs in off-premise
locations include consumer demand for cash at these locations and the
competitive advantage an ATM can give a retailer through increased customer
traffic and incremental revenues. The Company believes the factors contributing
to the attractive economics of owning and operating a focused-function ATM
include (i) lower retail prices and monthly operating costs compared to
conventional ATMs and (ii) incremental revenues available from surcharge fees.
The first primary reason for the increase in the number of focused-function
ATMs is the growing number of ATM installations in off-premise locations. From
1991 to 1995, the number of ATMs installed in off-premise locations has
increased from 18,380 to 38,039, for a compound annual growth rate of 19.9%, as
compared to the increase of ATMs installed in on-premise locations from 65,165
to 84,667, for a compound
23
<PAGE> 25
annual growth rate of 6.8%. The following chart, prepared by the Company based
on industry data, shows the number of ATMs installed in off-premise and
on-premise locations in the United States at the end of each of years 1991
through 1995.
[Graphic omitted: line chart showing the number of ATMs
installed at on-premise and off-premise locations over the
1991-1995 period and the corresponding compound annual growth
rates of 19.9% for off-premise ATMs and 6.8% for on-premise
ATMs. Source: The Forrester Report, Forrester Research, Inc.]
The Company estimates that the potential market for focused-function ATMs
includes over 700,000 off-premise locations in the United States, including
convenience stores, hotels, casinos, grocery stores, fast food restaurants,
department stores, gas stations, malls, campuses and entertainment complexes.
This potential market also includes suburban office parks and downtown office
towers.
Owners of off-premise ATMs, including retailers, investor groups,
independent sales organizations ("ISOs") and third party transaction processors,
in addition to banks and credit unions, have placed focused-function ATMs at
off-premise locations to capitalize on consumer demand for cash at these sites.
From a retailer's perspective, an ATM offers a competitive advantage by
increasing customer traffic and generating incremental revenues. According to
Convenience Store Decisions 1995 Sales Trend Handbook, the typical ATM customer
will spend 20%-25% more than a non-ATM customer in a convenience store. The
Company also believes that some retailers consider installing ATMs in their
stores as a competitive response to installation of ATMs by competitors in
nearby locations.
The second primary reason for the increase in the number of
focused-function ATMs is the attractive economics of owning and operating a
focused-function ATM. The Company estimates that focused-function ATMs have
retail prices and monthly operating costs that are 50%-70% lower than those of
conventional ATMs. The Company believes that the lower monthly operating costs
for focused-function ATMs are primarily due to (i) the use of dial-up
communications rather than the typical use of leased telephone lines by
conventional ATMs and (ii) lower servicing costs principally due to the absence
of a deposit function and the associated daily servicing requirements.
Owning and operating an ATM has become even more attractive with recent
changes in network association rules eliminating barriers to surcharging by the
ATM owner. In the traditional transaction at a bank-owned ATM, when a bank
customer uses another bank's ATM, the customer's bank will pay an interchange
fee (typically $.50) to the bank sponsoring the ATM and the customer's bank may
pass that cost on to the consumer by charging a usage fee. When parties other
than the sponsoring bank are involved, such as a third party processor, an ISO
or a retailer, such additional parties typically share the interchange fee with
the sponsoring bank. Historically, these additional parties have derived their
ATM revenues only from the interchange fee. In recent years, however, ATM owners
have begun to charge consumers a transaction fee or "surcharge" for using the
ATM. In a typical arrangement, a surcharge ranging from $.50 to $3.00 is charged
to a bank customer and is shared among the parties involved in the transaction,
providing them an additional revenue stream.
24
<PAGE> 26
The ability to surcharge consumers has enabled the profitable placement of
ATMs in low traffic locations. According to The Forrester Report, a conventional
bank-owned ATM requires approximately 5,230 transactions per month to break even
without surcharging and approximately 2,580 transactions per month to break even
with a $.50 surcharge. The Company estimates that an off-premise
focused-function ATM requires 785-800 transactions per month to break even
without surcharing, and 350-375 transactions per month to break even with a $.50
surcharge.
As a result of the increased deployment of ATMs in off-premise locations
and the attractive economics of owning and operating a focused-function ATM,
this segment has become an important part of the total market for ATMs.
According to The Nilson Report, focused-function ATMs represented approximately
51% of total 1995 ATM shipments in the United States.
ATMs are typically sold to banks and credit unions by ATM manufacturers
through their in-house direct sales forces. Sales of ATMs for installation in
off-premise locations are typically made through distributors who frequently
offer to merchants a turnkey package including the ATM, transaction processing,
bank sponsorship, maintenance, service and cash replenishment, if required. From
a manufacturer's perspective, the use of distributors represents a
cost-effective alternative to selling directly. The Company believes that
establishing a distribution network can serve as a significant barrier to entry
for potential new ATM manufacturers.
In the United States, ATM transactions are processed either directly by the
bank or credit union that owns and operates the ATM, or by third party
processors that act as intermediaries for these transactions. The Company
believes that third party processors are less prevalent in foreign markets where
banks process most ATM transactions.
Banks and credit unions typically communicate with their ATMs by means of
an industry standard communications protocol. Accordingly, ATMs shipped to bank
and credit union locations generally must use this communications protocol.
Third party processors typically use their own communications protocol to
receive and send information to corresponding ATMs. Each ATM must contain
communications software that is compatible with the protocol being used by the
processor. Conforming an ATM's communications software so it is compatible with
the protocol of a third party processor requires a significant collaborative
effort on the part of both the ATM manufacturer and the third party processor.
The Company believes that establishing this collaborative relationship can serve
as a significant barrier to entry for potential new ATM manufacturers.
The growth in consumer use of ATMs and the attractive economics of placing
ATMs in off-premise locations have created a demand for focused-function ATMs.
Consequently, an opportunity exists for ATM manufacturers to address the growing
demand for focused-function ATMs and related products by offering cost-effective
ATMs with functionality directed at the most common transaction needs of
consumers.
STRATEGY
The Company's strategy is to strengthen its leadership position as a
supplier of focused-function ATMs, to expand its presence in the ATM and related
product markets by leveraging its core competency in the focused-function ATM
market, and to exploit new opportunities in the transaction and payment
processing industry as they develop.
The key elements in implementing the Company's strategy are as follows:
Leverage Distribution Channels to Penetrate New Domestic Geographic
Markets. The Company's products are currently sold primarily through
distributors, which enables the Company to leverage its sales and marketing
resources. The Company has strong distributor relationships in most regions of
the United States and is expanding its distribution channels to penetrate new
markets, such as the Northeast, through the expanded use of its existing
distributors, an increased emphasis on sales to high volume distributors, and
the addition of new distributors.
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Penetrate Domestic Bank and Credit Union Customer Base. The Company
intends to penetrate the bank and credit union market by providing an economical
way for banks and credit unions to give their customers access to on-premise and
off-premise ATMs. The Company intends to use its distributors, rather than an
in-house direct sales force, to cost-effectively penetrate this market. The
Company also intends to hire dedicated marketing personnel to assist distributor
sales efforts, and to capitalize on the relationships previously developed by
the Company with certain banks and credit unions through the sale of its ATM
demonstrators and card activators. In order to offer a targeted product for this
market, the Company has been beta testing a new focused-function ATM model that
conforms with the industry standard communications protocol used by most banks
and credit unions to communicate with their ATMs.
Develop International Presence. The Company intends to promote its ATMs
internationally by developing new distributor relationships in foreign markets
and, in some cases, by building upon distributor relationships previously
established for its ATM demonstrators and card activators. The Company intends
to focus its initial international marketing efforts on Latin America and
Canada. For each country the Company intends to enter, the Company plans to
appoint one or more distributors with whom the Company will work to develop a
tailored marketing and product strategy. Since transaction processors in many
foreign markets use the bank and credit union industry standard communications
protocol, the Company believes that the new ATM model currently being beta
tested by the Company for use with this protocol will improve the Company's
ability to penetrate foreign markets.
Continue to Upgrade Functionality and Develop New Products to Capitalize on
Market Opportunities. The Company intends to continue to offer products to meet
emerging needs in the marketplace. The Company seeks to identify markets with
established demand and target these markets by delivering products with a
superior combination of price and functionality. The Company's engineering staff
works with the Company's distributors and end-users to incorporate customer
driven enhancements to the Company's products. For example, the Company recently
introduced Triton Connect, a software product which enables the transaction
processor, using cost-effective dial-up communications, to upload electronic
journal information, to download advertisement screens, couponing messages and
other terminal parameters, and to monitor the ATM for service-related problems
and cash replenishment needs. This software provides a level of monitoring that
is comparable to the monitoring available for conventional ATMs that use more
expensive leased telephone lines. The Company also recently introduced a
multi-cassette ATM suitable for dispensing multiple denominations of bills and
other items such as tickets, stamps, telephone cards and coupons.
Continue to Emphasize Cost-Effective Operations. The Company intends to
continue to emphasize cost-effective operations principally by (i) outsourcing
the manufacture of many components used in its products at prices the Company
believes to be lower than what it would cost the Company to manufacture such
components, (ii) utilizing an established network of distributors to distribute
the Company's products instead of maintaining a large direct sales force, and
(iii) locating its manufacturing facility in an area where operating and labor
costs are typically lower than in many other regions of the United States. The
Company intends to continue evaluating the relative economic benefits of
outsourcing its components.
Maintain Short Delivery Schedules and High Level of Customer Service. The
Company seeks to differentiate itself through its short delivery schedules and
the high level of its customer service and support. The Company is generally
able to provide short delivery schedules due to its streamlined manufacturing
operations. The Company is adding more technical support staff and expanding its
maintenance organization to provide more extensive service to its distributors
and end users. In addition, the Company strives to minimize downtime for its
ATMs through its quality assurance program and the service provided by its
network of distributors and third party maintenance organizations. The Company
believes that down time will be further reduced for ATMs equipped with the
Company's recently introduced software product, Triton Connect, through periodic
automatic remote monitoring for service-related problems.
PRODUCTS
The Company's product strategy is to leverage its technological expertise
in the ATM industry to create economical, highly durable equipment targeted at
the focused-function segment of the ATM market. The
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Company continues to monitor opportunities to improve the functionality of its
existing ATM product line and to develop product extensions and new products
through the integration of new technologies and industry standards.
FOCUSED-FUNCTION ATMS ("MINIATM" PRODUCT LINE)
Since the introduction of the focused-function product line in 1994, the
Company has shipped over 8,000 focused-function ATMs in the United States. The
Company's focused-function ATMs are targeted primarily at lower ATM transaction
volume locations such as convenience stores, hotels, casinos, grocery stores,
fast food restaurants, department stores, gas stations, malls, campuses and
entertainment complexes. Many of these locations have either a low daily ATM
transaction volume or periodic levels of high ATM activity followed by relative
long periods of inactivity.
The miniATM Cash Dispenser Model 9500 was the initial offering in the
Triton focused-function ATM product line, and is the basic model, with a single
cassette and front service entry. Set forth below is a chart summarizing certain
features of the miniATM Cash Dispenser Model 9500, and a typical conventional
ATM.
<TABLE>
<CAPTION>
TRITON FOCUSED-FUNCTION
ATM (MODEL 9500) TYPICAL CONVENTIONAL ATM
----------------------------- -----------------------------
<S> <C> <C>
Size.......................... 18" wide, 22" deep and 51" 31" wide, 37" deep and 56"
high high
Weight........................ 300 lbs 1500 lbs
Price Range................... $9,000 - $10,000 $20,000 - $30,000
Monthly Operating Costs....... $300 - $500 per month $1,000 - $1,200 per month
Communications Technology..... Dial-up Leased line
Key Functionality............. Dispenses cash Dispenses cash
Makes balance inquiries Makes balance inquiries
Transfers between accounts Transfers between accounts
Accepts deposits
Display Screen................ Monochrome (color under Monochrome; color optional
development)
UL Certification.............. Yes Yes
</TABLE>
In addition to the miniATM Cash Dispenser Model 9500, the Company currently
offers four other models of focused-function ATM, with prices of up to $15,000.
The principal features of these other four models are set forth below:
- The miniATM Cash Dispenser Model 9501 is a rear-access unit. The unit is
designed so that it can be mounted through an interior wall to enable cash
servicing to be performed from the rear of the machine. This is primarily
a security feature for merchants concerned about exposure during the cash
loading process.
- The miniATM Cash Dispenser Model 9520 has a thicker ( 1/2-inch) steel
door and a thicker ( 1/2-inch) steel cabinet, weighs approximately 750
pounds and is rated for use as a safe in unattended locations. It features
an electronic combination lock and an optional alarm package. The lock and
alarm features are optional on the Model 9500 and 9501.
- The Company recently has begun shipping the miniATM Cash Dispenser Model
9515, which is a multi-cassette ATM suitable for dispensing multiple
denominations of cash and other items such as tickets, stamps, telephone
cards and coupons. The Company's existing Model 9500 can be easily
upgraded to a Model 9515 without moving the machine from its installed
location, by replacing the dispensing mechanism.
- The Company recently has introduced the miniATM Cash Dispenser Model
9535, which combines the security features of the Model 9520 with the
multi-cassette feature used in the Model 9515.
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<PAGE> 29
In addition, the Company recently introduced Triton Connect, a software
product which enables the transaction processor, using cost-effective dial-up
communications, to upload electronic journal information, to download
advertisement screens, couponing messages and other terminal parameters, and to
monitor the ATM for service-related problems and cash replenishment needs. This
software provides a level of monitoring that is comparable to the monitoring
available for conventional ATMs that use more expensive leased telephone lines.
Models 9500, 9501 and 9515 are intended for locations which will be staffed
24-hours per day or in which the cassette will be removed at night and placed in
a safe. Because of their intended applications, Models 9500, 9501 and 9515 have
been certified and are listed with Underwriters Laboratories under UL-291
Business Hour Service. Models 9520 and 9535 have been certified to the more
rigorous UL-291 Level 1, 24-Hour Safe status because of their intended use in
unattended locations. The UL certification establishes that, for a certain class
of tools and a given length of time, the product will withstand attack attempts.
The Company provides a limited warranty on each of its products covering
manufacturing defects and premature failure, which generally covers parts for
its focused-function ATMs, and parts and labor for its ATMjr Demonstrator,
ATMjr+CAS and miniATM scrip models. The Company also offers for purchase
extended warranties on all of its products.
OTHER PRODUCTS
The Company's initial product line was introduced to the banking industry
in 1985 and consisted of a portable ATM demonstrator unit called the ATMjr
Demonstrator, which enables banks, credit unions, and other financial
institutions to demonstrate to a customer the use of an ATM. The ATMjr+CAS, a
demonstrator which is equipped with a card activation system, enables customer
service representatives to issue ATM cards and activate or change a customer's
personal identification number.
In 1992, the Company recognized that many retailers could profit by having
a small, inexpensive ATM installed in their business locations. By leveraging
its development resources in ATM demonstration machines, the Company introduced
the miniATM Scrip Terminal. The miniATM Scrip Terminal allows customers to use
their ATM cards to obtain cash in a manner similar to a regular bank ATM.
However, instead of cash the miniATM Scrip Terminal issues a voucher, or scrip,
that may be redeemed for cash at the point of sale, dramatically reducing
operating costs since no cash replenishment is required. In addition, due to its
simpler design, the retail price of a miniATM Scrip Terminal is approximately
85% lower than that of a conventional ATM. The unit also can be programmed to
issue other voucher materials, such as coupons, travel tickets and tickets to
sporting events and theaters.
PRODUCT DEVELOPMENT
The Company recognizes that continuous product development and innovation
are essential to its long-term success. The Company has been successful in
introducing products that quickly capture a significant market share. The
Company believes that its market-driven product development efforts have
contributed to the success of its product introductions. The Company relies on
information provided by customers and distributors to understand market needs in
detail. The Company's engineering expertise has enabled it to bring new products
to market quickly and to reduce manufacturing costs over time.
The Company's product development efforts emphasize products with focused
functionality and attractive cost characteristics which leverage the Company's
core strengths of low-cost design and efficient use of technology. The Company
believes that continued strengthening of its electronics and software
engineering development group is a key to broadening the Company's product
offerings.
The Company's product development efforts have resulted in the recent
introduction of the miniATM Model 9515, a multi-cassette ATM suitable for
dispensing multiple denominations of cash and other items such as stamps,
telephone cards and coupons; the miniATM Model 9535, a UL certified 24-Hour Safe
version of the Model 9515; and Triton Connect, an ATM monitoring software
application which enables the transaction processor, using cost-effective
dial-up communications, to upload electronic journal information,
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<PAGE> 30
to download advertisement screens, couponing messages and other terminal
parameters, and to monitor the ATM for service-related problems and cash
replenishment needs.
In addition to these products, the Company is currently beta testing with a
limited group of customers a new focused-function ATM model equipped with a
"black box" that conforms with the widely used industry standard communications
protocol. This model is intended to enable an ATM to be driven directly by banks
and certain large third party processors that communicate with the same industry
standard protocol typically used by banks. With this new model, the Company can
now target the bank and credit union market, where the Company expects that its
focused-function ATMs will be an attractive low-cost alternative to conventional
ATMs. In addition, transaction processors in many foreign countries also use
this standard communications protocol. Consequently, the version of the
Company's focused-function ATM with this communications protocol should assist
the Company's marketing efforts in foreign markets.
The Company has several new products in development, including new
applications for its scrip terminals. The Company continues to monitor
developments in consumer needs and technological advances with specific focus on
emerging opportunities in the transaction and payment processing industry such
as electronic benefits transfers, acceptance of stored value cards, and use of
"smart card" applications.
DISTRIBUTION, SALES AND MARKETING
DISTRIBUTION AND SALES ORGANIZATION
The Company's focused-function ATM product line and scrip terminals are
sold in the United States through a network of approximately 30 distributors,
which includes ISOs and third party processors. Many of these distributors have
sub-distributors, and the Company believes that as many as 50 total distributors
offer the Company's products inclusive of these relationships. The Company's
distributors sell to end users such as convenience stores, hotels, casinos,
grocery stores, fast food restaurants, department stores, gas stations, malls,
campuses and entertainment complexes. The Company regularly evaluates its
distributors and frequently receives inquiries from potential new distributors.
The Company's distributors include national distributors such as Access Cash
International and Card Capture Services, which accounted for approximately 22%
and 19%, respectively, of the Company's net sales in 1996, regional distributors
such as ATM International and North American Cash Systems, and third party
processors such as Lynk Systems and Affiliated Computer Services. The Company's
distributors typically offer a turnkey package to retailers including the sale
and installation of the ATM, transaction processing, bank sponsorship,
maintenance service and cash replenishment if required. Although the Company
typically does not sign exclusive agreements with its distributors, the Company
believes that most of its distributors do not offer competing focused-function
ATMs.
The sales efforts of the Company's distributors are supplemented by the
Company's in-house sales force. This includes account managers and customer
service specialists, who service distributors, and account executives whose
efforts are targeted at specific markets, such as hotels, banks and credit
unions. The account executives build sales in their respective markets by
assisting distributors.
The ATMjr Demonstrator and ATMjr+CAS products are sold domestically by the
Company's direct sales force and in international markets predominantly by
distributors with some sales generated by the Company's direct sales force.
END USERS
Off-premise locations represent substantially all of the Company's end user
installed base for focused-function ATMs, and include convenience stores,
hotels, casinos, grocery stores, fast food restaurants, department stores, gas
stations, malls, campuses and entertainment complexes. With the introduction of
a focused-function ATM that conforms with the industry standard communications
protocol used by most banks and credit unions to communicate with their ATMs,
the Company intends to expand its customer base to include more domestic banks
and credit unions, as well as more foreign locations.
End users of the Company's ATMjr Demonstrator product line include
primarily banks and credit unions throughout the United States and several
foreign countries, including Australia, Canada, Chile, Egypt,
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<PAGE> 31
Guatemala, Indonesia, Philippines, South Africa and the West Indies, with an
installed base at over 1,500 financial institutions.
MARKETING SUPPORT
Triton promotes its products and supports the sales efforts of its
distributors and internal sales force by advertising in trade publications,
preparing brochures for use by its distributors, exhibiting products at trade
conferences, providing customer leads to its distributors, conducting targeted
direct mail campaigns, conducting sales and product training seminars for its
distributors, and formulating co-op advertising with selected distributors. The
Company's trade conference exhibitions are targeted primarily toward the
convenience store, banking, hospitality, and gaming industries. Triton routinely
exhibits at large industry trade shows, such as the Retail Delivery Systems
Conference for the banking industry and the National Association of Convenience
Stores show.
INTERNATIONAL MARKETING
The Company intends to model its approach to distribution, sales and
marketing in foreign markets on the distributor-based approach used successfully
by the Company in the United States. The Company also intends to build upon its
established relationship with distributors selling the ATMjr Demonstrator
product line in foreign markets to develop its presence in the international
focused-function ATM market. The Company intends to target its initial
international marketing efforts on Latin America and Canada. The Company
believes that its newly developed focused-function ATM model, which conforms
with the industry standard communications protocol generally used by banks and
credit unions, will improve the Company's ability to penetrate foreign markets
once it becomes commercially available, because many transaction processors in
foreign market use this communications protocol.
PRODUCT SERVICE AND SUPPORT
SERVICE
The Company relies primarily on distributors to support and maintain its
products. The distributors typically enter into maintenance agreements with the
ATM owner to provide after-sale service and support. The Company also utilizes,
to a lesser extent, the services of a national third party maintenance
organization to provide customer service and support. The third party
maintenance organization is used in situations where the distributor does not
have the capability or the desire to provide maintenance support.
Recognizing the importance of after-sale support, the Company is adding
more technical support staff and expanding its maintenance organization to
provide more extensive service to its distributors and end users. In addition,
the Company strives to minimize downtime for its ATMs through its quality
assurance program and the service provided by its network of distributors and
third party maintenance organizations. The Company examines and adjusts its
customer support procedures in response to customer suggestions and feedback in
an effort to improve this critical support function. The Company maintains an
in-house technical support group for all products, consisting of telephone
technical support personnel, electronic technicians for in-house repairs, and a
technical support group leader. This group provides telephone support to
distributors and end-users of the equipment via a toll-free 800 number.
In the case of focused-function ATMs, repairs are typically performed in
the field by a distributor or a third party maintenance organization using
replacement parts sent by the Company. In the case of the ATMjr Demonstrator,
ATMjr+CAS, and miniATM Scrip Terminal, a depot maintenance system is used to
repair units at the Company's headquarters when the units cannot be repaired in
the field by the end user.
SERVICE TRAINING AND SUPPORT
The Company provides regular service training courses to its distributors
and third party maintenance organizations. The training course is typically held
at the Company's facility on a monthly basis and provides detailed instruction
on all aspects of focused-function ATM troubleshooting, repair, installation and
setup, and
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<PAGE> 32
the procedures for obtaining support and replacement parts from the Company.
Attendees who successfully complete the training course receive a certification
from the Company establishing their qualifications. Arrangements can be made to
conduct special training classes at the distributor's or end-user's site.
MANUFACTURING
The Company's manufacturing strategy is to produce low-cost, highly
reliable ATMs. Triton's outsourcing strategy, combined with the Company's access
to lower-priced labor and its emphasis on quality control, has helped the
Company to achieve this goal. The Company's manufacturing operations consist
primarily of assembly, software loading, testing, burn-in and quality control.
All manufacturing activities are performed at the Company's facility in Long
Beach, Mississippi, where operating and labor costs are typically lower than in
many other regions of the United States. Most of the components of the Company's
products are outsourced to suppliers at prices that the Company believes to be
lower than what it would cost the Company to manufacture such components.
Triton's manufacturing operations are grouped into several functional areas
including (i) electronic/electrical assembly, such as printed circuit boards,
cable and wiring harnesses, control panels and switches, (ii)
mechanical/electronic sub-assembly integration and (iii) final integration,
software program loading, testing and product burn-in. The Company has adopted
quality assurance procedures that include standard design practices, component
selection procedures, vendor control procedures and comprehensive reliability
testing and analysis to ensure the reliability of its products. Quality control
is performed on completed assemblies in each functional area of its assembly and
at the final integration phase of the manufacturing process.
Current demand for the Company's products is being met with a single shift
in the Company's existing plant. The Company believes that growth in demand for
its products in the foreseeable future can be met with additional shifts and
limited plant expansion. The Company is currently exploring replacement and
expansion alternatives for its existing facility in anticipation of its long
term capacity needs.
SUPPLIERS
The Company outsources the manufacture of most of its components as part of
its low-cost manufacturing strategy. Component level parts, both mechanical and
electronic, and some complete subsystems are purchased through outside vendors.
Certain parts are custom-manufactured by these outside vendors according to the
Company's specifications. Several important components used in the Company's
focused-function ATMs, including the single cassette and multicassette cash
dispensing subassemblies, the display screens and key pads, the business hour
service cabinets and the safe-type cabinets, are obtained from single suppliers.
The Company has identified alternative suppliers for its single cassette cash
dispenser, display screen and both styles of cabinets, and is currently in the
process of identifying potential alternative suppliers of multi-cassette cash
dispensing subassemblies and key pads. Certain of the alternative suppliers
identified by the Company currently supply other components to the Company. In
the event the Company is required to obtain components from the alternative
suppliers it has identified, there can be no assurance that the unit costs
currently paid by the Company for these components would not increase. Moreover,
the inability of the Company to obtain sufficient quantities of, or the failure
of suppliers to deliver, the cash dispensing subassemblies, key pads, display
screens or cabinets used in its focused-function ATMs would require the Company
to change the design of the products in order to use an alternative component,
which could increase the cost or delay the shipment of the Company's
focused-function ATMs, which in turn would have a material adverse effect on the
Company's business, results of operations and financial condition. There can be
no assurance that alternative sources of supply would be available on reasonably
acceptable terms, on a timely basis, or at all.
The Company does not maintain long-term agreements with any of its
component suppliers. Because the purchase of key components involves long lead
times, in the event of unanticipated increases in demand for the Company's
products, the Company could be unable to manufacture certain products in a
quantity sufficient to meet demand. Any inability to obtain adequate deliveries
of any of the components or any other circumstance that would require the
Company to seek alternative sources of supply could affect the Company's ability
to
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ship its products on a timely basis or result in increased component costs, each
of which could have a material adverse effect on the Company's business, results
of operations and financial condition. In order to attempt to mitigate the risk
of component shortages, the Company maintains a limited inventory of components
for which the Company is dependent upon sole or limited source suppliers. There
can be no assurance, however, that these inventories will be sufficient, and any
deficiency could have a material adverse effect on the Company's business,
results of operations and financial condition.
COMPETITION
The markets for the Company's products are characterized by intense
competition. The Company has a number of direct competitors for ATMs, the most
significant of which are Diebold Incorporated (including Interbold, a joint
venture between Diebold Incorporated and IBM), NCR Corporation, Fujitsu
Corporation and the Tidel Division of American Medical Technologies, Inc. The
Company believes that the principal competitive factors in its markets are
price, features and functionality, reliability, strength of distribution
channels and processor relationships, length of delivery cycles, service and
support. The Company believes that it competes favorably with respect to these
factors.
Many of the Company's competitors have longer operating histories, are
substantially larger, and have substantially greater financial, technical,
manufacturing, marketing and other resources than the Company. As a result of
their greater resources, many of such competitors are better positioned than the
Company to withstand significant price competition or downturns in the economy.
A number of these competitors also have substantially greater name recognition
and a significantly larger installed base of products than the Company, which
could provide leverage to such companies in their competition with the Company.
Many competitors also offer products with more functionality and features than
those offered by the Company. The Company expects competition to increase, and
anticipates that new competitors may enter the ATM market, particularly the
focused-function segment. Such increased competition may result in price
reductions, reduced gross margins and loss of market share, any of which could
materially adversely affect the Company's business, results of operations and
financial condition. There can be no assurance that the Company will be able to
continue to compete effectively, and any failure to do so would have a material
adverse effect upon the Company's business, results of operations and financial
condition.
INTELLECTUAL PROPERTY
The Company does not own any issued patent, and relies primarily on
trademark, copyright and trade secret law to protect its intellectual property
in the United States and abroad. These laws afford only limited protection, and
there can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology. There can be no assurance that any trademark
or copyright owned by the Company, or any patent, trademark or copyright
obtained by the Company in the future, will not be invalidated, circumvented or
challenged or that the rights granted thereunder will provide competitive
advantages to the Company. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights as fully as do the laws of the
United States. Thus, effective intellectual property protection may be
unavailable or limited in certain foreign countries. There can be no assurance
that the Company's means of protecting its proprietary rights in the United
States or abroad will be adequate or that competitors will not independently
develop technologies that are similar or superior to the Company's technology,
duplicate the Company's technology or design around any patent of the Company.
Moreover, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
management's time and resources and could have a material adverse effect on the
Company's business, results of operations and financial condition.
EMPLOYEES
As of December 31, 1996, the Company had 91 full-time employees. None of
the Company's employees is represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees to
be good. The Company's future success will depend, in part, upon its ability to
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attract and retain qualified personnel. Competition for qualified personnel in
the Company's industry is intense, and there can be no assurance that the
Company will be successful in retaining its key employees or that it will be
able to attract skilled personnel necessary for the development of its business.
FACILITIES
The Company's headquarters are located in a 19,000 square foot facility in
Long Beach, Mississippi, which is owned by the Company. This facility
accommodates corporate administration, engineering, marketing, sales, customer
service and support and manufacturing, including assembly, testing, packaging
and shipping of products. The Company is currently expanding its facility by
approximately 9,000 square feet in order to provide additional space for its
administrative offices. The Company believes that, with additional shifts and
limited plant expansion, this facility will be adequate for its needs for the
foreseeable future. The Company is currently exploring replacement alternatives
for its existing facility in anticipation of its long term capacity needs.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company, and
their ages as of January 7, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- --------------------------------------------
<S> <C> <C>
Ernest L. Burdette........................ 51 Chief Executive Officer, President and
Director
Robert E. Sandoz.......................... 46 Vice President and Director
Frank J. Wilem, Jr........................ 46 Vice President and Director
Jeffrey A. Bandrowski..................... 54 Chief Financial Officer
Thomas A. Cooper.......................... 60 Director
Charles A. Emling, III.................... 44 Director
Kevin P. Mohan............................ 33 Director
Joseph F. Trustey......................... 34 Director
William D. Jackson........................ 42 Manager of Engineering
Mary E. Dressel........................... 44 Manager of Marketing and Sales
</TABLE>
Ernest L. Burdette, a co-founder of the Company, has served as Chief
Executive Officer, President and director of the Company since August 1979.
Prior to founding the Company, Dr. Burdette was employed as Engineering Manager
and Systems Engineer at Computer Sciences Corporation, a technical services
provider to the government, and held faculty positions at Auburn University and
Georgia University. Dr. Burdette earned a B.A. in Physics from
Birmingham-Southern College, and an M.S. and a Ph.D. in Physics from Auburn
University.
Robert E. Sandoz, a co-founder of the Company, has served as Vice President
of the Company since 1991, and as Treasurer and director of the Company since
August 1979. Prior to founding the Company, Mr. Sandoz served as manager of
Engineering Applications Software at Computer Sciences Corporation. Mr. Sandoz
earned a B.S. in Computer Science from the University of Southwestern Louisiana.
Frank J. Wilem, Jr., a co-founder of the Company, has served as Vice
President and director of the Company since August 1979. Prior to founding the
Company, Mr. Wilem was Engineering Manager at Computer Sciences Corporation. Mr.
Wilem earned a B.S. in Electrical Engineering from Texas A & M University and an
M.S. in Ocean Engineering from the University of Miami.
Jeffrey A. Bandrowski has served as Chief Financial Officer of the Company
since October 1996. From February 1996 to October 1996, Mr. Bandrowski served as
Assistant Treasurer of Sequoia Systems, Inc., a computer manufacturer, and from
September 1987 to June 1995, served as Chief Financial Officer, Vice President
and General Manager of Kevlin Corporation, a manufacturer of microwave systems
and process control systems. Mr. Bandrowski earned a B.S. in Chemistry from The
College of the Holy Cross and an M.B.A. from Seton Hall University.
Thomas A. Cooper, a director of the Company since January 1997, is Chairman
and Principal of T.A.C. Associates, and has served as Chairman, President and
Chief Executive Officer of Chase Federal Bank. Prior to 1991, Mr. Cooper served
as Chief Executive Officer of Goldome Savings Bank, FSB and President of Bank of
America. Mr. Cooper is a director of RenaissanceRe Holdings Ltd. Mr. Cooper
earned a B.A. from Haverford College and a B.A. from Drew University.
Charles A. Emling, III, a director of the Company since October 1996, was
President and Chief Executive Officer of A+ Network, Inc., a paging company,
from 1988 to November 1996. From 1988 to 1995, Mr. Emling served as President of
Florida Network USA., a paging company. Mr. Emling earned a B.S. in Business
Administration and an M.B.A. from the University of Southwestern Louisiana.
Kevin P. Mohan, a director of the Company since July 1996, has been
employed by Summit Partners since 1994 and currently serves as principal. From
1991 to 1994, Mr. Mohan served as Engagement Manager at McKinsey & Company,
Inc., a management consulting firm. Mr. Mohan is a director of Intelligroup,
Inc.
34
<PAGE> 36
and several privately held companies. Mr. Mohan holds an A.B. in Economics from
Harvard College, an M.B.A. from Harvard University Graduate School of Business
Administration and a J.D. from Harvard Law School.
Joseph F. Trustey, a director of the Company since July 1996, has been
employed by Summit Partners since June 1992 and currently serves as general
partner. From June 1990 to June 1992, Mr. Trustey was a strategy consultant with
Bain & Co., Inc., a management consulting firm. Mr. Trustey is a director of
Home Health Corporation of America, Inc., Suburban Ostomy Supply Company, Inc.
and several privately held companies. Mr. Trustey earned a B.S. in Chemical
Engineering from the University of Notre Dame and an M.B.A. from Harvard
University Graduate School of Business Administration.
William D. Jackson has served as Manager of Engineering of the Company
since 1993. Prior to joining the Company in 1982 as an Electronics Engineer, Mr.
Jackson served as Electronics Engineer and Component Engineer at Computer
Sciences Corporation. Mr. Jackson earned a B.S. in Biomedical Engineering from
the University of Tennessee and an M.B.A. from the University of Southern
Mississippi.
Mary E. Dressel has served as Manager of Marketing and Sales of the Company
since 1989. Ms. Dressel joined the Company in 1988 as a Market Analyst. Prior to
joining the Company, Ms. Dressel was a principal in a marketing communications
company from 1986 to 1987 and a Territory Manager for Revlon Inc. from 1983 to
1986. Ms. Dressel earned a B.A. from the University of Southwestern Louisiana
and an M.Ed. and an M.B.A. from the University of Southern Mississippi.
Certain of the current directors of the Company were nominated and elected
in accordance with a Shareholders' Agreement, which will terminate upon the
closing of this offering. See "Certain Transactions."
All directors hold office until the next annual meeting of stockholders of
the Company and until their successors have been duly elected and qualified.
Executive officers of the Company are elected by the Board of Directors on an
annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
COMMITTEES OF THE BOARD
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company, and administers the Company's stock plans. The
members of the Compensation Committee currently are Messrs. Trustey, Mohan and
Cooper. The Board of Directors also has an Audit Committee, which reviews the
results and scope of the audit and other services provided by the Company's
independent accountants. The members of the Audit Committee currently are
Messrs. Cooper, Emling and Trustey.
BOARD COMPENSATION
Directors currently receive no cash compensation for serving on the Board
of Directors, although directors are reimbursed for all reasonable expenses
incurred by them in attending Board and Committee meetings. In connection with
their election to the Board of Directors of the Company, Messrs. Emling and
Cooper were each granted options to purchase 33,000 shares of Common Stock under
the Company's 1996 Stock Option Plan at exercise prices of $4.97 and $11.00 per
share, respectively. The options vest in five equal annual installments,
commencing on the first anniversary of the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was established in
July 1996, and currently consists of Messrs. Trustey, Mohan and Cooper. None of
these individuals were at any time an officer or employee of the Company. Prior
to July 1996, the functions of the Compensation Committee were performed by the
Board of Directors as a whole. For information regarding certain transactions
between the Company and members of the Board of Directors and the Compensation
Committee, see "Certain Transactions."
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<PAGE> 37
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation earned in the year ended December 31, 1996 by the Company's
President and Chief Executive and by the Company's other executive officers in
office at December 31, 1996 who earned in excess of $100,000 during 1996
(collectively, the "Named Executive Officers"). No stock options were granted
to, or exercised by, the Named Executive Officers during 1996. None of the Named
Executive Officers held any stock options at the end of 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------------------------------- -------- -------- ---------------
<S> <C> <C> <C>
Ernest L. Burdette,................................ $224,280 $100,000 $22,500(1)
Chief Executive Officer, President and Director
Robert E. Sandoz,.................................. $224,280 $100,000 $22,500(1)
Vice President
Frank J. Wilem, Jr.,............................... $224,280 $100,000 $22,500(1)
Vice President
</TABLE>
- ---------------
(1) Represents contributions by the Company on behalf of the Named Executive
Officer to the Company's Simplified Employee Pension Plan, which has been
replaced by its 401(k) Plan.
EMPLOYMENT AGREEMENTS
On July 25, 1996, the Company entered into three year employment agreements
with each of Messrs. Burdette, Sandoz and Wilem. These agreements were amended
on December 31, 1996. Mr. Burdette's agreement provides for his employment as
President and Chief Executive Officer of the Company at an annual base salary of
$125,000. Mr. Sandoz' agreement provides for his employment as Vice President of
Operations of the Company at an annual base salary of $125,000. Mr. Wilem's
agreement provides for his employment as Vice President of Corporate Development
of the Company at an annual base salary of $125,000. Each of the foregoing
agreements provides for annual salary increases in such amounts, if any, as
determined by the Compensation Committee of the Board of Directors. In addition,
Messrs. Burdette, Sandoz and Wilem are eligible to receive annual bonuses upon
the achievement by the Company of certain financial targets established by the
Compensation Committee, and, upon termination of employment by the Company
without cause, are entitled to receive severance pay for the lesser of twelve
months and the remaining balance of the term of the agreements, along with any
accrued bonuses.
STOCK PLANS
1996 Stock Option Plan. The Company has a 1996 Stock Option Plan (the
"1996 Plan"). A maximum of 1,541,707 shares of Common Stock are reserved for
issuance pursuant to the 1996 Plan upon exercise of options. Under the 1996
Plan, incentive stock options may be granted to employees and officers of the
Company and non-qualified stock options may be granted to consultants,
directors, employees and officers of the Company. As of January 27, 1997,
options to purchase 433,655 shares of Common Stock were outstanding under the
1996 Plan, of which options to purchase 263,706 shares were then exercisable.
The 1996 Plan is administered by the Compensation Committee of the Board of
Directors, subject to the supervision and control of the entire Board. Subject
to the provisions of the 1996 Plan, the Compensation Committee has the authority
to select optionees and determine the terms of the options granted, including
(i) the number of shares subject to each option, (ii) when the option becomes
exercisable, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less than the fair market value of the Common
Stock on the date of grant, or less than 110% of fair market value in the case
of employees or officers holding 10% or more of the voting stock of the
Company), (iv) the duration of the option, and (v) the time, manner and form of
payment upon exercise of an option.
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<PAGE> 38
An option is not transferrable by the optionee except by will, by the laws
of descent and distribution or pursuant to a qualified domestic relations order.
Options are exercisable only while the optionee remains in the employ of the
Company or for a short period of time thereafter. If an optionee becomes
permanently disabled or dies while in the employ of the Company, the option is
exercisable prior to the last day of the sixth or twelfth month, respectively,
following the date of termination of employment. If the optionee leaves the
employ of the Company for any other reason, the option is exercisable for only
thirty days following the date of termination of employment. Options which are
exercisable following termination of employment are exercisable only to the
extent that the optionee was entitled to exercise such options on the date of
such termination.
1997 Employee Stock Purchase Plan. The 1997 Employee Stock Purchase Plan
(the "1997 Purchase Plan") for employees of the Company was adopted by the Board
of Directors and approved by the stockholders of the Company in January 1997.
The 1997 Purchase Plan authorizes the issuance of a maximum of 250,000 shares of
Common Stock pursuant to the exercise of nontransferable options granted to
participating employees. No shares have been granted under the 1997 Purchase
Plan.
The 1997 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
20 hours or more per week and have been employed by the Company for at least six
months are eligible to participate in the 1997 Purchase Plan. Employees who own
5% or more of the Company's stock and directors who are not employees of the
Company may not participate in the 1997 Purchase Plan. To participate in the
1997 Purchase Plan, an employee must authorize the Company in writing to deduct
an amount (not less than 1% nor more than 10% of a participant's base
compensation) from his or her pay during the six-month periods commencing on
July 1, 1997, and on each January 1 and July 1 thereafter (each a "Purchase
Period"). On the first day of each Purchase Period, the Company grants to each
participating employee an option to purchase up to 500 shares of Common Stock.
The exercise price for the option for each Purchase Period is the lesser of 85%
of the fair market value of the Common Stock on the first or last business day
of the Purchase Period. The fair market value will be the closing price of the
Common Stock as quoted on the Nasdaq National Market. If an employee is not a
participant on the last day of the Purchase Period, such employee is not
entitled to exercise his or her option, and the amount of his or her accumulated
payroll deduction will be refunded to the employee. An employee's rights under
the 1997 Purchase Plan terminate upon his or her voluntary withdrawal from the
Plan at any time or upon termination of employment.
Common Stock for the 1997 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
401(K) PLAN
The Company has a defined contribution plan (the "401(k) Plan") pursuant to
which employees at least 21 years of age who have completed at least six months
of service are eligible to participate. Participants in the 401(k) Plan may not
contribute more than the greater of a specified statutory amount or 15% of their
pre-tax total compensation. The 401(k) Plan permits, but does not require,
additional contributions to the 401(k) Plan by the Company. Eligible employees
are 100% vested in their own contributions.
LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation provide that a director shall not be liable
to the Company or its stockholders for monetary damages for any action taken as
a director, except for (i) the amount of a financial benefit received by a
director to which he is not entitled, (ii) an intentional infliction of harm on
the Company or its stockholders, (iii) a violation of Section 79-4-8.33 of the
Mississippi Business Corporation Act relating to unlawful distributions, or (iv)
an intentional violation of criminal law.
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<PAGE> 39
The Company's Articles of Incorporation and By-laws provide for
indemnification of the officers and directors of the Company to the fullest
extent permitted by Mississippi law, including some instances in which
indemnification is otherwise discretionary under Mississippi law. The Articles
of Incorporation and By-laws provide that the Company shall indemnify, and upon
request shall advance expenses to, in the manner and to the full extent
permitted by law, any officer or director who was or is a party to, or is
threatened to be made a party to, any threatened, pending or completed action,
suit or proceeding; provided, however, the Company shall not indemnify an
officer or director if a judgment or final adjudication adverse to the officer
or director establishes his liability for (i) the amount of a financial benefit
received by a director to which he is not entitled, (ii) an intentional
infliction of harm on the Company or its stockholders, (iii) a violation of
Section 79-4-8.33 of the Mississippi Business Corporation Act relating to
unlawful distributions, or (iv) an intentional violation of criminal law. The
Company believes that these provisions are essential to attracting and retaining
qualified persons as officers and directors.
38
<PAGE> 40
CERTAIN TRANSACTIONS
Summit Financing and Recapitalization. The Company completed the
Recapitalization on July 25, 1996 to provide liquidity to Ernest L. Burdette,
Robert E. Sandoz, Frank J. Wilem, Jr. (the "Founders"), William D. Jackson and
Mary E. Dressel (collectively with the Founders, the "Original Stockholders").
Pursuant to the Recapitalization, the Company repurchased an aggregate of
approximately 55% of the outstanding Common Stock from the Original Stockholders
for a total consideration of $22.7 million, which was allocated to the Original
Stockholders in the following amounts: Mr. Burdette ($7.4 million), Mr. Sandoz
($7.4 million), Mr. Wilem ($7.4 million), Mr. Jackson ($493,000), and Ms.
Dressel ($49,000). Of such amount, $16.7 million was paid in cash and $6.0
million was paid through the issuance of 8% Subordinated Promissory Notes due
2001 of the Company (the "Original Stockholder Notes"). Each of the Original
Stockholders received a pro rata portion of the cash and Original Stockholder
Notes in proportion to their ownership of the Company's Common Stock.
Immediately prior to the consummation of the Recapitalization, the Company made
a dividend distribution to the Original Stockholders in the form of an aggregate
of 100,000 shares of Series B Preferred Stock, which also was allocated among
the Original Stockholders in proportion to their ownership of the Company's
Common Stock.
In order to finance the Recapitalization, the Company (i) issued and sold
an aggregate of 114,000 shares of Series A Preferred Stock to Summit Investors
III, L.P. and Summit Ventures IV L.P. for an aggregate purchase price of $11.4
million, and (ii) issued and sold an aggregate of $5.5 million in principal
amount of 12% Subordinated Debentures due 2001 of the Company (the "Subordinated
Debentures") to Summit Investors III, L.P. and Summit Subordinated Debt Fund,
L.P. (collectively with Summit Ventures IV, L.P., the "Summit Entities") for an
aggregate purchase price of $5.5 million. After the foregoing transactions, the
Company issued and sold an aggregate of 6,863,999 shares of Common Stock to the
Summit Entities for an aggregate purchase price of $100,000.
The Original Stockholder Notes and Subordinated Debentures were repaid in
full, for an aggregate of approximately $11.7 million (including accrued
interest of $206,000) on September 26, 1996 with the proceeds of the Bank Credit
Facility provided by The First National Bank of Boston. In January 1997, the
Bank Credit Facility was amended to increase the credit line by $15.0 million to
$30.0 million, with the proceeds used to redeem all of the outstanding Series A
preferred stock for an aggregate redemption price of $12.0 million (including
accrued dividends of $580,000) and all of the outstanding Series B preferred
stock for an aggregate redemption price of $10.5 million (including accrued
dividends of $508,000).
In connection with the Recapitalization, the Company entered into a
Shareholders' Agreement dated July 25, 1996 (the "Shareholders' Agreement") with
the Summit Entities and the Original Stockholders, and a Registration Rights
Agreement dated July 25, 1996 (the "Registration Rights Agreement") with the
Summit Entities and the Founders. The Shareholders' Agreement provides for,
among other things, restrictions on transfer of shares, rights of first refusal,
rights of participation in sales, take along rights and election of directors.
The Shareholders' Agreement will terminate upon consummation of this offering,
except that the right of the Summit Entities to participate in sales of Common
Stock by the Original Stockholders will continue until the tenth anniversary of
the Recapitalization. Pursuant to the Registration Rights Agreement, holders of
at least 25% of the shares of Common Stock held by the Summit Entities may
require the Company to effect the registration of shares of Common Stock held by
such parties for sale to the public on any two occasions, subject to certain
conditions and limitations. In addition, under the terms of the Registration
Rights Agreement, if the Company proposes to register any of its securities
under the Securities Act of 1933, as amended (the "Securities Act"), whether for
its own account or otherwise, the parties to the Registration Rights Agreement
are entitled to receive notice of such registration and to include their shares
therein, subject to certain conditions and limitations. The Company has agreed
to pay the fees, costs and expenses of any registration effected on behalf of
the parties to the Registration Rights Agreement (other than underwriting
discounts and commissions.) All rights to register Common Stock in connection
with this offering, other than the shares being sold hereby by the Selling
Stockholders, have been waived by the parties to the Registration Rights
Agreement. See "Shares Eligible for Future Sale -- Registration Rights."
39
<PAGE> 41
In connection with the Recapitalization, Messrs. Burdette, Sandoz and Wilem
made certain representations and warranties to the Summit Entities with respect
to the business, operations and financial condition of the Company, and agreed
to indemnify the Company and the Summit Entities for losses incurred as a result
of a breach of such representations and warranties; provided that the aggregate
liability of such individuals shall not exceed $6.6 million for claims arising
prior to April 30, 1997, and $3.3 million for claims arising after such date.
Such indemnification obligations will expire thirty days after the delivery of
financial statements for the Company's fiscal year ended December 31, 1997 to
the Summit Entities; provided that such obligations will continue with respect
to certain matters, including certain tax matters, until expiration of the
applicable statute of limitations.
Headquarters Lease and Purchase. Prior to December 31, 1996, the Company's
headquarters facility at 522 East Railroad Street, Long Beach, Mississippi was
leased to the Company by Ernest L. Burdette, Robert E. Sandoz and Frank J.
Wilem, doing business as Calypso Properties. Under the lease dated February 1,
1995, the Company paid an annual minimum rent ranging from $6,666 to $13,332 per
month. The Company believes that the terms of the lease were no less favorable
to it than could have been obtained from an unaffiliated party. From October 30,
1995 through February 14, 1996, the Company made loans to Calypso Properties in
the aggregate principal amount of $176,000, at an annual rate of interest of
9.75%, the proceeds of which were used for improvements to the Company's
headquarters. The loans were repaid in full in July 1996.
On December 31, 1996, the Company purchased the land and buildings for
$587,000, an amount agreed upon by the disinterested members of the Board of
Directors after review of independent appraisals. The original cost to Calypso
Properties of the land, building and improvements was $611,471. On December 31,
1996, the Company also purchased its telephone system, which previously had been
leased from Calypso Properties for $3,000 per month, from Calypso Properties for
$44,257, its book value.
Other. The Company and the Founders entered into employment agreements in
July 1996, which were amended in December 1996. See "Management -- Employment
Agreements." The Company also paid one-time year-end bonuses aggregating $1.9
million to the Founders in the fourth quarter of 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." From
January 1, 1996 until July 25, 1996, the Company was a Subchapter S corporation
for federal and state income tax purposes and paid out substantially all of its
earnings to its stockholders during such period. See "Dividend Policy."
The Company has adopted a policy pursuant to which all future transactions
between the Company and its officers, directors and affiliates will be on terms
no less favorable to the Company than could be obtained from unrelated third
parties and will be approved by a majority of the disinterested members of the
Company's Board of Directors.
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<PAGE> 42
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1996, as adjusted to
reflect the sale of the shares offered hereby, (i) by each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) by each director and Named Executive Officer, (iii) by all
directors and executive officers of the Company as a group and (iv) by each
Selling Stockholder. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BEING
OFFERED(2)
------------
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE OFFERING(1) THE OFFERING(1)(2)
------------------- --------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Summit Partners(3)........................... 6,863,999 55.3% 450,000 6,413,999 39.7%
600 Atlantic Avenue
Boston, MA 02110
Ernest L. Burdette........................... 1,803,999 14.5 -- 1,803,999 11.2
522 East Railroad Street
Long Beach, MS 39560
Robert E. Sandoz............................. 1,803,999 14.5 -- 1,803,999 11.2
522 East Railroad Street
Long Beach, MS 39560
Frank J. Wilem, Jr........................... 1,803,999 14.5 -- 1,803,999 11.2
522 East Railroad Street
Long Beach, MS 39560
Thomas A. Cooper............................. -- -- -- -- --
Charles A. Emling, III....................... -- -- -- -- --
Kevin P. Mohan(4)............................ 6,863,999 55.3 450,000 6,413,999 39.7
Joseph F. Trustey(5)......................... 6,863,999 55.3 450,000 6,413,999 39.7
All executive officers and directors
as a group(8).............................. 12,275,996 98.9% 450,000 11,825,996 73.2%
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable, or become exercisable within 60 days following
December 31, 1996, are deemed outstanding. However, such shares are not
deemed outstanding for purposes of computing the percentage ownership of
any other person. No options are presently exercisable within 60 days after
December 31, 1996. The number of shares of Common stock deemed outstanding
after this offering includes an additional 3,750,000 shares of Common Stock
that are being offered for sale by the Company in this offering.
(2) Represents 401,935, 26,432, and 21,633 shares of Common Stock being sold in
the offering by Summit Ventures IV, L.P., Summit Subordinated Debt Fund,
L.P. and Summit Investors III, L.P., respectively. In the event that the
Underwriters' over-allotment option is exercised in full, each of the
following stockholders will sell the following numbers of additional
shares: (i) Summit Ventures IV, L.P., Summit Subordinated Debt Fund, L.P.
and Summit Investors III, L.P. will sell an additional 80,387, 5,286 and
4,327 shares, respectively; (ii) Messrs. Burdette, Sandoz and Wilem each
will sell 175,705 shares; and (iii) William D. Jackson and Mary E. Dressel
will sell 11,714 shares and 1,171 shares, respectively. Mr. Jackson and Ms.
Dressel owned 120,266 shares and 12,026 shares, respectively, prior to the
offering (representing in each case less than 1% of the outstanding
shares). If the over-allotment option is
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<PAGE> 43
exercised in full, the following stockholders will own the following number
of shares, representing the following percentages of the outstanding
shares: (i) Summit Ventures IV, L.P. (5,648,528 shares; 35.0%); (ii) Summit
Subordinated Debt Fund, L.P. (371,461 shares; 2.3%); (iii) Summit Investors
III, L.P. (304,010 shares; 1.9%); (iv) each of Messrs. Burdette, Sandoz and
Wilem (1,628,294 shares; 10.1%); (v) Mr. Jackson (108,552 shares; less than
1%); and (vi) Ms. Dressel (10,855 shares; less than 1%).
(3) Shares owned beneficially prior to the offering consist of 6,130,850,
403,179 and 329,970 shares held by Summit Ventures IV, L.P., Summit
Subordinated Debt Fund, L.P. and Summit Investors III, L.P., respectively.
Summit Partners SD, L.P. is the General Partner of Summit Subordinated Debt
Fund, L.P., and Summit Partners IV, L.P. is the General Partner of Summit
Ventures IV, L.P. Stamps, Woodsum & Co., III is the General Partner of
Summit Partners SD, L.P. and Stamps, Woodsum & Co. IV is the General
Partner of Summit Partners IV, L.P. Joseph F. Trustey, a director of the
Company, is a General Partner of Stamps, Woodsum & Co. III, Stamps, Woodsum
& Co. IV and Summit Investors III, L.P. See Note (4)
(4) Includes shares described in Note (3) above. Mr. Mohan, a director of the
Company, is a principal of affiliates of Summit Partners. Mr. Mohan
exercises shared investment and voting power with respect to such shares,
but disclaims beneficial ownership of such shares.
(5) Includes shares described in Note (3) above. Mr. Trustey, a director of the
Company, is a general partner of affiliates of Summit Partners. Mr. Trustey
exercises shared investment and voting power with respect to such shares,
but disclaims beneficial ownership of such shares.
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<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering, the authorized capital stock
of the Company will consist of 40,000,000 shares of Common Stock, $.01 par value
per share, and 5,000,000 shares of Preferred Stock, $.01 par value per share
(the "Preferred Stock").
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Restated Articles of
Incorporation as amended and restated (the "Articles of Incorporation"), which
are included as an exhibit to the Registration Statement, and by the provisions
of applicable law.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on matters to be
voted upon by the stockholders. There are no cumulative voting rights. Holders
of Common Stock are entitled to receive ratable dividends when, as and if
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any then outstanding Preferred
Stock. Upon the liquidation, dissolution or winding up of the Company, holders
of Common Stock are entitled to share ratably in the assets of the Company
available for distribution to its stockholders, subject to the preferential
rights of any then outstanding Preferred Stock. The shares of Common Stock
outstanding upon the effective date of this Prospectus are, and the shares
offered by the Company hereby will be, when issued and paid for, fully paid and
nonassessable. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of holders of shares of any Preferred Stock that the Company may
designate in the future.
PREFERRED STOCK
After the closing of this offering, the Company's Board of Directors will
have the authority, without further stockholder approval, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
relative rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of the Company, may discourage bids for the Company's Common Stock at a
premium over the market price of the Common Stock and may adversely affect the
market price, and the voting and other rights of the holders of, the Common
Stock. No shares of Preferred Stock will be outstanding immediately following
the closing of this offering. The Company has no present plans to issue any
shares of Preferred Stock.
BANK WARRANT
The Company issued a warrant (the "Bank Warrant") to an affiliate of The
First National Bank of Boston (the "Bank") in connection with the January 1997
increase in the Bank Credit Facility. The exercise price of the Bank Warrant is
$11.00 per share. The Bank Warrant expires January 24, 2007, and is presently
exercisable with respect to 32,109 shares of Common Stock.
CERTAIN ARTICLES OF INCORPORATION, BY-LAW AND STATUTORY PROVISIONS AFFECTING
STOCKHOLDERS
Articles of Incorporation and By-laws. The Company's Articles of
Incorporation provide that stockholders may remove a director only for cause.
Advance notice of stockholder nominations and any other matter to be brought
before a meeting of stockholders will be required to be given in writing to the
Secretary of the Company within the time periods specified in the Company's
By-laws. The Articles of Incorporation provide that special meetings of
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board of Directors, the Chief Executive Officer, the President
or the holders of 50% or more of the outstanding shares. The By-laws provide
that no action required or permitted to be taken at any annual
43
<PAGE> 45
or special meeting of the stockholders of the Company may be taken without a
meeting, unless the unanimous consent of stockholders entitled to vote thereon
is obtained.
Mississippi Anti-Takeover Statutes The Mississippi Shareholder Protection
Act (the "Protection Act"), which will be applicable after this offering at such
time as the Company has 500 or more beneficial owners of its stock, requires
that a business combination be approved by the affirmative vote of at least (a)
80% of the votes entitled to be cast by outstanding shares of voting stock of
the corporation and (b) two-thirds ( 2/3) of the votes entitled to be cast by
holders of voting stock not held by an interested stockholder who is a party to
the business combination, except that the provisions of the Protection Act shall
not apply if the business combination is approved by at least 80% of the
Company's directors or if the aggregate amount of any offer meets certain fair
price criteria.
"Business combination" is defined in the Protection Act generally as:
(i) Any merger, consolidation, share exchange or similar transaction
with any interested stockholder or other corporation which is an affiliate
of an interested stockholder, (ii) any sale, lease, transfer or other
disposition in a transaction with any interested stockholder of assets
having an aggregate market value of 20% or more of the total market value
of the outstanding stock of the corporation or of its assets; (iii) the
issuance or transfer by the corporation, or any subsidiary, of any
securities of the corporation or any subsidiary which have an aggregate
market value of 5% or more of the total market value of the outstanding
stock of the corporation to any interested stockholder or any affiliate of
any interested stockholder; (iv) the adoption of any plan or proposal for
the liquidation, dissolution of or similar transaction involving the
corporation in which anything other than cash will be received by an
interested stockholder; or (v) any reclassification or recapitalization of
securities or any merger, consolidation or share exchange of the
corporation with any of its subsidiaries which increases by 5% or more the
proportionate share of the total number of outstanding shares or class of
equity securities held by any interested stockholder or affiliate thereof.
"Interested stockholder" means any person or associated group of persons
acting in concert (other than the corporation and/or any subsidiaries) that (i)
is the beneficial owner of 20% or more of the voting power of the outstanding
voting stock of the corporation, or (ii) is an affiliate of the corporation and
at any time within the two-year period immediately prior to the date in question
was the beneficial owner of 20% or more of the voting power of the then
outstanding voting stock of the corporation.
Following the closing of this offering, the Company will be subject to the
Mississippi Control Share Act (the "Control Act"). The Control Act, subject to
certain exceptions, reduces the voting power of "control shares" having voting
power of one-fifth or more of all voting power of the corporation to zero unless
the shareholders of the corporation approve a resolution granting the shares the
same voting rights as they had before they became control shares.
"Control shares" means issued and outstanding shares of a corporation that,
except for the Control Act, would have voting power when added to all other
shares of the issuing corporation owned of record or beneficially by an
acquiring person that would entitle the acquiring person to exercise more than
one-fifth of the voting power of the corporation in the election of directors.
Directors' Liability. The Articles of Incorporation of the Company provide
that no director shall be liable to the Company or its stockholders for monetary
damages for any action taken as a director, except for (i) the amount of a
financial benefit received by a director to which he is not entitled, (ii) an
intentional infliction of harm on the Company or its stockholders, (iii) a
violation of Section 79-4-8.33 of the Mississippi Business Corporation Act
relating to unlawful distribution, or (iv) an intentional violation of criminal
law. The effect of this provision is to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care other than as described in clauses (i) through (iv)
above. The limitations summarized above, however, do not affect the ability of
the Company or its stockholders to seek non-monetary based remedies, such as an
injunction or rescission against a director for breach of his fiduciary duty,
nor would such limitations limit liability under the federal securities laws.
The Company's Articles of Incorporation and By-
44
<PAGE> 46
laws provide that the Company shall, to the full extent permitted by Mississippi
law, as amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors, officers, employees and agents arising in
connection with their acting in such capacities, including some instances in
which indemnification is otherwise discretionary under Mississippi law.
The provisions of the Protection Act and the Control Act, the provisions of
the Company's By-laws and Articles of Incorporation relating to the removal of
directors and the taking of actions at stockholder meetings, and the authority
of the Board of Directors to issue Preferred Stock, all as described above, may
have certain anti-takeover effects. Such provisions, individually or in
combination, may discourage other persons from or make it more difficult for
other persons to make a tender offer or acquisitions of substantial amounts of
the Company's Common Stock or from launching other takeover attempts that a
stockholder might consider in such stockholder's best interest, including those
attempts that might result in the payment of a premium over the market price for
the Common Stock held by such stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
45
<PAGE> 47
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock of the Company, and no predictions can be made as to the effect, if any,
that future sales of shares, or the availability of shares for future sale, will
have on the prevailing market prices for the Common Stock. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock and could impair
the Company's future ability to obtain capital through an offering of equity
securities.
Upon completion of this offering, the Company will have 16,158,288 shares
of Common Stock outstanding (assuming no exercise of outstanding options and
warrants). Of these shares, the 4,200,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except that any
shares purchased by "affiliates" of the Company, as that term is defined in Rule
144 ("Rule 144") under the Securities Act ("Affiliates"), may generally only be
sold in compliance with the limitations of Rule 144 described below. The
remaining shares of Common Stock outstanding upon completion of this offering
will be "restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares"). Restricted Shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 promulgated under the Securities Act,
which are summarized below. Sales of the Restricted Shares in the public market,
or the availability of such shares for sale, could adversely affect the market
price of the Common Stock.
Of the Restricted Shares, up to 132,292 shares, all of which are subject to
lock-up agreements as described below, may be eligible for sale in the public
market immediately after this offering pursuant to Rule 144(k) under the
Securities Act. An additional 5,411,997 Restricted Shares, all of which are
subject to lock-up agreements as described below, will be eligible for resale
under Rule 144 commencing 90 days after the effective date of this offering.
The holders of all shares of Common Stock outstanding prior to the offering
have entered into contractual "lock-up" agreements providing that they will not
offer, sell or otherwise dispose of the shares of Common Stock of the Company,
options or warrants to acquire shares of Common Stock or any securities
exercisable for or convertible into the Company's Common Stock owned by them for
a period of 180 days after the date of this Prospectus, without the prior
written consent of Montgomery Securities. See "Underwriting."
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of this offering, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two years
(including the holding period of any prior owner except an Affiliate) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of (i) one percent of the number of shares of Common Stock
then outstanding (which will equal approximately 161,583 shares immediately
after this offering); or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least three years (including the holding period of any prior owner except
an Affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provision of Rule 144.
In addition, the Securities and Exchange Commission has proposed an
amendment to Rule 144 which would reduce by one year the holding periods before
shares subject to Rules 144 and 144(k) become eligible for sale in the public
market. This proposal, if adopted, would substantially increase the number of
shares of the Company's Common Stock eligible for immediate sale following the
expiration of the lock-up period.
As of January 27, 1997, options to purchase a total of 433,655 shares of
Common Stock were outstanding. Of the total shares issuable pursuant to such
options, 362,706 (including all options that are currently exercisable) are
subject to lock-up agreements. An additional 1,358,052 shares of Common Stock
are
46
<PAGE> 48
available for future grants under the Company's stock option and employee stock
purchase plans. See "Management -- Stock Plans."
In general, under Rule 701, as currently in effect, beginning 90 days after
the effective date of this offering, certain shares issued upon exercise of
options granted by the Company prior to the date of this Prospectus will also be
eligible for sale in the public market. Any employee, officer or director of or
consultant to the Company who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits Affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-Affiliates may sell such shares in reliance
on Rule 144 without having to comply with the public information, volume
limitation or notice provisions of Rule 144. In both cases, a holder of Rule 701
shares is required to wait until 90 days after the date of this Prospectus
before selling such shares.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options and Common Stock issuable pursuant to the Company's
stock option and employee stock purchase plans that do not qualify for an
exemption under Rule 701 from the registration requirements of the Securities
Act. The Company expects to file these registration statements upon the
effectiveness of this offering or shortly thereafter, and such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to the lock-up agreements, to the extent applicable.
REGISTRATION RIGHTS
Upon the completion of this offering, certain stockholders and the holder
of the Bank Warrant (the "Rightsholders") will be entitled to require the
Company to register under the Securities Act up to a total 11,858,105 shares
(11,240,990 shares if the Underwriters' over-allotment is exercised in full) of
outstanding Common Stock (the "Registrable Shares") under the terms of a
Registration Rights Agreement among the Company and the Rightsholders (the
"Registration Agreement") and the terms of the Bank Warrant. The Registration
Agreement and the Bank Warrant provide that in the event the Company proposes to
register any of its securities under the Securities Act at any time or times,
the Rightsholders, subject to certain exceptions, shall be entitled to include
Registrable Shares in such registration. However, the managing underwriter of
any such offering may exclude for marketing reasons some or all of such
Registrable Shares from such registration. Certain Rightsholders who currently
hold an aggregate of 6,413,999 shares of Common Stock have, subject to certain
conditions and limitations, additional rights to require the Company to prepare
and file a registration statement under the Securities Act with respect to their
Registrable Shares if Rightsholders holding at least 25% of the Registrable
Shares held by all such Rightsholders so request. The Company is generally
required to bear the expenses of all such registrations, except underwriting
discounts and commissions.
47
<PAGE> 49
UNDERWRITING
The Underwriters named below, represented by Montgomery Securities, Dean
Witter Reynolds Inc. and Smith Barney Inc. (the "Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company and certain of the Selling
Stockholders the number of shares of Common Stock indicated below opposite their
respective names at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to purchase
all of such shares if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities.....................................................
Dean Witter Reynolds Inc..................................................
Smith Barney Inc..........................................................
---------
Total........................................................... 4,200,000
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the Common Stock to the public
on the terms set forth on the cover page of this Prospectus. The Underwriters
may allow to selected dealers a concession of not more than $ per share; and
the Underwriters may allow, and such dealers may reallow, a concession of not
more than $ per share to certain other dealers. After the initial public
offering, the offering price and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.
The Selling Stockholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of 630,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 4,200,000
shares to be purchased by the Underwriters. To the extent that the Underwriters
exercise this option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the Underwriters may be required to make in
respect thereof.
All holders of Common Stock, including each director, officer and Selling
Stockholder, who will together hold 11,958,288 shares of Common Stock following
the closing of this offering, have agreed, subject to certain limited
exceptions, not to sell, or offer to sell, or otherwise dispose of, directly or
indirectly, any shares of Common Stock currently held by them, any right to
acquire any shares of Common Stock or any securities exercisable for or
convertible into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, the Company has agreed, subject to certain
exceptions, that for a period of
48
<PAGE> 50
180 days after the date of this Prospectus it will not, without the prior
written consent of Montgomery Securities, issue, offer, sell, grant options to
purchase or otherwise dispose of any equity securities or securities convertible
into or exchangeable for equity securities except for shares of Common Stock
offered hereby, shares issuable upon exercise of the Bank Warrant and options
granted or shares issued pursuant to new or outstanding options under the 1996
Plan or the 1997 Purchase Plan. See "Management -- Stock Plans."
The Representatives have informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of this offering.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations between the Company and the Representatives. Among the
factors to be considered in such negotiations will be the history of, and
prospects for, the Company and the industry in which it competes, an assessment
of the Company's management, the Company's past and present operations and
financial performance, its past and present earnings and the trend of such
earnings, the prospects for future earnings of the Company, the present state of
the Company's development, the general condition of the securities markets at
the time of the offering and the market prices of publicly traded common stocks
of comparable companies in recent periods.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Hutchins, Wheeler &
Dittmar, A Professional Corporation, Boston, Massachusetts. Certain legal
matters in connection with the offering will be passed upon for the Underwriters
by Hale and Dorr LLP, Boston, Massachusetts. With respect to certain matters of
Mississippi law, Hutchins, Wheeler & Dittmar will rely on the opinion of
Brunini, Grantham, Grower & Hewes, PLLC, Jackson, Mississippi.
EXPERTS
The financial statements included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
49
<PAGE> 51
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act (the "Registration Statement") with respect to the
Common Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement and the exhibits and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge or copied at
prescribed rates at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549,
and at the Commission's Regional Offices located at The Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material may
be obtained at prescribed rates by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
or accessed on the Commission's World Wide Web site at (http://www.sec.gov).
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent accountants and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
---------------------
ATMjr Demonstrator, ATMjr+CAS, miniATM, Triton Connect, and Triton are
trademarks of Triton Systems, Inc. All other trademarks and trade names referred
to in this Prospectus are the property of their respective owners.
50
<PAGE> 52
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Financial Statements:
Balance Sheets as of December 31, 1995 and 1996.................................. F-3
Statements of Operations for the years ended December 31, 1994, 1995 and 1996.... F-4
Statements of Stockholders' Equity (Deficit) for the years ended December 31,
1994, 1995 and 1996............................................................. F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 53
INDEPENDENT AUDITORS' REPORT
Board of Directors
Triton Systems, Inc.
Long Beach, Mississippi
We have audited the accompanying balance sheets of Triton Systems, Inc. as
of December 31, 1995 and 1996 and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1996. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Triton Systems, Inc. as of December 31, 1995
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 24, 1997
F-2
<PAGE> 54
TRITON SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
PRO FORMA
1995 1996 1996
---------- ------------ ------------
(NOTE 13)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................................... $2,502,931 $ 4,518,783 $ 3,991,783
Accounts receivable, net of $100,000 (1995) and $1,030,000
(1996) allowance for bad debts............................... 4,648,130 4,472,146 4,472,146
Inventory...................................................... 1,888,344 3,044,939 3,044,939
Prepaid expenses and other current assets...................... 3,798 4,559 4,559
Deferred income taxes.......................................... 80,000 700,000 700,000
---------- ------------ ------------
Total current assets......................................... 9,123,203 12,740,427 12,213,427
---------- ------------ ------------
Property and Equipment:
Equipment...................................................... 289,811 434,890 434,890
Building and improvements...................................... 39,824 685,426 685,426
---------- ------------ ------------
329,635 1,120,316 1,120,316
Less accumulated depreciation.................................. 179,625 241,425 241,425
---------- ------------ ------------
Property and equipment, net.................................. 150,010 878,891 878,891
---------- ------------ ------------
Other Assets..................................................... -- 56,250 56,250
---------- ------------ ------------
Total Assets..................................................... $9,273,213 $ 13,675,568 $ 13,148,568
========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable............................................... $ 768,814 $ 2,071,802 $ 2,071,802
Income taxes payable........................................... 2,682,935 236,855 236,855
Accrued expenses............................................... 377,615 1,092,252 1,092,252
---------- ------------ ------------
Total current liabilities.................................... 3,829,364 3,400,909 3,400,909
---------- ------------ ------------
Long-Term Debt -- revolving line of credit....................... -- 8,000,000 29,818,000
Mandatorily Redeemable Preferred Stock:
Mandatorily redeemable Series A preferred stock, $.01 par
value; 114,000 shares authorized, issued and outstanding in
1996 with a redemption value of $100 per share ($11,400,000),
plus accrued dividends; none outstanding in 1995 and pro
forma........................................................ -- 11,652,000 --
Mandatorily redeemable Series B preferred stock, $.01 par
value; 100,000 shares authorized, issued and outstanding in
1996 with a redemption value of $100 per share ($10,000,000),
plus accrued dividends; none outstanding in 1995 and pro
forma........................................................ -- 10,442,000 --
---------- ------------ ------------
Total mandatorily redeemable preferred stock................. -- 22,094,000 --
---------- ------------ ------------
Commitments (Notes 1 and 11)
Stockholders' Equity (Deficit):
Preferred stock $.01 par value, 5,000,000 shares authorized,
none issued.................................................. -- -- --
Common stock $.01 par value; 40,000,000 shares authorized;
12,408,288 shares issued in 1995 and 1996.................... 124,083 124,083 124,083
Common stock $.01 par value (non-voting), 1,000,000 shares
authorized, none issued...................................... -- -- --
Additional paid in capital..................................... -- 302,360 302,360
Distributions in excess of basis............................... (23,176,784) (23,176,784)
Retained earnings.............................................. 5,319,766 2,931,000 2,680,000
---------- ------------ ------------
Total stockholders' equity (deficit)......................... 5,443,849 (19,819,341) (20,070,341)
---------- ------------ ------------
Total Liabilities and Stockholders' Equity (Deficit)............. $9,273,213 $ 13,675,568 $ 13,148,568
========== ============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 55
TRITON SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................ $3,236,058 $21,007,965 $40,967,899
Cost of sales........................................ 1,948,479 9,246,818 21,350,001
---------- ----------- -----------
Gross profit.................................... 1,287,579 11,761,147 19,617,898
Operating expenses................................... 916,603 4,342,767 5,235,474
---------- ----------- -----------
Income from operations.......................... 370,976 7,418,380 14,382,424
Interest income (expense), net....................... 7,330 110,309 (185,432)
---------- ----------- -----------
Income before income taxes...................... 378,306 7,528,689 14,196,992
Income taxes......................................... 145,000 2,815,000 2,650,000
---------- ----------- -----------
Net income...................................... 233,306 4,713,689 11,546,992
Accretion of preferred stock dividends and
redemption value................................... -- -- 965,000
---------- ----------- -----------
Net income applicable to common stockholders.... $ 233,306 $ 4,713,689 $10,581,992
========== =========== ===========
Net income applicable to common
stockholders -- per common share.............. $ 0.01 $ 0.24
========== ===========
Pro Forma Information (unaudited):
Historical net income applicable to common
stockholders.................................... $10,581,992
Adjustment to reflect income tax expense........... (2,850,000)
Adjustment for assumed replacement of preferred
stock with debt................................. 485,000
-----------
Pro forma net income applicable to common
stockholders.................................... $ 8,216,992
===========
Pro forma net income applicable to common
stockholders -- per common share................ $ 0.50
===========
Weighted average shares outstanding.................. 19,564,107 19,564,107 16,568,778
========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 56
TRITON SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DISTRIBUTIONS
--------------------- PAID-IN IN EXCESS RETAINED
SHARES AMOUNT CAPITAL OF BASIS EARNINGS TOTAL
---------- -------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994.............. 12,408,288 $124,083 $ -- $ -- $ 372,771 $ 496,854
Net income.......................... 233,306 233,306
---------- -------- -------- ------------ ------------ ------------
Balance, December 31, 1994............ 12,408,288 124,083 -- -- 606,077 730,160
Net income.......................... 4,713,689 4,713,689
---------- -------- -------- ------------ ------------ ------------
Balance, December 31, 1995............ 12,408,288 124,083 -- -- 5,319,766 5,443,849
Net income -- January 1, 1996 to
July 25, 1996..................... 7,650,992 7,650,992
Recapitalization and distributions
to stockholders................... (6,863,999) (68,640) (23,176,784) (12,970,758) (36,216,182)
Issuance of common stock.............. 6,863,999 68,640 302,360 371,000
Net income -- July 26, 1996 to
December 31, 1996................. 3,896,000 3,896,000
Accretion of redemption value on
mandatorily redeemable Series A
preferred stock................... (20,000) (20,000)
Accretion of dividends on
mandatorily redeemable Series A
and B preferred stock............. (945,000) (945,000)
---------- -------- -------- ------------ ------------ ------------
Balance, December 31, 1996............ 12,408,288 $124,083 $302,360 $ (23,176,784) $ 2,931,000 $(19,819,341)
========== ======== ======== ============ ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 57
TRITON SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
-------- ---------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................................... $233,306 $4,713,689 $11,546,992
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 31,937 50,798 61,800
Deferred income taxes................................. -- (20,000) (620,000)
Changes in operating assets and liabilities:
Accounts receivable................................. 17,916 (4,287,900) 175,984
Inventory........................................... (57,537) (1,553,794) (1,156,595)
Prepaid expenses and other current assets........... (24,348) 22,511 (761)
Accounts payable.................................... 174,132 491,768 1,302,988
Income taxes payable................................ (20,708) 2,657,286 (2,446,080)
Accrued expenses.................................... 47,885 25,913 714,637
-------- ---------- -----------
Net cash provided by operating activities........ 402,583 2,100,271 9,578,965
-------- ---------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment.................... (55,560) (136,050) (790,681)
Other.................................................... (56,250)
-------- ---------- -----------
Net cash used in investing activities............ (55,560) (136,050) (846,931)
-------- ---------- -----------
Cash Flows from Financing Activities:
Proceeds from revolving line of credit................... 11,700,000
Repayment of revolving line of credit.................... (3,700,000)
Proceeds from issuance of Common Stock................... 371,000
Proceeds from issuance of mandatorily redeemable Series A
preferred stock....................................... 11,129,000
Proceeds from issuance of 12% subordinated debentures.... 5,500,000
Repayment of 12% subordinated debentures................. (5,500,000)
Repayment of 8% subordinated promissory notes............ (6,000,000)
Distributions to the original stockholders as dividends
and redemption consideration.......................... (20,216,182)
-------- ---------- -----------
Net cash used in financing activities............ -- -- (6,716,182)
-------- ---------- -----------
Net Increase in Cash....................................... 347,023 1,964,221 2,015,852
Cash, Beginning of Year.................................... 191,687 538,710 2,502,931
-------- ---------- -----------
Cash, End of Year.......................................... $538,710 $2,502,931 $ 4,518,783
======== ========== ===========
Supplemental Cash Flow Information:
Income taxes paid........................................ $171,588 $ 150,000 $ 5,724,000
======== ========== ===========
Interest paid............................................ $ 5,811 $ 3,749 $ 347,233
======== ========== ===========
Noncash Financing Activities:
Issuance of 8% subordinated promissory notes to original
stockholders in connection with the Recapitalization
(Note 1).............................................. $ -- $ -- $ 6,000,000
======== ========== ===========
Issuance of mandatorily redeemable Series B preferred
stock to original stockholders (Note 1)............... $ -- $ -- $10,000,000
======== ========== ===========
Accretion of preferred stock dividends and redemption
value................................................. $ -- $ -- $ 965,000
======== ========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 58
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The Company was founded in 1979 and designs and
manufactures automated teller machines ("ATMs") and other financial hardware
products, such as scrip terminals and ATM demonstration machines.
Recapitalization -- On July 25, 1996, the Company effected a
recapitalization (the "Recapitalization") pursuant to which the Company
repurchased an aggregate of approximately 55% of the outstanding Common Stock
from its founders and certain other stockholders (the "Original Stockholders")
for a total consideration of $22.7 million. Of this amount, $16.7 million was
paid in cash and $6.0 million was paid through the issuance of 8% Subordinated
Promissory Notes of the Company due in 2001 (the "Stockholder Notes").
Immediately prior to the consummation of the Recapitalization, the Company made
a dividend distribution to the Original Stockholders in the form of an aggregate
of 100,000 shares of Series B preferred stock.
In order to finance the Recapitalization, the Company issued and sold (1)
an aggregate of 114,000 shares of Series A Preferred Stock with a redemption
value of $11.4 million for an aggregate purchase price of $11.4 million, and (2)
$5.5 million of 12% Subordinated Debentures of the Company due 2001 (the
"Subordinated Debentures") for an aggregate purchase price of $5.5 million.
After the foregoing transactions, the Company issued and sold an aggregate of
6,863,999 shares of Common Stock for an aggregate purchase price of $100,000.
On September 26, 1996, the Stockholder Notes and Subordinated Debentures
were repaid from the proceeds of a revolving line of credit provided by The
First National Bank of Boston. See Note 12 regarding the subsequent redemption
of the Series A and Series B preferred stock on January 24, 1997.
The transaction has been accounted for as a recapitalization, and
accordingly, no change in the accounting basis of the Company's assets have been
made in the accompanying financial statements. The amount of cash paid and
securities issued to the stockholders exceeded the Company's net assets on the
date of the transaction and has been recorded in the stockholders' equity
section as distributions in excess of basis.
Cash and Cash Equivalents -- All highly liquid investments with an original
maturity of three months or less from the date of purchase and money market
funds are considered cash equivalents.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Accounts Receivable -- Accounts receivable are reduced by any necessary
allowance for doubtful accounts. The allowance is determined by management based
on an evaluation of individual accounts and historical chargeoffs.
Financial Instruments -- The fair value of the Company's financial
instruments approximate their carrying amount.
Inventory -- Parts and supplies are carried at the lower of cost (FIFO) or
market. The cost of work in process and finished goods is based on accumulated
direct costs and allocated overhead.
Property and Equipment -- Property and equipment is stated at cost.
Depreciation and amortization are provided over the estimated useful lives of
the various properties using accelerated methods. The headquarters building is
being depreciated over a 25 year useful life. Furniture, fixtures, and equipment
are depreciated over useful lives varying from three to seven years. Automobiles
are depreciated over a five year useful life. Upon
F-7
<PAGE> 59
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
disposal, the assets and related accumulated depreciation are removed from the
Company's accounts, and the resulting gains and losses are reflected in the
statements of operations.
Revenue Recognition -- Revenue is recognized upon shipment of the product
to the customer. The Company does not grant rights of return.
Warranties -- The Company's products are covered by a one-year parts-only
warranty. During 1996, the Company increased its warranty coverage from three
months to one year. Estimated future costs of repair, replacement, or customer
accommodations are reflected in the accompanying financial statements. Such
warranty reserves amounted to $35,000 and $585,000 at December 31, 1995 and 1996
and are included in accrued expenses.
Research and Development -- Research and development expenditures are
charged to operations as incurred.
Income Taxes -- The provision for income taxes includes federal and state
taxes currently payable and deferred taxes arising from temporary differences
between income for financial statement purposes and income tax purposes.
Net Income Applicable to Common Stockholders Per Share -- Net income
applicable to common stockholders per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period. Dilutive common equivalent shares consist of stock options
(using the Treasury stock method for all periods presented) as if converted for
all years presented.
In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83, all common shares issued and options to purchase shares of
common stock granted by the Company during the twelve-month period prior to the
filing of a proposed initial public offering are included in the calculation as
if they were outstanding for all periods.
Recent Pronouncements -- The Financial Accounting Standards Board has
issued Statement No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" which is required to be adopted in
1997 and 1998. The Company does not expect the adoption of this standard to have
a material impact on the Company's financial condition or results of operations.
Reclassifications -- Certain reclassifications have been made to the 1994
and 1995 financial statements to conform to the classifications used in 1996.
2. ALLOWANCE FOR BAD DEBTS
Following is a summary of the allowance for bad debts (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
------- ---- ------
<S> <C> <C> <C>
Balance at beginning of year...................... $ -- $ -- $ 100
Provision for bad debts........................... -- 100 930
------- ---- ------
Balance at end of year............................ $ -- $100 $1,030
======= ==== ======
</TABLE>
F-8
<PAGE> 60
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORY
Following is a summary of inventory at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Parts and supplies................................................. $1,503 $2,381
Work in process.................................................... 141 137
Finished goods..................................................... 244 527
------ ------
$1,888 $3,045
====== ======
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of a revolving line of credit due on September 26,
2001. The line has an adjustable interest rate. At December 31, 1996, the
effective interest rate thereon was 7.25%. The agreement provides for annual
reductions of $1,000,000 in the available line beginning in September 1997.
Based on the balance of the line at December 31, 1996, no payments would be
required in 1997. In connection with the revolving line of credit, the Company
has entered into a pledge and security agreement with the lender under which
substantially all assets of the Company were pledged to secure the revolving
credit line.
The revolving line of credit contains certain covenants that prohibit the
Company from incurring certain indebtedness, restricts investments, and
prohibits cash dividends. In addition, the Company is required to maintain
required quarterly net income, meet minimum debt service coverages, maintain
certain leverage ratios and limit the amount of capital expenditures in any one
year. The Company was in compliance with all covenants of the line at December
31, 1996. The revolving line of credit was amended in January 1997 (see Note
12). The amendment requires an annual $2.0 million reduction in the maximum
available borrowing amount beginning in September 1997. Interest expense
amounted to $6,000, $4,000 and $350,000 for 1994, 1995 and 1996, respectively.
5. MANDATORILY REDEEMABLE PREFERRED STOCK
The Company authorized and issued 114,000 shares of Series A preferred
stock at a price of $100 per share in order to finance the Recapitalization. The
Company authorized and issued 100,000 shares of Series B preferred stock as a
stock dividend to stockholders immediately prior to the Recapitalization. Both
the Series A and Series B preferred stock have a face value of $100. Dividends
accrue at 10% annually and are cumulative whether or not declared and paid.
Neither the Series A nor Series B preferred stockholders have any conversion
rights or voting rights. The Company has recorded the Series A preferred stock
at its estimated fair value on the issue date (as determined by a third-party
independent appraisal) which resulted in an original issue discount of $271,000.
The discount is being accreted over the life of the Series A preferred stock.
The rights and preferences of the Series A and B preferred stock are as follows:
Liquidation Rights -- The Series A and B preferred stock have certain
liquidation preferences over the common stock in the event of liquidation,
dissolution or winding up of the Company. The liquidation preferences
entitle the preferred stockholders to receive $100 per share in addition to
any accrued and unpaid dividends. The Series A preferred stockholders have
preferences over the Series B stockholders in determining the order of
liquidation payout. The preferred stock does not participate in the
distribution of assets remaining after the preference has been paid.
Dividend Rights -- The preferred stockholders are entitled to receive
dividends in preference to the common stockholders at an annual rate of ten
percent (10%) of the purchase price of $100 per share, compounded annually.
As long as any preferred shares are outstanding, the Company cannot declare
or pay any dividend or make any distribution to any common stock. The
carrying amounts of both Series A
F-9
<PAGE> 61
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and Series B preferred stock have been increased by amounts representing
dividends accrued but not paid but which will be payable under the dividend
rights of the respective series of preferred stock. The increases have been
effected by a charge against retained earnings.
Redemption Rights -- The Company may redeem all or any of the shares
of the Series A preferred stock at any time. On July 31, 2002, the Company
must redeem all of the shares of Series A preferred stock outstanding. The
Company may also redeem all or any shares of the Series B preferred stock
at any time but only if all shares of Series A preferred stock has been
redeemed.
The Company is required to redeem all of the shares of the Series A and
Series B preferred stock in the event of a public offering of the Company's
common stock or a merger or sale of the Company. However, the Series A stock
must be redeemed prior to the Series B. The redemption price of the Series A and
Series B preferred stock is $100 per share plus any accrued and unpaid
dividends.
See Note 12 regarding the subsequent redemption of the Series A and Series
B preferred stock on January 24, 1997.
6. PENSION PLAN AND 401(K) PLAN
The Company had a simplified employee pension plan (SEP). Contributions
were made to the plan at the discretion of the Company's Board of Directors and
amounted to approximately $120,000 in 1995 and $100,000 in 1994. In 1996 the
Company discontinued the SEP and instituted a 401(k) plan. The Company's
contribution to the 401(k) plan each year is at the discretion of the Board of
Directors and amounted to $264,000 in 1996 and was included in accrued expenses
at December 31, 1996.
7. INCOME TAXES
Income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Current
Federal.................................................. $125 $2,455 $2,830
State.................................................... 20 380 440
----- ------ ------
145 2,835 3,270
----- ------ ------
Deferred
Federal.................................................. -- (17) (538)
State.................................................... -- (3) (82)
----- ------ ------
-- (20) (620)
----- ------ ------
Total tax expense................................ $145 $2,815 $2,650
===== ====== ======
</TABLE>
F-10
<PAGE> 62
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's effective tax rate differs from the statutory federal tax
rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
---- ---- -----
<S> <C> <C> <C>
Income taxes at statutory rate................................ 34.0% 34.0% 34.0%
Income taxed to stockholders.................................. -- -- (18.4)
State income taxes............................................ 3.5 3.3 1.7
Non-deductible items.......................................... 0.6 0.1 1.4
Other items -- net............................................ 0.3 -- --
---- ---- -----
Effective tax rate.................................. 38.4% 37.4% 18.7%
==== ==== =====
</TABLE>
The components of the Company's deferred tax assets were as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
---- ----
<S> <C> <C>
Allowance for bad debts............................................... $ 38 $385
Inventory............................................................. 10 60
Compensated absences.................................................. 44 35
Warranty reserves..................................................... 12 220
Other -- net.......................................................... (24) --
---- ----
Total deferred tax assets................................... $ 80 $700
==== ====
</TABLE>
From January 1, 1996 through July 25, 1996, the Company elected to be taxed
as a Subchapter S corporation for federal and state income tax purposes.
Therefore, taxable income during this period was taxed directly to the
stockholders.
8. STOCK OPTION PLAN
The Company has reserved up to 1,541,707 shares of its $.01 par value
Common Stock and Non-Voting Common Stock for issuance under the 1996 Stock
Option Plan. Incentive stock options and non-qualified stock options may be
granted under the terms of the Plan. Options are exercisable only while the
optionee remains in the employ of the Company or for a short period of time
thereafter. All options granted as of December 31, 1996 were non-qualified stock
options and were exercisable for Non-Voting Common Stock. No incentive stock
options have been granted. Options granted in 1996 were vested immediately as to
263,706 shares, vest one-third each year over 3 years as to 103,949 shares and
vest one-fifth each year over 5 years as to 33,000 shares. All options expire no
later than 10 years from the date of grant.
Transactions in the plan are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ------------------------------
AVAILABLE SHARES UNDER PRICE
FOR GRANT OPTION PER SHARE
--------- ------------ -------------
<S> <C> <C> <C>
Authorized................................... 1,541,707 -- --
Granted...................................... 400,655 400,655 $1.21 - $4.97
Exercised.................................... -- -- --
------- ------- -------------
Balance at December 31, 1996....... 1,141,052 400,655 $1.21 - $4.97
======= ======= =============
</TABLE>
Options to purchase 263,706 shares were exercisable at December 31, 1996.
F-11
<PAGE> 63
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company is applying APB opinion No. 25 and related interpretations in
accounting for the Plan. All shares granted in 1996 were at or above the
estimated fair market value on the date of grant, as determined by an
independent third party appraisal. Accordingly, no compensation expense has been
recognized. If the Company determined compensation cost based on the fair value
at the date of grant, consistent with the requirements of Financial Accounting
Standards Board Statement No. 123 "Accounting for Stock Based Compensation," the
effect on the Company's net income and net income applicable to common
stockholders would not have been material and, accordingly, the pro forma
effects of such costs have not been presented. In computing these pro forma
amounts the Company has assumed a risk-free interest rate equal to approximately
6 1/2% and expected life of approximately 3 years. The effects of applying SFAS
No. 123 in this disclosure are not indicative of future amounts.
9. SIGNIFICANT CUSTOMERS
For the year ended December 31, 1994, one customer accounted for 27% of the
Company's net sales. For the year ended December 31, 1995, one customer
accounted for 12% of the Company's net sales. For the year ended December 31,
1996, two customers accounted for 22% and 19%, respectively, of the Company's
net sales. In addition, the Company's five largest customers, in the aggregate,
accounted for approximately 62% of the Company's net sales in 1996.
10. RELATED PARTY TRANSACTIONS
Prior to December 30, 1996, the Company leased its headquarters and
manufacturing facility and telephone system from three major officers and
stockholders. Under the lease, dated February 1, 1995, the Company paid rent
ranging from $9,666 to $16,332 per month. On December 30, 1996, the Company
purchased the land, building and telephone system from the officers and
stockholders for an aggregate of $631,257, an amount agreed upon by the
disinterested members of the Board of Directors after review of independent
appraisals. From October 30, 1995 through February 14, 1996, the Company made
loans to an entity owned by the three stockholders in the aggregate principal of
$176,000, at an annual interest rate of 9.75%, the proceeds of which were used
for improvements to the Company headquarters. The loans were repaid in full in
July 1996.
11. COMMITMENTS
On July 25, 1996, the Company entered into certain employment agreements
for a three year period. These employment agreements, as amended, require
aggregate minimum payment of $375,000 annually. Such agreements provide for
annual salary increases and bonuses as determined by the Board of Directors.
12. SUBSEQUENT EVENTS
1997 Stock Purchase Plan -- On January 23, 1997, the Board of Directors
adopted the 1997 Employee Stock Purchase Plan and authorized the issuance of up
to 250,000 shares of common stock under this plan to participating employees. On
the first day of each purchase period, participating employees will be granted
an option to purchase up to 500 shares of common stock. The exercise price for
the option for each purchase period is the lesser of 85% of the fair market
value of the common stock on the first or last business day of the purchase
period.
Stock Splits -- On January 23, 1997, the Company's Board of Directors
approved a 1.65 for 1 stock split to be effected on January 27, 1997. All share
and per share data in the accompanying financial statements have been
retroactively restated to reflect the stock split.
Stock Offering -- On January 23, 1997, the Company's Board of Directors
authorized management of the Company to file a Registration Statement with the
Securities and Exchange Commission relating to the initial
F-12
<PAGE> 64
TRITON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
public offering of shares of common stock. The Board has also directed that the
net proceeds to the Company from the offering be used to retire the revolving
credit line.
Redemption of Mandatorily Redeemable Series A and B Preferred Stock -- On
January 24, 1997, the Company redeemed all of the outstanding shares of Series A
preferred stock for an aggregate redemption price of $11,400,000 (plus accrued
dividends of $580,000), and all outstanding shares of Series B preferred stock
for an aggregate redemption price of $10,000,000 (plus accrued dividends of
$508,000). The redemption was financed in part through $21,818,000 in additional
borrowings under the Company's revolving line of credit, the availability under
which was increased from $15.0 to $30.0 million pursuant to an amendment to the
revolving credit facility. In connection with the increase in availability under
the revolving line of credit, the Company issued a warrant to purchase 32,109
shares of common stock at an exercise price of $11.00 per share to an affiliate
of the Bank. The warrant expires in January 2007 and is presently exercisable.
The amendment to the revolving line of credit provides for annual reductions of
$2.0 million in the available line beginning in September 1997.
Amendment to Articles -- On January 27, 1997, the Company's Articles of
Incorporation were amended to increase the number of authorized shares of common
stock, par value $.01 per share, from 10,000,000 to 40,000,000 and to set the
number of authorized shares of undesignated preferred stock, par value $.01 per
share, at 5,000,000.
13. UNAUDITED PRO FORMA INFORMATION
Pro Forma Balance Sheet Information -- The pro forma balance sheet
information is adjusted for the pro forma effect of the redemption of all
mandatorily redeemable preferred stock at its required redemption price at
December 31, 1996 of approximately $22,345,000 and its replacement with
long-term debt funded by a $21,818,000 increase in the Company's revolving line
of credit and a deemed use of $527,000 in cash.
Pro Forma Net Income Applicable to Common Stockholders -- The pro forma
adjustments reflect what the effect on historical net income applicable to
common stockholders would have been if the Company had not elected to be taxed
as a Subchapter S corporation during the period from January 1, 1996 through
July 25, 1996. The adjustments include a provision for federal and state income
taxes at an effective rate of 38.7% as if the Company was subject to such taxes
during such period. In connection with the Recapitalization on July 25, 1996,
the Company terminated its status as a Subchapter S corporation. The 1996
historical net income applicable to common stockholders is also adjusted by (i)
the additional interest expense (net of tax) as if the additional $21,818,000
borrowed to fund in part the redemption of the mandatorily redeemable preferred
stock had been incurred on July 25, 1996 and (ii) the elimination of accretion
of dividends and redemption value on the mandatorily preferred stock to reflect
such redemption. Pro forma net income applicable to common stockholders per
share is based on the weighted average number of common and dilutive common
equivalent shares (common stock options) outstanding.
* * * * * *
F-13
<PAGE> 65
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company, any Selling Stockholder or the Underwriters. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the shares of Common Stock to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction in which such offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or that the information
contained herein is correct as of any time subsequent to the date hereof.
------------------------------
TABLE OF CONTENTS
------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 23
Management............................ 34
Certain Transactions.................. 39
Principal and Selling Stockholders.... 41
Description of Capital Stock.......... 43
Shares Eligible for Future Sale....... 46
Underwriting.......................... 48
Legal Matters......................... 49
Experts............................... 49
Additional Information................ 50
Index to Financial Statements......... F-1
</TABLE>
------------------------------
Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
4,200,000 SHARES
[TRITON SYSTEMS LOGO]
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
MONTGOMERY SECURITIES
DEAN WITTER REYNOLDS INC.
SMITH BARNEY INC.
, 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee, the NASD filing fee
and the Nasdaq National Market listing fee:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Registration fee under the Securities Act................................. $ 19,028
NASD filing fee........................................................... 6,779
Nasdaq National Market listing fee........................................ 50,000
Legal fees and expenses................................................... 275,000
Accounting fees and expenses.............................................. 75,000
Blue Sky fees and expenses................................................ 15,000
Printing, engraving and mailing expenses.................................. 85,000
Transfer agent fees and expenses.......................................... 5,000
Miscellaneous............................................................. 69,193
--------
Total........................................................... $600,000
========
</TABLE>
All the above expenses will be paid by the Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation and By-laws provide for
indemnification of the officers and directors of the Company to the fullest
extent permitted by Mississippi law, including some instances with respect to
directors where indemnification is otherwise discretionary under Mississippi
law. The Articles of Incorporation and By-laws provide that the Company shall
indemnify, and upon request shall advance expenses to, in the manner and to the
full extent permitted by law, any officer or director who was or is a party to,
or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding; provided, however, the Company shall not indemnify
an officer or director if a judgment or final adjudication adverse to the
officer or director establishes his liability for (i) the amount of financial
benefit received by a director to which he is not entitled, (ii) an intentional
infliction of harm on the Company or its stockholders, (iii) a violation of
Section 79-4-8.33 of the Mississippi Business Corporation Act relating to
unlawful distributions, or (iv) an intentional violation of criminal law.
Reference is made to the Company's Articles of Incorporation and By-laws filed
as Exhibits 3.2 and 3.4 hereto.
The Company intends to purchase insurance with respect to, among other
things, the liabilities that may arise under the statutory provisions referred
to above. The directors and officers of the Company also are insured against
certain liabilities, including certain liabilities arising under the Securities
Act of 1933, which might be incurred by them in such capacities and against
which they are not indemnified by the Company.
Reference is hereby made to Section 11 of the Underwriting Agreement filed
as Exhibit 1.1 hereto, which provides for indemnification of the Company, its
directors, officers and controlling persons.
II-1
<PAGE> 67
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1994, the Company has issued the following securities
(giving effect to the 1.65:1 stock split effected in the form of a stock
dividend on January 27, 1997), none of which have been registered under the
Securities Act of 1933, as amended (the "Act"):
(a) On July 25, 1996, the Company issued and sold an aggregate of $5.5
million in principal amount of 12% Subordinated Debentures due 2001 of the
Company to Summit Investors III, L.P. and Summit Subordinated Debt Fund,
L.P. in a private venture capital financing.
(b) On July 25, 1996, the Company issued an aggregate of 114,000
shares of Series A Preferred Stock for aggregate consideration of
$11,400,000 in a private venture capital financing, at a price of $100 per
share, to Summit Ventures IV, L.P. and Summit Investors III, L.P.
(c) On July 25, 1996, the Company issued 6,863,999 shares of Common
Stock for aggregate consideration of $100,000 in a private venture capital
financing, to Summit Ventures IV, L.P., Summit Investors III, L.P. and
Summit Subordinated Debt Fund, L.P.
(d) Between July 25, 1996 and January 23, 1997, the Company granted
options to purchase an aggregate of 433,655 shares of Non-Voting Common
Stock to employees and directors under the Company's 1996 Stock Option
Plan.
No underwriters were involved in any of the foregoing transactions. Such
sales of stock and grants of options were made in reliance upon an exemption
from the registration provisions of the Act set forth in Section 4(2) thereof
relative to sales by an issuer not involving a public offering or the rules and
regulations thereunder, or, in the case of certain options to purchase Common
Stock, Rule 701 of the Act. All of the foregoing securities are deemed
restricted securities for purposes of the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of exhibits filed as part of the
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ----------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Company
3.2 Form of Restated Articles of Incorporation of the Company, to be effective upon
the closing of the offering
3.3 By-Laws of the Company
3.4 Form of By-Laws of the Company, to be effective upon the closing of the offering
*4.1 Specimen stock certificate representing the shares of Common Stock
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, as to the
legality of the securities being registered
10.1 Stock Purchase and Redemption Agreement, dated July 25, 1996
10.2 Redemption Agreement among the Company and the Shareholders, dated July 25, 1996
10.3 Shareholders' Agreement among the Company and the Shareholders, dated July 25,
1996
10.4 Registration Rights Agreement among the Company and the Shareholders, dated July
25, 1996
10.5 Credit Agreement between the Company and The First National Bank of Boston, dated
September 26, 1996
10.6 Revolving Credit Note to The First National Bank of Boston, dated September 26,
1996
10.7 Pledge and Security Agreement between the Company and The First National Bank of
Boston, dated September 26, 1996
</TABLE>
II-2
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ----------------------------------------------------------------------------------
<C> <S>
10.8 Collateral Assignment and Security Agreement in Respect of Stock Purchase and
Redemption Agreement between the Company and The First National Bank of Boston,
dated September 26, 1996
10.9 Triton Systems, Inc. 1996 Stock Option Plan
10.10 Triton Systems, Inc. 1997 Employee Stock Purchase Plan
10.11 Employment Agreement with Ernest L. Burdette, dated July 25, 1996
10.12 Employment Agreement with Frank J. Wilem, Jr., dated July 25, 1996
10.13 Employment Agreement with Robert E. Sandoz, dated July 25, 1996
10.14 Purchase and Sale Agreement, among the Company, Ernest L. Burdette, Frank J.
Wilem, Jr. and Robert E. Sandoz, dated December 31, 1996
10.15 Amendment to Employment Agreement with Ernest L. Burdette, dated December 31, 1996
10.16 Amendment to Employment Agreement with Frank J. Wilem, Jr., dated December 31,
1996
10.17 Amendment to Employment Agreement with Robert E. Sandoz, dated December 31, 1996
10.18 First Amendment to Credit Agreement, dated January 24, 1997, by and between Triton
Systems Inc. and The First National Bank of Boston
10.19 First Amendment to Promissory Note, dated as of January 24, 1997 by and between
Triton and the First National Bank of Boston
10.20 First Amendment to Security Documents, dated January 24, 1997, by and between
Triton Systems Inc. and The First National Bank of Boston
10.21 Warrant to Purchase Common Stock of Triton Systems, Inc., dated as of January 24,
1997
10.22 Co-Sale Agreement, dated as of January 24, 1997 by and among the Company, Summit
Ventures IV, L.P., Summit Investors III, L.P. and Summit Subordinated Debt Fund,
L.P., Triton Systems, Inc. and F.S.C. Corp.
11.1 Statement re computation of per share earnings
21.1 Subsidiaries
23.1 Consent of Deloitte & Touche LLP
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
(b) Financial Statement Schedules. Financial statement schedules have not
been filed with this Registration Statement since either they are not applicable
or the required information has been included in the Company's financial
statements.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Articles of Incorporation, as amended, and Bylaws of
the Registrant and the laws of the State of Mississippi, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
II-3
<PAGE> 69
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts on the 28th day of January, 1997.
TRITON SYSTEMS, INC.
ERNEST L. BURDETTE
By: ................................
ERNEST L. BURDETTE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Ernest L. Burdette and Jeffrey A. Bandrowski, and
each of them, with the power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or in his name, place and stead, in any and all capacities to sign any
and all amendments or post-effective amendments to this Registration Statement,
and to sign any and all additional registration statements relating to the same
offering of securities as this Registration Statement that are filed pursuant to
Rule 462(b) of the Securities Act of 1933, as amended, 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
agents, and each of them, 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 agents or either of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -----------------
<C> <S> <C>
ERNEST L. BURDETTE President, Chief Executive January 28, 1997
........................................ Officer and Director
ERNEST L. BURDETTE (principal executive officer)
JEFFREY A. BANDROWSKI Vice President-Chief Financial January 28, 1997
........................................ Officer (principal accounting
JEFFREY A. BANDROWSKI and financial officer)
ROBERT E. SANDOZ Director January 28, 1997
........................................
ROBERT E. SANDOZ
FRANK J. WILEM, JR. Director January 28, 1997
........................................
FRANK J. WILEM, JR.
JOSEPH F. TRUSTEY Director January 28, 1997
........................................
JOSEPH F. TRUSTEY
KEVIN P. MOHAN Director January 28, 1997
........................................
KEVIN P. MOHAN
CHARLES A. EMLING, III Director January 28, 1997
........................................
CHARLES A. EMLING, III
THOMAS A. COOPER Director January 28, 1997
........................................
THOMAS A. COOPER
</TABLE>
II-5
<PAGE> 71
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Company
3.2 Form of Restated Articles of Incorporation of the Company, to be effective
upon the closing of the offering
3.3 By-Laws of the Company
3.4 Form of By-Laws of the Company, to be effective upon the closing of the
offering
*4.1 Specimen stock certificate representing the shares of Common Stock
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, as to
the legality of the securities being registered
10.1 Stock Purchase and Redemption Agreement, dated July 25, 1996
10.2 Redemption Agreement among the Company and the Shareholders, dated July 25,
1996
10.3 Shareholders' Agreement among the Company and the Shareholders, dated July
25, 1996
10.4 Registration Rights Agreement among the Company and the Shareholders, dated
July 25, 1996
10.5 Credit Agreement between the Company and The First National Bank of Boston,
dated September 26, 1996
10.6 Revolving Credit Note to The First National Bank of Boston, dated September
26, 1996
10.7 Pledge and Security Agreement between the Company and The First National
Bank of Boston, dated September 26, 1996
10.8 Collateral Assignment and Security Agreement in Respect of Stock Purchase
and Redemption Agreement between the Company and The First National Bank of
Boston, dated September 26, 1996
10.9 Triton Systems, Inc. 1996 Stock Option Plan
10.10 Triton Systems, Inc. 1997 Employee Stock Purchase Plan
10.11 Employment Agreement with Ernest L. Burdette, dated July 25, 1996
10.12 Employment Agreement with Frank J. Wilem, Jr., dated July 25, 1996
10.13 Employment Agreement with Robert E. Sandoz, dated July 25, 1996
10.14 Purchase and Sale Agreement, among the Company, Ernest L. Burdette, Frank J.
Wilem, Jr. and Robert E. Sandoz, dated December 31, 1996
10.15 Amendment to Employment Agreement with Ernest L. Burdette, dated December
31, 1996
10.16 Amendment to Employment Agreement with Frank J. Wilem, Jr., dated December
31, 1996
10.17 Amendment to Employment Agreement with Robert E. Sandoz, dated December 31,
1996
10.18 First Amendment to Credit Agreement, dated January 24, 1997, by and between
Triton Systems Inc. and The First National Bank of Boston
10.19 First Amendment to Promissory Note, dated as of January 24, 1997 by and
between Triton and the First National Bank of Boston
10.20 First Amendment to Security Documents, dated January 24, 1997, by and
between Triton Systems Inc. and The First National Bank of Boston
10.21 Warrant to Purchase Common Stock of Triton Systems, Inc., dated as of
January 24, 1997
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------
<C> <S> <C>
10.22 Co-Sale Agreement, dated as of January 24, 1997 by and among the Company,
Summit Ventures IV, L.P., Summit Investors III, L.P. and Summit Subordinated
Debt Fund, L.P., Triton Systems, Inc. and F.S.C. Corp.
11.1 Statement re computation of per share earnings
21.1 Subsidiaries
23.1 Consent of Deloitte & Touche LLP
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included
in Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
(b) Financial Statement Schedules. Financial statement schedules have not
been filed with this Registration Statement since either they are not applicable
or the required information has been included in the Company's financial
statements.
<PAGE> 1
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
----------------------------------
OF TRITON SYSTEMS, INC.
-----------------------
Pursuant to the provisions of Section 79-4-10.07 of the Mississippi
Business Corporation Act (the "Act"), the undersigned corporation adopts the
following Restated Articles of Incorporation:
ARTICLE I.
The name of the corporation of is TRITON SYSTEMS, INC. (the "Corporation").
ARTICLE II.
The name and address of the registered agent of the corporation is Frank J.
Wilem, Jr., 522 East Railroad Street, Long Beach, Mississippi 39560.
ARTICLE III.
The registered office of the corporation is 522 East Railroad Street, Long
Beach, Mississippi 39560.
ARTICLE IV.
The aggregate number of shares of capital stock that the Corporation shall
have the authority to issue is Forty-Six Million (46,000,000), consisting of
Five Million (5,000,000) shares of Preferred Stock (the "Preferred Stock"),
Forty Million (40,000,000) shares of Common Stock, par value $.01 per share (the
"Common Stock"), and One Million (1,000,000) shares of Non-Voting Common Stock,
par value $.01 per share (the "Non-Voting Common Stock").
ARTICLE V.
The preferences, limitations and relative rights of the shares of each
class are as follows:
A. PREFERRED STOCK. The Preferred Stock shares shall be entitled to such
preferences in the distribution of dividends and assets, and shall be divided
into such series, as the Board of Directors of the Corporation shall determine,
with full authority in the Board of Directors to determine, prior to issuance,
from time to time, the relative preferences, limitations and relative rights of
the shares of any of series of Preferred Stock, with respect to par value, if
any, dividends, redemption, payments on liquidation, sinking fund provisions,
conversion privileges, and voting rights.
<PAGE> 2
B. COMMON STOCK.
------------
1. IDENTICAL RIGHTS. Except as otherwise provided herein, all shares
of the Common Stock shall be identical and shall entitle the holder thereof to
the same rights and privileges. The voting, dividend and liquidation rights of
the holders of the Common Stock are subject to and qualified by the rights of
the holders of the Preferred Stock of any series as may be designated by the
Board of Directors upon any issuance of the Preferred Stock of any series.
2. DIVIDENDS. From and after the date of issuance, the holders of
outstanding shares of the Common Stock shall be entitled to receive dividends on
the shares of the Common Stock when, as and if declared by the Board of
Directors, out of funds legally available for such purpose and subject to any
preferential dividend rights of any then outstanding Preferred Stock. All
holders of shares of the Common Stock shall share ratably, in accordance with
the numbers of shares held by each such holder, in all dividends or
distributions on shares of the Common Stock payable in cash, in property or in
securities of the Corporation (other than shares of the Common Stock). All
dividends or distributions declared on shares of the Common Stock which are
payable in shares of the Common Stock shall be declared at the same rate on both
classes of shares, but shall be payable only in shares of the Common Stock to
the holders of shares of the Common Stock and in shares of the Non-Voting Common
Stock to the holders of shares of the Non-Voting Common Stock.
3. LIQUIDATION. Subject to any preferential rights of any then
outstanding Preferred Stock, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
holders of shares of the Common Stock shall be entitled to share ratably, in
accordance with the number of shares held by each such holder, in all of the
assets of the Corporation available for distribution to the holders of shares of
the Common Stock.
4. VOTING RIGHTS. The holders of shares of the Common Stock shall be
entitled to one vote for each share of the Common Stock held of record by such
holder at all meetings of shareholders (and written actions in lieu of
meetings). Except as otherwise provided for by law, the holders of shares of the
Non-Voting Common Stock shall not be entitled to vote at meetings of
shareholders (and written actions in lieu of meetings). There shall be no
cumulative voting.
5. CONVERSION.
----------
(a) CONVERSION. Immediately prior to the occurrence of a
Liquidity Event (as hereafter defined), each share of the Non-Voting Common
Stock shall automatically convert into a share of the Common Stock at the
conversion rate of one share of the Common Stock for one share of the Non-Voting
Common Stock. The term Liquidity Event shall mean any one or more of the
following: (i) any merger or consolidation of the Corporation with or into
another corporation, or the sale of all or substantially all of the
Corporation's properties or assets to any person or any transaction or series of
related transactions in which more than fifty percent (50%) of the outstanding
voting securities of the Corporation are sold or assigned, (ii) the liquidation,
dissolution or winding up of the Corporation, or (iii) the sale of securities by
the Corporation pursuant to an effective registration statement under the
Securities Act of 1933, as amended.
(b) DELIVERY OF CERTIFICATES. Holders of the Non-Voting Common
Stock shall deliver to the Corporation at its principal office (or such other
office or agency as the
<PAGE> 3
Corporation may designate by notice in writing) during its usual business hours,
the certificate or certificates for shares of the Non-Voting Common Stock being
converted, and the Corporation shall issue and deliver to such holders a
certificate or certificates for the number of shares of the Common Stock to
which such holders are entitled. Until such time as holders of shares of the
Non-Voting Common Stock shall surrender those certificates therefor as provided
above, such certificates shall be deemed to represent the shares of the Common
Stock which the holders shall be entitled upon the surrender thereof.
(c) REISSUE OF SHARES. Shares of the Non-Voting Common Stock
which are converted into shares of the Common Stock as provided herein shall be
retired and canceled and shall not be reissued.
(d) RESERVATION. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of the Common Stock or
its treasury shares, solely for the purpose of issue upon conversion of the
shares of the Non-Voting Common Stock as provided herein, such number of shares
of the Common Stock as shall then be issuable upon the conversion of all
authorized shares of the Non-Voting Common Stock. The shares of the Common Stock
so issuable shall when so issued be duly and validly issued, fully paid and
non-assessable.
6. DISTRIBUTION. For purposes of determining the Corporation's
ability to declare or pay dividends on, or purchase, redeem or otherwise
acquire, or make distributions on, the Common Stock, the Corporation need not
give effect to the amount that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
ARTICLE VI.
The period of existence of the Corporation is perpetual.
ARTICLE VII.
The purpose of the Corporation is to engage in any lawful business
permitted by Mississippi law.
ARTICLE VIII.
A. Directors of the Corporation shall have no liability to the Corporation
or its shareholders for money damages for any action taken, or any failure to
take any action, as a director, except liability for:
<PAGE> 4
1. The amount of a financial benefit received by a director to which
he is not entitled;
2. An intentional infliction of harm on the Corporation or the
shareholders;
3. A violation of Section 79-4-8.33 of the Act; or
4. An intentional violation of criminal law.
B. The Corporation shall indemnify a director for liability (as defined in
Section 79-4-8.50 of the Act) to any person for any action taken, or any failure
to take any action, as a director, except liability for:
1. Receipt of a financial benefit to which he is not entitled;
2. An intentional infliction of harm on the Corporation or its
shareholders;
3. A violation of Section 79-4-8.33 of the Act; or
4. An intentional violation of criminal law.
C. If the Act is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Act, as so amended. Any repeal or modification of the
provisions of this Article VIII by the shareholders shall not adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE IX.
A. The Corporation shall indemnify, and upon request shall advance expenses
prior to final disposition of a proceeding to, any person (or the estate or
personal representative of any person) who was or is a party to, or is
threatened to be made a party to, any threatened, pending or completed action,
suit or proceeding, whether or not by or in the right of the Corporation, and
whether civil, criminal, administrative, investigative or otherwise, by reason
of the fact that such person is or was a director of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability incurred
in the action, suit or proceeding: (a) to the full extent permitted by Section
79-4-8.51 of the Act, and (b) despite the fact that such person has not met the
standard of conduct set forth in Section 79-4-8.51(a) of the Act or would be
disqualified for indemnification under Section 79-4-8.51(d) of the Act, if a
determination is made by a person or persons enumerated in Section 79-4-8.55(b)
of the Act that (i) the director is fairly and reasonably entitled to
indemnification in view of all of the relevant circumstances, (ii) the acts or
omissions of the director did not constitute gross negligence or willful
misconduct, and (iii) the Corporation is not precluded from providing
indemnification for such acts
<PAGE> 5
or omissions under Section 79-4-2.02 of the Act. A request for reimbursement or
advancement of expenses prior to final disposition of the proceeding need not be
accompanied by the affirmation required by Section 79-4-8.53(a)(1) of the Act,
but the remaining provisions of Section 79-4-8.53 of the Act shall be applicable
to any such request. The Corporation may, to the full extent permitted by law,
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against him or her.
B. The right to indemnification and advancement of expenses set forth in
Subsection (a) of this Article IX are intended to be more extensive than those
which are provided for with respect to the permissive indemnification in the
Act, are contractual between the Corporation and the person being indemnified,
and the heirs, executors and administrators of such person, and in this respect
are mandatory, notwithstanding a person's failure to meet the standard of
conduct required for permissive indemnification under the Act, as amended from
time to time. The rights to indemnification and advancement of expenses set
forth in Subsection (a) of this Article IX shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancements of expenses
may be entitled or granted by law, these Restated Articles of Incorporation, the
bylaws, a resolution of the Board of Directors, a vote of the shareholders of
the Corporation, or an agreement with the Corporation, which means of
indemnification and advancement of expenses are hereby specifically authorized.
Any repeal or modification of the provisions of this Article IX shall not affect
any obligations of the Corporation or any rights regarding indemnification and
advancement of expenses of a director, officer, employee or agent with respect
to any threatened, pending or completed action, suit or proceeding for which
indemnification or the advancement of expenses is requested, in which the
alleged cause of action accrued at any time prior to such repeal or
modification. If an amendment to the Act hereafter limits or restricts in any
way the indemnification rights permitted by law as of the date hereof, such
amendment shall apply only to the extent mandated by law and only to activities
of persons subject to indemnification under this Article IX which occur
subsequent to the effective date of such amendment.
C. If this Article IX or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, officer, employee or agent of the
Corporation as to any liability incurred or other amounts paid in with respect
to any proceeding, including, without limitation, a grand jury proceeding and
any proceeding by or in the right of the Corporation, to the fullest extent
permitted by any applicable portion of this Article IX that shall not have been
invalidated, by the Act, or by any other applicable law. Unless the context
otherwise requires, terms used in this Article IX shall have the meanings given
in Section 79-4-8.50 of the Act.
<PAGE> 1
Exhibit 3.2
RESTATED ARTICLES OF INCORPORATION
----------------------------------
OF TRITON SYSTEMS, INC.
----------------------
Pursuant to the provisions of Section 79-4-10.07 of the Mississippi
Business Corporation Act (the "Act"), the undersigned corporation adopts the
following Restated Articles of Incorporation:
ARTICLE I.
The name of the corporation of is TRITON SYSTEMS, INC. (the "Corporation").
ARTICLE II.
The name and address of the registered agent of the corporation is Frank J.
Wilem, Jr., 522 East Railroad Street, Long Beach, Mississippi 39560.
ARTICLE III.
The registered office of the corporation is 522 East Railroad Street, Long
Beach, Mississippi 39560.
ARTICLE IV.
The aggregate number of shares of capital stock that the Corporation shall
have the authority to issue is Forty-Five Million (45,000,000), consisting of
Five Million (5,000,000) shares of Preferred Stock (the "Preferred Stock"), and
Forty Million (40,000,000) shares of Common Stock, par value $.01 per share (the
"Common Stock").
ARTICLE V.
The preferences, limitations and relative rights of the shares of each
class are as follows:
A. PREFERRED STOCK. The Preferred Stock shares shall be entitled to such
preferences in the distribution of dividends and assets, and shall be divided
into such series, as the Board of Directors of the Corporation shall determine,
with full authority in the Board of Directors to determine, prior to issuance,
from time to time, the relative preferences, limitations and relative rights of
the shares of any of series of Preferred Stock, with respect to par value, if
any, dividends, redemption, payments on liquidation, sinking fund provisions,
conversion privileges, and voting rights.
-1-
<PAGE> 2
B. COMMON STOCK.
------------
1. RIGHTS. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. DIVIDENDS. From and after the date of issuance, the holders of
outstanding shares of the Common Stock shall be entitled to receive dividends on
the shares of the Common Stock when, as and if declared by the Board of
Directors, out of funds legally available for such purpose and subject to any
preferential dividend rights of any then outstanding Preferred Stock. All
holders of shares of the Common Stock shall share ratably, in accordance with
the numbers of shares held by each such holder, in all dividends or
distributions on shares of the Common Stock payable in cash, in property or in
securities of the Corporation.
3. LIQUIDATION. Subject to any preferential rights of any then
outstanding Preferred Stock, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
holders of shares of the Common Stock shall be entitled to share ratably, in
accordance with the number of shares held by each such holder, in all of the
assets of the Corporation available for distribution to the holders of shares of
the Common Stock.
4. VOTING RIGHTS. The holders of shares of the Common Stock shall be
entitled to one vote for each share of the Common Stock held of record by such
holder at all meetings of shareholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
5. DISTRIBUTION. For purposes of determining the Corporation's ability
to declare or pay dividends on, or purchase, redeem or otherwise acquire, or
make distributions on, the Common Stock, the Corporation need not give effect to
the amount that would be needed, if the Corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
ARTICLE VI.
The period of existence of the Corporation is perpetual.
ARTICLE VII.
The purpose of the Corporation is to engage in any lawful business
permitted by Mississippi law.
-2-
<PAGE> 3
ARTICLE VIII.
The provisions of the Mississippi Shareholder Protection Act,
[section]79-25-1 through [section]79-25-9 of the Mississippi Code of 1972, as
now in effect or as hereafter amended, shall apply to the Corporation as if the
Corporation were a "Corporation" as defined in that statute. The Corporation
elects to be subject to the provisions of the Mississippi Control Share Act,
[section]79-27-1 through [section]79-27-11 of the Mississippi Code of 1972, as
now in effect or as hereafter amended, and that statute shall apply to the
Corporation as if the Corporation were an "issuing public corporation" as
defined in that statute.
ARTICLE IX.
A. Directors of the Corporation shall have no liability to the Corporation
or its shareholders for money damages for any action taken, or any failure to
take any action, as a director, except liability for:
1. The amount of a financial benefit received by a director to which
he is not entitled;
2. An intentional infliction of harm on the Corporation or the
shareholders;
3. A violation of Section 79-4-8.33 of the Act; or
4. An intentional violation of criminal law.
B. The Corporation shall indemnify a director for liability (as defined in
Section 79-4- 8.50 of the Act) to any person for any action taken, or any
failure to take any action, as a director, except liability for:
1. Receipt of a financial benefit to which he is not entitled;
2. An intentional infliction of harm on the Corporation or its
shareholders;
3. A violation of Section 79-4-8.33 of the Act; or
4. An intentional violation of criminal law.
C. If the Act is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Act, as so amended. Any repeal or modification of the
provisions of this Article IX by the shareholders shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
-3-
<PAGE> 4
ARTICLE X.
A. The Corporation shall indemnify, and upon request shall advance expenses
prior to final disposition of a proceeding to, any person (or the estate or
personal representative of any person) who was or is a party to, or is
threatened to be made a party to, any threatened, pending or completed action,
suit or proceeding, whether or not by or in the right of the Corporation, and
whether civil, criminal, administrative, investigative or otherwise, by reason
of the fact that such person is or was a director of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability incurred
in the action, suit or proceeding: (a) to the full extent permitted by Section
79-4-8.51 of the Act, and (b) despite the fact that such person has not met the
standard of conduct set forth in Section 79-4-8.51(a) of the Act or would be
disqualified for indemnification under Section 79-4-8.51(d) of the Act, if a
determination is made by a person or persons enumerated in Section 79-4-8.55(b)
of the Act that (i) the director is fairly and reasonably entitled to
indemnification in view of all of the relevant circumstances, (ii) the acts or
omissions of the director did not constitute gross negligence or willful
misconduct, and (iii) the Corporation is not precluded from providing
indemnification for such acts or omissions under Section 79-4-2.02 of the Act. A
request for reimbursement or advancement of expenses prior to final disposition
of the proceeding need not be accompanied by the affirmation required by Section
79-4-8.53(a)(1) of the Act, but the remaining provisions of Section 79-4-8.53 of
the Act shall be applicable to any such request. The Corporation may, to the
full extent permitted by law, purchase and maintain insurance on behalf of any
such person against any liability which may be asserted against him or her.
B. The right to indemnification and advancement of expenses set forth in
Subsection (a) of this Article X are intended to be more extensive than those
which are provided for with respect to the permissive indemnification in the
Act, are contractual between the Corporation and the person being indemnified,
and the heirs, executors and administrators of such person, and in this respect
are mandatory, notwithstanding a person's failure to meet the standard of
conduct required for permissive indemnification under the Act, as amended from
time to time. The rights to indemnification and advancement of expenses set
forth in Subsection (a) of this Article X shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancements of expenses
may be entitled or granted by law, these Restated Articles of Incorporation, the
bylaws, a resolution of the Board of Directors, a vote of the shareholders of
the Corporation, or an agreement with the Corporation, which means of
indemnification and advancement of expenses are hereby specifically authorized.
Any repeal or modification of the provisions of this Article X shall not affect
any obligations of the Corporation or any rights regarding indemnification and
advancement of expenses of a director, officer, employee or agent with respect
to any threatened, pending or completed action, suit or proceeding for which
indemnification or the advancement of expenses is requested, in which the
alleged cause of action accrued at any time prior to such repeal or
modification. If an amendment to the Act hereafter limits or restricts in any
way the indemnification rights permitted by law as of the date hereof, such
amendment shall apply only to the extent
-4-
<PAGE> 5
mandated by law and only to activities of persons subject to indemnification
under this Article X which occur subsequent to the effective date of such
amendment.
C. If this Article X or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, officer, employee or agent of the
Corporation as to any liability incurred or other amounts paid in with respect
to any proceeding, including, without limitation, a grand jury proceeding and
any proceeding by or in the right of the Corporation, to the fullest extent
permitted by any applicable portion of this Article X that shall not have been
invalidated, by the Act, or by any other applicable law. Unless the context
otherwise requires, terms used in this Article X shall have the meanings given
in Section 79-4-8.50 of the Act.
ARTICLE XI.
The Board of Directors of the Corporation shall consist of such number of
members not less than one (1) nor more than fifteen (15), the exact number to be
fixed and determined from time to time by resolution of a majority of the Board
of Directors. If at any time the number of members of the Board of Directors is
fixed at nine (9) or more, then the Board of Directors may, upon the unanimous
resolution of the Board of Directors, be divided into three (3) classes, of as
nearly equal size as possible, designated by the Board of Directors. The terms
of the directors elected prior to the first annual meeting of shareholders
occurring after the date of effectiveness of these Restated Articles of
Incorporation shall be filled as specified in the Bylaws of the Corporation. At
each annual meeting of shareholders, the number of directors equal to the number
of the class whose term expires at the time of such meeting shall be elected to
hold office until the next succeeding annual meeting after their election,
unless the Board of Directors has determined to divide the Board into three (3)
classes as provided above, in which case directors shall be elected to serve
three year terms. Any vacancy arising from the earlier retirement of a
director may be filled by vote of the remaining directors or the shareholders,
and the term of any such director shall be for the balance of the term of the
retiring director's class. A vote of at least eighty percent (80%) of the
outstanding voting stock of the Corporation is required to increase the maximum
number of the members of the Board of Directors if the Board of Directors does
not recommend an increase in the maximum number of members of the Board. The
minimum and maximum number of directors may be changed only by the affirmative
vote of a majority of the outstanding voting stock of the Corporation.
The Shareholders may remove one or more directors only for cause.
ARTICLE XII.
Special meetings of the shareholders of the Corporation for any purpose or
purposes may be called at any time be (a) the Board of Directors; (b) the
Chairman of the Board of Directors (if one is so appointed); (c) the President
of the Corporation or the Chief Executive Officer of the Corporation (if one is
so appointed); or (d) by the holders of not less than fifty percent (50%) of all
the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting,
-5-
<PAGE> 6
if such shareholders sign, date and deliver to the Secretary of the Corporation
one or more written demands for the meeting describing the purposes for which it
is to be held. Special meetings of the shareholders of the Corporation may not
be called by any other person or persons.
At any special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been set
forth in the notice of such special meeting.
-6-
<PAGE> 1
BYLAWS OF
TRITON SYSTEMS, INC.
ARTICLE I
Title Section 1. The title of this corporation is Triton Systems, Inc.
Principal Section 2. The principal offices shall be in Bay St. Louis,
Office Mississippi, and the company may have such other offices and
places of business as the directors may from time to time
designate.
ARTICLE II
Annual Section 1. The annual meeting of the stockholders of the
Meeting corporation shall be held in the offices of the corporation in
Bay St. Louis, Mississippi, or in such other place as the
directors may designate on the second Monday of November of each
year for the purpose of electing the Board of Directors and for
the transaction of such other business as may be properly
presented to the meeting.
Notices It shall be the duty of the secretary to cause a notice of each
annual meeting of the company to be given to each stockholder of
record by mail, addressed to him at his usual post office
address as the same shall appear on the company's books at least
five (5) days prior to said meeting.
Special Section 2. Special meetings of the stockholders shall, at the
Meetings request of the holder or holders of fifteen per cent (15%) of
stock in said company, be called by the president by mailing
Notices notice thereof stating the object of the meeting and the
business to be transacted at said meeting at least five (5) days
prior to the date of the meeting to each stockholder at his post
office address as it appears on the books of the corporation.
Quorum Section 3. A majority of the amount of stock outstanding having
a voting power, represented by the holders thereof in person or
by proxy, shall be requisite at every meeting to constitute a
quorum, except as may be otherwise provided by statute.
<PAGE> 2
Voting Section 4. No stockholder shall be entitled to vote at any
Power of regular or special meeting of the corporation either in person
Stockholder or by proxy unless his name shall appear on the books of the
corporation as such stockholder.
Order of Section 5. At the annual meeting of the stockholders, the
Business following shall be the order of business:
1. Calling the meeting to order by the president or
presiding officer.
2. Reading notice of meeting by secretary and statement
showing the serving of said notice having been made to
all stockholders of record.
3. Reports of officers.
4. Appointment of tellers for the election of directors.
5. Election of directors.
6. Miscellaneous business.
ARTICLE III
Management Section 1. The property and business of the corporation shall
be managed by a board of not less than three (3) nor more
than five (5) directors who shall be chosen annually and shall
hold office for one (1) year or until their successors are
chosen and qualified.
Vacancies Section 2. Any vacancies occurring in the Board of Directors
Filled before the expiration of the term of any director shall be
filled by the majority vote of the remaining directors at any
regular or special meeting of the Board.
Regular Section 3. The Board of Directors shall hold regular
Meetings quarterly meetings at which time there shall be presented
to the Board such condensed statements of the business as
shown by the books of the corporation.
Special Section 4. The Board of Directors may be convened at any
Meetings time by the president upon one day's notice to each director,
and in the event of the refusal of the president to call such
a meeting, said meeting may be called by the majority of the
directors upon one day's notice to each director.
<PAGE> 3
Rules for Section 5. The Board of Directors may, if they see fit,
Directors adopt additional rules and regulations conformable to law
for their own government and control.
ARTICLE IV
Meeting Section 1. The meetings of the Board of Directors shall be
Place of held either in the offices of the corporation or such other
Directors place as may be determined by them.
ARTICLE V
Management Section 1. The Board of Directors shall have the management
of Business of the business of the corporation, and in addition to the
powers and authority conferred by these bylaws expressly upon
them, said Board of Directors may exercise all such power and
do all such acts and things as may be exercised and done by
the corporation, but subject, nevertheless, to the provisions
of the statutes, of the charter, and of these bylaws, and
subject to any regulations from time to time made by the
stockholders, provided that no regulations so made should
invalidate any prior act of the directors which would have
been valid if such regulations had not been made.
Specific Section 2. Without prejudice to the general powers conferred
Powers of by the preceding clause and other powers conferred by these
Directors bylaws, it is hereby expressly declared that the directors
shall have the following powers, that is to say:
(a) To purchase or otherwise acquire for the corporation any
property, rights or privileges which the corporation is
authorized to acquire at such prices and on such terms and
conditions and for such considerations as they think fit.
(b) At their discretion, to buy any property or rights, and
to pay for such property so acquired by the corporation either
wholly or partially in stock, bonds, debentures, or other
securities of the corporation, or in money.
(c) To appoint, and, at their discretion, remove or suspend
subordinate managers, officers, clerks, agents or servants
permanently or temporarily, as they may from time to time see
fit and to determine
<PAGE> 4
their duties and fix and, from time to time, change their
salaries and emoluments and to require security in such
instances and in such amounts as they may see fit.
(d) To confer by resolution upon any officer of the corporation
the right to choose, remove or suspend any subordinate agents
or factors.
(e) From time to time, to provide for the management of the
affairs of the corporation in such manner as they think fit,
and in particular from time to time to delegate any of the
powers of the Board of Directors which may be lawfully delegated
to any committee, officer or agent and to appoint any persons to
be agents of the corporation with such powers and upon such
terms as they may deem proper.
(f) To determine who shall be authorized to sign in the
corporation's behalf bills, notes, receipts, acceptances,
endorsements, checks, releases, contracts, and documents.
ARTICLE VI
Officers Section 1. The elected Board of Directors shall meet as soon
as possible after the annual meeting of the stockholders for
the purpose of organization. At such meeting, the Board shall
elect the officers for the corporation as prescribed by the
bylaws and shall appoint such subordinate officers as the Board
may deem proper and necessary.
Section 2. The president shall preside at all meetings of the
stockholders and of the Board of Directors. Subject at all
times to the control of the Board of Directors, he shall have
general charge of the business of the corporation and shall
execute in its name all contracts, bonds, and other obligations
and may sign checks.
Section 3. The vice-president or vice-presidents shall, in the
absence of or inability of the president, perform the duties of
that officer.
Section 4. The treasurer shall be the fiscal officer of the
corporation and, as such, shall be the custodian of all monies,
bonds, notes, and other securities
<PAGE> 5
belonging to the corporation. He shall have power to endorse in
behalf of the corporation all checks, notes, or other
obligations payable to the order of the corporation and shall
deposit same to the credit of the corporation in some bank
designated by the Board of Directors as the depository for the
corporation. He shall have authority to sign all checks, notes,
and bills made by the corporation, and shall cause to be kept
full and complete books showing all receipts and disbursements
made by him for and in behalf of the corporation.
Section 5. The secretary shall keep the minutes of the meetings
of the stockholders and of the Board of Directors. He shall be
the custodian of the seal of the corporation and shall affix the
same to all contracts authorized by the Board of Directors. He
shall attend the meetings of the stockholders and the Board of
Directors and shall attend to the sending of all notices.
Section 6. Any two offices may be combined and held by one and
the same person upon proper resolution of the Board of
Directors, excepting the offices of president and
vice-president.
ARTICLE VII
Seal Section 1. The Board of Directors shall provide a suitable
seal; the outer circle to contain the works "Triton Systems,
Inc." and the inner circle to contain the words "Corporate
Seal."
Stock Section 2. The stock certificates of this corporation shall
Certificates be in accordance with selection of the Board of Directors at
the first regular meeting.
ARTICLE VIII
Waiver of Section 1. Any notice required to be given either by statute
Notice or by the bylaws of the corporation may be waived in writing
by the party to whom such notice is to be sent.
<PAGE> 6
ARTICLE IX
Fiscal Section 1. The fiscal year of the corporation shall begin on
Year the first day of December and end on the 30th day of November
of each year.
ARTICLE X
Amendments Section 1. Any bylaws may be amended at any annual meeting of
the stockholders without notice thereof being given in advance
of such meetings or the same may be amended at any special
meeting of the stockholders, provided notice of the proposed
amendment is given in the notice of said meeting. For the
purpose of amending bylaws, providing a quorum be present, a
majority vote of the stockholders represented at said meeting
shall be sufficient.
<PAGE> 1
Exhibit 3.4
BYLAWS
OF
TRITON SYSTEMS, INC.
ARTICLE I
---------
NAME AND OFFICES
----------------
1.01 NAME. The name of this corporation is Triton Systems, Inc.
1.02 PRINCIPAL OFFICE. The corporation shall maintain its principal offices
in Long Beach, Mississippi, or at such other place as the Board of Directors may
from time to time designate.
1.03 REGISTERED OFFICE. The registered office of the corporation shall be
the place designated from time to time in the document filed by the corporation
with the Secretary of State of Mississippi.
ARTICLE II
----------
CAPITAL STOCK
-------------
2.01 CONSIDERATION FOR SHARES. Except as otherwise permitted by law,
capital stock of the corporation may be issued for such consideration as shall
be determined from time to time by the Board of Directors.
2.02 PAYMENT FOR SHARES. The consideration for the issuance of shares may
be paid, in whole or in part, in any tangible or intangible property or benefit
to the corporation, including cash, promissory notes, services performed,
contracts for services to be performed, or other securities of the corporation.
Before the corporation issues shares, the Board of Directors must determine that
the consideration received or to be received for shares to be issued is
adequate, which determination is conclusive insofar as the adequacy of
consideration for the issuance of shares related to whether the shares are
validly issued, fully paid and nonassessable. When the corporation receives the
consideration for which the Board authorized the issuance of shares, the shares
issued therefor are fully paid and nonassessable. The corporation may place in
escrow shares issued for a contract for future services or benefits or a
promissory note, or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respect of the shares against their
purchase price, until the services are performed, the note is paid or the
benefits received. Such escrow arrangements may
<PAGE> 2
provide that if the services are not performed, the note is not paid or the
benefits are not received, then the shares escrowed or restricted and the
distributions credited may be canceled in whole or in part.
2.03 CERTIFICATES FOR SHARES. The Board of Directors may authorize the
issuance of some or all of the shares without certificates. Shares of stock of
this corporation may be represented by certificates. Certificates shall be in
such form as shall be determined by the Board of Directors. At a minimum, each
share certificate must state on its face (1) the name of the corporation and
that the corporation is organized under the law of the State of Mississippi; (2)
the name of the person to whom issued; and (3) the number and class of shares
and the designation of the series, if any, the certificate represents. If the
corporation is authorized to issue different classes of shares or different
series within a class, the designations, relative rights, preferences and
limitations applicable to each class and the variations in rights, preferences
and limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) must be summarized on the
front or back of each certificate or the corporation must furnish the
shareholder this information on request in writing and without charge.
2.04 CERTIFICATES FOR SHARES SIGNED. Each share certificate must be signed
(either manually or in facsimile) by the Chief Executive Officer or a Vice
President and by the Secretary or an Assistant Secretary or by such other
officer designated in the Bylaws or by the Board of Directors to do so, and may
be sealed with the corporate seal. If the person who signed (either manually or
in facsimile) a share certificate no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
2.05 CERTIFICATES FOR SHARES NUMBERED. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in the case of a lost, destroyed, or mutilated certificate, a new one may
be issued therefor upon terms and indemnity acceptable to the corporation.
2.06 TRANSFER OF SHARES. Upon compliance with any provisions restricting
the transferability of shares that may be set forth in the Articles of
Incorporation, these Bylaws or any written agreement in respect thereof,
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation (1) by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
(2) by his attorney authorized by power of attorney duly executed and filed with
the Secretary of the corporation, and on surrender for cancellation of the
certificate for such shares.
<PAGE> 3
ARTICLE III
-----------
SHAREHOLDERS
------------
3.01 PLACE OF MEETING. Meetings of shareholders of the corporation shall be
held at the principal office of the corporation or at such other place, in or
out of the State of Mississippi, stated in the notice of the meeting or in a
waiver of notice.
3.02 (a) ANNUAL MEETINGS. The annual meeting of the shareholders shall be
held at such time and place as the Board of Directors shall designate. At the
meeting, shareholders shall elect directors and transact such other business as
may properly come before the meeting. Failure to hold an annual meeting at the
designated time shall not affect the validity of any corporate action.
(b) ADVANCE NOTICE. To be properly brought before the meeting,
business must be of a nature that is appropriate for consideration at an annual
meeting and must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, or (ii)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (iii) otherwise properly brought before the meeting by a
shareholder. In addition to any other applicable requirements, for business to
be properly brought before the annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, each such notice must be given either by personal
delivery or by United States mail, postage prepaid, notwithstanding Section 8.01
hereof, to the Secretary of the corporation not later than (1) with respect to a
matter to be brought before an annual meeting of shareholders or a special
meeting in lieu of an annual meeting, sixty (60) days prior to the first
anniversary date of the initial notice referred to in clause (i) above to the
previous year's annual meeting of shareholders or special meeting in lieu of an
annual meeting, as the case may be, and (2) with respect to a matter to be
brought before a special meeting of the shareholders not in lieu of an annual
meeting, the close of business on the tenth day following the date on which
notice of such meeting is first given to shareholders. The notice shall set
forth (i) information concerning the shareholder, including his or her name and
address, (ii) a representation that the shareholder is entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to present
the matter specified in the notice, and (iii) such other information as would be
required to be included in a proxy statement soliciting proxies for the
presentation of such matter to the meeting.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be transacted at the annual meeting except in accordance with the procedures set
forth in this section; provided, however, that nothing in this section shall be
deemed to preclude discussion by any shareholder of any business properly
brought before the annual meeting in accordance with these Bylaws.
3.03 SPECIAL MEETINGS. Special meetings of the shareholders of the
corporation for any purpose or purposes may be called at any time by (a) the
Board of Directors; (b) the Chairman of the Board of Directors (if one is so
appointed); (c) the President of the corporation or the Chief Executive Officer
of the corporation (if one is so appointed); or (d) by holders of not less than
50% of all the votes entitled to be cast on any issue proposed to be considered
at the proposed special meeting, if such shareholders sign, date and deliver to
the Secretary of the corporation one or more written demands for the meeting
describing the purposes for which it is to be held. Special meetings of the
shareholders of the corporation may not be called by any other person or
persons.
<PAGE> 4
At any special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall be been set
forth in the notice of such special meeting.
3.04 NOTICE OF MEETINGS - WAIVER. Written notice stating the place, date
and time of each meeting, and in case of a special meeting, the purpose(s) for
which the meeting is called, shall be delivered not less than ten (10) days or
more than sixty (60) days before the date of the meeting, either personally or
by mail, to each shareholder entitled to vote at such meeting. Only the
shareholders whose names appear on the stock transfer books at the close of
business the day before the first notice is delivered to shareholders shall be
entitled to notice of and to vote at such meeting, notwithstanding the transfer
of shares thereafter.
The corporation shall give notice to shareholders not entitled to vote in
any instance where such notice is required by the provisions of the Mississippi
Business Corporation Act ("MBCA"). A shareholder may waive notice before or
after the date and time stated in the notice. The waiver must be in writing,
must be signed by the shareholder entitled to notice and must be delivered to
the corporation for inclusion in the minutes or filing with the corporate
records. A shareholder's attendance at a meeting waives objection to lack of
notice or defective notice of the meeting unless at the beginning of the meeting
(or promptly upon arrival) the shareholder objects to holding the meeting or
transacting business at the meeting. A shareholder's attendance at a meeting
also waives objection to consideration of a particular matter which is not
within the purpose(s) described in the notice unless the shareholder objects
when the matter is presented.
3.05 RECORD DATE. The Board of Directors may fix a record date for one (1)
or more voting groups in order to determine the shareholders entitled to notice
of a shareholders' meeting, to demand a special meeting, to vote, or to take any
other action; provided, that a record date fixed under this sentence may not be
more than seventy (70) days before the meeting or action requiring a
determination of shareholders. The stock transfer books of the corporation need
not be closed. The record date may precede the date on which the record date is
established. A determination of shareholders entitled to notice of or to vote at
a shareholders' meeting is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than one hundred twenty (120) days after the date
fixed for the original meeting.
3.06 SHARES HELD BY NOMINEES. The corporation may establish a procedure by
which the beneficial owner of shares that are registered in the name of a
nominee is recognized by the corporation as the shareholder. The extent of this
recognition may be determined in the procedure.
3.07 SHAREHOLDERS' LIST. After fixing a record date for a meeting, the
corporation shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
shall be arranged by voting group, and within each voting group by class or
series of shares, and show the address of and number of shares held by each
shareholder. The shareholders' list must be available for inspection by any
shareholder, beginning two (2) business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder, his or her agent or
attorney, is entitled on
<PAGE> 5
written demand to inspect and, subject to the requirements of Section
79-4-16.02(c) of the MBCA, to copy the list during regular business hours and at
his or her expense, during the period it is available for inspection. The
corporation shall make the shareholders' list available at the meeting, and any
shareholder, his or her agent or attorney, is entitled to inspect the list at
any time during the meeting or any adjournment.
3.08 QUORUM. Unless otherwise required by law or the Articles of
Incorporation, a majority of the votes entitled to be cast on the matter by a
voting group, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders for action on that matter. Holders of shares entitled to
vote as a separate voting group may take action on a matter at a meeting only if
a quorum of those shares exists with respect to that matter. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and any adjournment thereof unless a
new record date is or must be set for the adjourned meeting of shareholders for
action on that matter. The shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of a
number of shareholders so that less than a quorum remains. A meeting may be
adjourned despite the absence of a quorum.
3.09 MEANING OF CERTAIN TERMS. As used herein in respect to the right of
notice of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders or record of
outstanding shares when the corporation is authorized to issue only one (1)
class of shares, and said reference is also intended to include any outstanding
share or shares and any holder or holders of record of outstanding shares of any
class upon which or upon whom the Articles of Incorporation confer such rights
where there are two (2) or more classes or series of shares or upon which or
upon whom the MBCA confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one (1) class or series of shares, one
(1) or more of which are limited or denied such rights thereunder.
3.10 PROXIES AND VOTING. Except as otherwise provided by law or the
Articles of Incorporation, each outstanding share, regardless of class, is
entitled to one (1) vote on each matter voted on at a shareholders' meeting. A
shareholder may vote either in person or by proxy. A shareholder may appoint a
proxy by signing an appointment form, either personally or by his
attorney-in-fact, and delivering it to the Secretary or other officer of the
corporation who is authorized to tabulate votes. An appointment of a proxy is
revocable unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest. Such an appointment
becomes revocable when the interest is extinguished. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. Unless the Articles of Incorporation provide otherwise,
directors shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting in which a quorum is present.
3.11 CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting, the Chairman of the Board, if any, the Vice Chairman of the Board,
if any, the President, a Vice President, if any, or if none of
<PAGE> 6
the foregoing is in office and present and acting, by a chairman to be chosen by
the shareholders. The Secretary of the corporation, or in his or her absence, an
Assistant Secretary, shall act as secretary of every meeting, but, if neither
the Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
3.12 ACTION WITHOUT A MEETING. Action required or permitted by the MBCA to
be taken at a shareholders' meeting may be taken without a meeting if the action
is taken by all the shareholders entitled to vote on the action. The action must
be evidenced by one (1) or more written consents describing the action taken,
signed by all the shareholders entitled to vote on the action, and delivered to
the corporation for inclusion in the minutes or filing with the corporate
records. The corporation must give any required notice to nonvoting
shareholders, if any.
ARTICLE IV
----------
BOARD OF DIRECTORS
------------------
4.01 NUMBER AND TERM. The Board of Directors of the corporation shall
consist of such number of members not less than one (1) nor more than fifteen
(15), the exact number to be fixed and determined from time to time by
resolution of a majority of the Board of Directors. If at any time the number of
members of the Board of Directors is fixed at nine (9) or more, then the Board
of Directors may, upon the unanimous resolution of the Board of Directors, be
divided into three (3) classes, of as nearly equal size as possible, designated
by the Board of Directors. The terms of directors elected prior to the first
annual meeting of shareholders occurring after the date of effectiveness of
these Bylaws shall be filled as specified in these Bylaws. At each annual
meeting of shareholders, the number of directors equal to the number in the
class whose term expires at the time of such meeting shall be elected to hold
office until the next succeeding annual meeting after their election, unless the
Board of Directors has determined to divide the Board into three (3) classes as
provided above, in which case directors shall be elected to serve three year
terms. Any vacancy arising from the earlier retirement of a director may be
filled by vote of the remaining directors or the shareholders, and the term of
any such director shall be for the balance of the term of the retiring
director's class. A vote of at least eighty percent (80%) of the outstanding
voting stock of the corporation is required to increase the maximum number of
the members of the Board of Directors if the Board of Directors does not
recommend an increase in the maximum number of members of the Board. The
minimum and maximum number of directors may be changed only by the affirmative
vote of a majority of the outstanding voting stock of the corporation.
4.02 QUALIFICATIONS. A director need not be a shareholder, a citizen of the
United States, nor a resident of the state of Mississippi. The business and
affairs of the corporation shall be managed under the direction of, and all
corporate powers shall be exercised by or under the authority of, its Board of
Directors.
4.03 ELECTION. At each annual meeting at which directors are elected,
directors shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election. Each director shall hold office for the term
for which he or she is elected and until his or her successor shall be
<PAGE> 7
elected and qualified. Shareholders shall have no right to cumulate their votes
in the election of directors.
4.04 REMOVAL OF DIRECTORS. The directors or the shareholders may remove one
(1) or more director(s) only for cause. A director may be removed only if the
number of votes cast to remove the director exceeds the number of votes cast not
to remove the director. A director may be removed by the shareholders or
directors only at a meeting called for the purpose of removing the director, and
the meeting notice must state that the purpose or one of the purposes of the
meeting is the removal of directors.
4.05 VACANCIES. Unless the Articles of Incorporation provide otherwise, if
a vacancy occurs in the Board of Directors, including a vacancy resulting from
an increase in the number of directors:
(a) the Board of Directors may fill the vacancy; or
(b) if the directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
A decrease in the number of directors does not shorten an incumbent director's
term. A vacancy that will occur at a specified later date may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.
4.06 PLACE OF MEETING. Meetings of the Board of Directors, regular or
special, may be held either in or out of the state of Mississippi.
4.07 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice of the date, time, place or purpose of the meeting.
4.08 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held upon notice. Unless the Articles of Incorporation provide for a longer or
shorter period, special meetings of the Board of Directors must be preceded by
at least two (2) days' notice of the date, time and place of the meeting. The
notice need not describe the purpose of the special meeting unless required by
the Articles of Incorporation. Attendance in person at or participation in a
special meeting waives any required notice of the meeting unless at the
beginning of the meeting (or promptly upon arrival) the director objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Notice of any
meeting of the Board of Directors may be waived before or after the date and
time stated in the notice if in writing, signed by the director entitled to the
notice, and filed with the minutes or corporate records.
4.09 QUORUM AND VOTING. A quorum of the Board shall consist of a majority
of the directors in office immediately before the meeting begins. If a quorum is
present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board.
<PAGE> 8
A director who is present at a meeting of the Board when corporate action is
taken is deemed to have assented to the action taken unless:
(a) he or she objects at the beginning of the meeting (or
promptly upon arrival) to holding the meeting or transacting business
at the meeting;
(b) his or her dissent or abstention from the action taken is
entered in the minutes of the meeting; or
(c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
4.10 CONDUCT OF MEETINGS. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by, or conduct the
meeting through use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
who so participates in a meeting is deemed to be present in person at the
meeting.
4.11 ACTION WITHOUT A MEETING. Unless the Articles of Incorporation or
Bylaws provide otherwise, action required or permitted by the MBCA to be taken
at a Board of Directors meeting may be taken without a meeting if the action is
taken by all members of the Board. The action must be evidenced by one or more
written consents describing the action taken, signed by each director, and
included in the minutes or filed with the corporate records reflecting the
action taken. Action taken under this section is effective when the last
director signs the consent, unless the consent specifies a different effective
date. A consent signed pursuant to this section has the effect of a meeting vote
and may be described as such in any document.
4.12 COMMITTEES OF THE BOARD. Unless the Articles of Incorporation or
Bylaws provide otherwise, the Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them. Each
committee must have two (2) or more members, who serve at the pleasure of the
Board of Directors. The creation of a committee and appointment of members to it
must be approved by a majority of all the directors in office when the action is
taken. The requirements applicable to the Board of Directors with regard to
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements apply to committees and their members as well. The Board of
Directors may delegate to a committee all such authority of the Board that it
deems desirable except the authority to:
<PAGE> 9
(a) authorize distributions;
(b) approve or propose to shareholders action required to be approved by
shareholders;
(c) fill vacancies on the Board of Directors or on any of its committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend or repeal bylaws;
(f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences and
limitations of a class or series of shares, except that the Board of Directors
may authorize a committee (or a senior executive officer of the corporation) to
do so within limits specifically prescribed by the Board of Directors.
ARTICLE V
---------
OFFICERS
--------
5.01 OFFICERS. The officers of the corporation shall consist of a Chairman
of the Board of Directors, President, Secretary and, as deemed appropriate by
the Board of Directors, a Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, General Counsel, Treasurer, one (1) or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and such other officers
and assistant officers and agents as may be deemed necessary by the Board of
Directors. The Chairman of the Board must be a member of the Board of Directors.
Any two (2) or more offices may be held by the same person. The Board of
Directors shall delegate one (1) of the officers the responsibility of preparing
minutes of directors' and shareholders' meetings and of authenticating records
of the corporation. Officers need not be directors or shareholders of the
corporation.
5.02 VACANCIES. Vacancies occurring in any office shall be filled by the
Board of Directors at any regular or special meeting.
5.03 THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the Board
shall preside at all meetings of the Board of Directors. The Vice Chairman shall
act as chairman in the absence of or incapacity of the Chairman.
<PAGE> 10
5.04 THE PRESIDENT. The President shall be responsible for the active,
executive management and supervision of the operations of the corporation and
shall perform such duties as the Board of Directors may prescribe or his or her
capacity as President by custom may provide.
5.05 THE VICE PRESIDENT. Vice Presidents shall perform such duties as the
Board of Directors may prescribe. Each Vice President shall report to the
President or his or her delegate who shall be responsible for the Vice
President's actions.
5.06 THE SECRETARY. The Secretary shall attend all meetings of the
shareholders and the Board of Directors, and shall keep a true and complete
record of the proceedings of these meetings. The Secretary shall be custodian of
the records of the corporation and shall attend to the giving of all notices,
attest, when requested, to the authority of the President or other officers, as
revealed by the minutes or these Bylaws, to execute legal documents binding the
corporation, and shall perform such other duties as these Bylaws may provide or
the Board of Directors may prescribe.
5.07 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep
correct and complete records of account, showing accurately at all times the
financial condition and results of operations of the corporation. The Chief
Financial Officer shall be the legal custodian of all monies, notes, securities
and other valuables that may from time to time come into the possession of the
corporation. The Chief Financial Officer shall immediately deposit all funds of
the corporation coming into his or her hands in some reliable bank or other
depository to be designated by the Board of Directors, and shall keep this bank
account in the name of the corporation. The Chief Financial Officer shall
furnish at meetings of the Board of Directors, or whenever requested, a
statement of the financial condition and results of operations of the
corporation, and shall perform such other duties as these Bylaws may provide or
the Board of Directors may prescribe. The Chief Financial Officer may be
required to furnish bond in such amount as shall be determined by the Board of
Directors.
5.08 OTHER OFFICERS. The duties of other officers elected by the Board of
Directors shall be such as are customary to their respective offices and as
shall be assigned to them by the President.
5.09 RESIGNATION AND REMOVAL. An officer may resign at any time by
delivering notice to the corporation. A resignation is effective when the notice
is delivered unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date provided the successor does not take office until the
effective date. The Board of Directors may remove any officer at any time with
or without cause and any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
<PAGE> 11
ARTICLE VI
----------
INDEMNIFICATION
---------------
6.01 INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The corporation shall
indemnify, and upon request shall advance expenses prior to final disposition of
a proceeding to, any person (or the estate or personal representative of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
director of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability incurred in the action, suit or
proceeding: (a) to the full extent permitted by Section 79-4-8.51 of the MBCA,
and (b) despite the fact that such person has not met the standard of conduct
set forth in Section 79-4-8.51(a) of the MBCA or would be disqualified for
indemnification under Section 79-4-8.51(d) of the MBCA, if a determination is
made by a person or persons enumerated in Section 79-4-8.55(b) of the MBCA that
(i) the director is fairly and reasonably entitled to indemnification in view of
all of the relevant circumstances, and (ii) the acts or omissions of the
director did not constitute gross negligence or willful misconduct, and (iii)
the corporation is not precluded from providing indemnification for such acts or
omissions under Section 79-4-2.02(b)(5) of the MBCA. A request for reimbursement
or advancement of expenses prior to final disposition of the proceeding need not
be accompanied by the affirmation required by Section 79-4-8.53(a)(1) of the
MBCA, but the remaining provisions of Section 79-4-8.53 of the MBCA shall be
applicable to any such request. The corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against him or her.
6.02 NATURE. The right to indemnification and advancement of expenses set
forth in section 6.01 are intended to be more extensive than those which are
provided for with respect to the permissive indemnification in the MBCA, are
contractual between the corporation and the person being indemnified, and the
heirs, executors and administrators of such person, and in this respect are
mandatory, notwithstanding a person's failure to meet the standard of conduct
required for permissive indemnification under the MBCA, as amended from time to
time. The rights to indemnification and advancement of expenses set forth in
section 6.01 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancements of expenses may be entitled or granted
by law, the Articles of Incorporation, the Bylaws, a resolution of the Board of
Directors, a vote of the shareholders of the corporation, or an agreement with
the corporation, which means of indemnification and advancement of expenses are
hereby specifically authorized. Any repeal or modification of the provisions of
this Article VI shall not affect any obligations of the corporation or any
rights regarding indemnification and advancement of expenses of a director,
officer, employee or agent with respect to any threatened, pending or completed
action, suit or proceeding for which indemnification or the advancement of
expenses is requested, in which the alleged cause of action accrued at any time
prior to such repeal or modification. If an amendment to the MBCA hereafter
limits or restricts in any way the indemnification rights permitted by law as of
the date hereof, such amendment shall apply
<PAGE> 12
only to the extent mandated by law and only to activities of persons subject to
indemnification under this Article VI which occur subsequent to the effective
date of such amendment.
6.03 SEVERABILITY. If this Article VI or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director, officer, employee or
agent of the corporation as to any liability incurred or other amounts paid in
with respect to any proceeding, including, without limitation, a grand jury
proceeding and any proceeding by or in the right of the corporation, to the
fullest extent permitted by any applicable portion of this Article VI that shall
not have been invalidated by the MBCA, or by any other applicable law. Unless
the context otherwise requires, terms used in this Article VI shall have the
meanings given in Section 79-4-8.50 of the MBCA.
ARTICLE VII
-----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
7.01 CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
7.02 LOANS. No loan shall be contracted on behalf of the corporation and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
7.03 CHECKS, DRAFTS, ETC.. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
7.04 DEPOSITS. All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
companies or other depositories as the Board of Directors may select.
ARTICLE VIII
------------
NOTICES
-------
8.01 GENERALLY. Notice shall be in writing unless oral notice is reasonable
under the circumstances. Notice may be communicated in person, by telephone,
telefax, or other form of wire or wireless communication, or by United States
mail or private carrier. If these
<PAGE> 13
forms of personal notice shall be impracticable, notice may be communicated by a
newspaper of general circulation in the area where published, or by radio,
television or other form of public broadcast communication.
8.02 WRITTEN NOTICE.
(a) Written notice to shareholders, if in a comprehensible form, shall be
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address as shown in the corporation's current record of
shareholders.
(b) Except as provided above with respect to notice to shareholders,
written notice, if in a comprehensible form, shall be effective at the earliest
of the following:
(1) when received;
(2) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed;
(3) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
8.03 ORAL NOTICE. Oral notice shall be effective when communicated if
communicated in a comprehensible manner.
8.04 APPLICABLE LAW. If applicable law prescribes notice requirements for
particular circumstances, those requirements govern. If the Articles of
Incorporation or other provisions of these Bylaws prescribe notice requirements,
not inconsistent with this section or other provisions of applicable law, those
requirements govern.
ARTICLE IX
----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be determined, and shall be
subject to change, by the Board of Directors.
ARTICLE X
---------
AMENDMENTS
----------
These Bylaws may be altered, amended or repealed and new Bylaws adopted by
the affirmative vote of the holders of a majority of the outstanding stock at
any regular meeting of the shareholders or special meeting called for the
purpose, or by the affirmative vote of
<PAGE> 14
a majority of the entire Board of Directors at any regular or special meeting of
the Board, unless the shareholders in amending or repealing a particular Bylaw
provide expressly that the Board of Directors may not amend or repeal that
Bylaw; provided, however, that the Board of Directors may not amend these Bylaws
to take any action which is reserved exclusively by the shareholders pursuant to
the MBCA. If any shareholder or director, as the case may be, should object to
the consideration of any proposed amendment, the proposal may not be voted upon
unless notice of the proposed amendment was given at least ten (10) days prior
to the meeting at which such objecting shareholder or director is entitled to
vote. Any amendment, modification, repeal or addition to these Bylaws adopted by
the Board of Directors may be amended or repealed by the shareholders.
A Bylaw that fixes a greater quorum or voting requirement for the Board of
Directors may be amended or repealed:
(a) if originally adopted by the shareholders, only by the shareholders; or
(b) if originally adopted by the Board of Directors, either by the
shareholders or the Board of Directors.
Action by the Board of Directors to adopt or amend a Bylaw originally
adopted by the Board of Directors fixing a greater quorum or voting requirement
must meet the same quorum requirement and be adopted by the same vote required
to take action under the quorum and voting requirement then in effect or
proposed to be adopted, whichever is greater. The Board is without authority to
amend this Article X.
ARTICLE XI
----------
SEVERABILITY
------------
Any provision in these Bylaws that is prohibited or unenforceable shall be
ineffective without invalidating or affecting the remaining provisions of these
Bylaws.
<PAGE> 1
EXHIBIT 10.1
TRITON SYSTEMS, INC.
STOCK PURCHASE AND REDEMPTION AGREEMENT
DATED AS OF JULY 25, 1996
<PAGE> 2
TRITON SYSTEMS, INC.
STOCK PURCHASE AND REDEMPTION AGREEMENT
Dated as of July 25, 1995
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Purchase and Sale of Shares
1.1 Purchase and Sale of Series A Preferred Stock .......................... 1
1.2 Subordinated Debt Investment ........................................... 2
1.3 Closing ................................................................ 2
1.4 Use of Proceeds ........................................................ 2
ARTICLE II
Redemption of Shares by the Company
2.1 Redemption by the Company on the Closing
Date ................................................................. 2
2.2 Redemption Consideration; Tax Distributions ............................ 3
2.3 Description of Redemption Notes ........................................ 4
2.4 Surrender and Exchange of Stock
Certificates; Payment of Redemption
Consideration ........................................................ 6
2.5 Stock Transfer Books ................................................... 6
ARTICLE III
Representations and Warranties of the Company and the Principal Shareholders
3.1 Organization and Corporate Power ....................................... 6
3.2 Authorization .......................................................... 6
3.3 Government Approvals ................................................... 7
3.4 Authorized and Outstanding Stock ....................................... 7
3.5 Subsidiaries ........................................................... 8
3.6 Financial Information .................................................. 8
</TABLE>
- i -
<PAGE> 3
3.7 Events Subsequent to the Date of the
Financial Statements.................................. 9
3.8 Litigation.............................................. 9
3.9 Compliance with Laws and Other Instruments.............. 9
3.10 Taxes................................................... 9
3.11 Real Property; Environmental Matters.................... 10
3.12 Personal Property....................................... 12
3.13 Patents, Trademarks, etc................................ 12
3.14 Agreements of Directors, Officers
and Employees......................................... 13
3.15 Governmental and Industrial Approvals................... 13
3.16 Federal Reserve Regulations............................. 13
3.17 Contracts and Commitments............................... 13
3.18 Securities Act.......................................... 13
3.19 Registration Rights..................................... 14
3.20 Insurance Coverage...................................... 14
3.21 Employee Matters........................................ 14
3.22 Customers and Suppliers................................. 14
3.23 No Brokers or Finders................................... 15
3.24 Transactions with Affiliates............................ 15
3.25 Assumptions, Guarantees, etc. of Indebtedness
of Other Persons...................................... 15
3.26 Disclosures............................................. 15
ARTICLE IV
Affirmative Covenants of the Company
4.1 Accounts and Reports.................................... 16
4.2 Payment of Taxes........................................ 17
4.3 Maintenance of Key Man Insurance........................ 17
4.4 Compliance with Laws, etc............................... 18
4.5 Inspection.............................................. 18
4.6 Corporate Existence; Ownership of
Subsidiaries.......................................... 18
4.7 Compliance with ERISA................................... 18
4.8 Board Approval.......................................... 19
4.9 Financings.............................................. 19
4.10 Meetings of the Board of Directors...................... 19
4.11 Compensation Committee.................................. 19
4.12 Rule 144A Information................................... 19
4.13 Reincorporation......................................... 19
- ii -
<PAGE> 4
ARTICLE V
Negative Covenants of the Company
5.1 Investments in Other Persons............................ 20
5.2 Distributions........................................... 20
5.3 Dealings with Affiliates................................ 21
5.4 Merger.................................................. 21
5.5 Limitation on Options................................... 21
5.6 Limitation on Restrictions on Subsidiary
Dividends and Other Distributions..................... 22
5.7 No Conflicting Agreements............................... 22
5.8 Amendments to Agreements................................ 22
ARTICLE VI
Preemptive Right
6.1 Preemptive Right........................................ 22
6.2 Definition of New Securities............................ 23
6.3 Notice from the Company................................. 23
6.4 Sale by the Company..................................... 23
6.5 Termination of Rights................................... 23
ARTICLE VII
Investment Representations
7.1 Representations and Warranties.......................... 23
7.2 Permitted Sales; Legends................................ 24
ARTICLE VIII
Conditions of the Purchasers' Obligation
8.1 Effect of Conditions.................................... 25
8.2 Representations and Warranties.......................... 25
8.3 Performance............................................. 25
8.4 No Material Adverse Change.............................. 26
8.5 Opinion of Counsel...................................... 26
8.6 Shareholders' Agreement................................. 26
8.7 Registration Rights Agreement........................... 26
8.8 Redemption Agreement.................................... 26
- iii -
<PAGE> 5
8.9 Employment Agreements................................... 26
8.10 Board Election.......................................... 26
8.11 Certificate of Incorporation............................ 26
8.12 Consents and Waivers.................................... 26
ARTICLE IX
Conditions of the Company's and the Shareholder's Obligations
9.1 Effect of Conditions.................................... 27
9.2 Representations and Warranties.......................... 27
9.3 Execution of Agreements................................. 27
9.4 Issuance of Series B Preferred Stock.................... 27
9.5 Employment Agreements................................... 27
9.6 Debentures.............................................. 27
9.7 Opinion of Counsel...................................... 27
ARTICLE X
Survival; Indemnification and Limits on Liability
10.1 Survival of Representations and Warranties.............. 27
10.2 Indemnification by the Principal Shareholders........... 28
10.3 Notice of Claim......................................... 29
10.4 Tax Payments............................................ 29
ARTICLE XI
Certain Definitions............................................... 30
ARTICLE XII
Miscellaneous
12.1 Parties in Interest..................................... 32
12.2 Shares Owned by Affiliates.............................. 32
12.3 Amendments and Waivers.................................. 32
12.4 Notices................................................. 32
12.5 Expenses................................................ 33
12.6 Counterparts............................................ 33
12.7 Effect of Headings...................................... 33
12.8 Adjustments............................................. 34
12.9 Governing Law........................................... 34
- iv -
<PAGE> 6
12.10 Lease Matters........................................... 34
EXHIBITS
A Description of Preferred Stock
B Form of Shareholder Subordinated Promissory Note
C Opinion of Company Counsel
D Shareholders' Agreement
E Registration Rights Agreement
F Redemption Agreement
G Employment Agreement
H Opinion of Counsel to the Purchasers
- v -
<PAGE> 7
July 25, 1996
To: The Persons listed on
Schedule 1.1 attached hereto:
Re: Series A Preferred Stock and Common Stock
Gentlemen:
Triton Systems, Inc., a Mississippi corporation (the "Company"), and
Ernest L. Burdette, Robert E. Sandoz and Frank J. Wilem, Jr. (each a "Principal
Shareholder" and collectively the "Principal Shareholders") hereby agree with
you as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Series A Preferred Stock. (a) At the Closing
(as herein defined) and prior to the Company's redemption of shares of Common
Stock as provided in Article II hereof (the "Redemption Transaction"), the
Company will sell to you (the "Purchasers") an aggregate of 114,000 shares of
the Company's Series A Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), at a price of $100 per share, for an aggregate purchase price
of $11,400,000, and (b) at the Closing and after giving effect to the Redemption
Transaction, the Company will sell to the Purchasers an aggregate of 4,160,000
shares of the Company's Common Stock, par value $1.00 per share (the "Common
Stock"), at a price of $.024 per share, for an aggregate purchase price of
$100,000. The Series A Preferred Stock shall have the rights, terms and
privileges set forth on Exhibit A attached hereto. The shares of Series A
Preferred Stock and Common Stock purchased pursuant to this Section 1.1 are
referred to herein as the "Preferred Shares" and "Common Shares," respectively.
The number of
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Preferred Shares and Common Shares to be sold by the Company to each Purchaser
is set forth in Schedule 1.1.
1.2 Subordinated Debt Investment. Pursuant to a certain Subordinated
Debenture Purchase Agreement of even date (the "Subordinated Debenture
Agreement"), Summit Subordinated Debt Fund, L.P. and Summit Investors III, L.P.
have committed to purchase $5,500,000 in principal amount of newly-issued
subordinated debentures (the "Debentures"). The closing of the transactions
contemplated by the Subordinated Debenture Agreement shall occur at the Closing
and currently with the closing of the purchase of the Preferred Shares
hereunder.
1.3 Closing. Subject to the satisfaction or waiver of the conditions
set forth in Articles VIII and IX hereof, the purchase of the Preferred Shares
and Common Shares shall be made at a closing (the "Closing") to be held at the
offices of Hutchins, Wheeler & Dittmar, A Professional Corporation, 101 Federal
Street, Boston, Massachusetts, at 10:00 A.M. on July 25, 1996 or at such other
time and on such other date as the Purchasers, the Company and the Principal
Shareholders may mutually agree (the "Closing Date"). Payment at the Closing for
the Preferred Shares and Common Shares shall be by wire transfer payable in
immediately available federal funds to the accounts designated by the Company.
Each Purchaser shall pay that amount for the Preferred Shares and Common Shares
being acquired by it at the Closing as described on Schedule 1.1 hereof. At the
Closing, the Company will deliver to each Purchaser one or more certificates
representing the Preferred Shares and Common Shares purchased by such Purchaser,
in such denominations and issued in such names as may be requested by such
Purchaser.
1.4 Use of Proceeds. The proceeds of the sale of the Preferred Shares,
together with the proceeds of the sale of the Debentures, shall be used to
redeem shares of Common Stock from the Principal Shareholders and other
shareholders of the Company as provided in Article II hereof.
ARTICLE II
REDEMPTION OF SHARES BY THE COMPANY
2.1 Redemption by the Company on the Closing Date. On the Closing Date,
immediately after the issuance and sale of the Preferred Shares to the
Purchasers, the Company shall redeem and purchase from the Principal
Shareholders and the other shareholders listed on Schedule 2.1 hereto (together
with the Principal Shareholders, the "Shareholders"), and the Shareholders shall
sell and deliver to the Company on the Closing Date, an aggregate of 4,160,000
shares of Common Stock (the "Redemption Shares"). The number of Redemption
Shares to be redeemed from each Shareholder is set forth on Schedule 2.1 hereto.
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2.2 Redemption Consideration; Tax Distributions. The consideration
payable to the Shareholders for the redemption of the Redemption Shares
contemplated hereby shall be as follows:
(a) Sixteen Million Seven Hundred Thousand Seven Thousand Six
Hundred Sixty-Four Dollars ($16,707,664) payable in cash at the Closing, which
amount shall be reduced by the aggregate amount of all dividends and other
distributions paid to the Shareholders since May 1, 1996 (including the amount
distributed pursuant to Section 2.2(b) below), other than (i) distributions of
$2,150,000 paid to the Shareholders immediately prior to the Closing, and (ii)
distributions of $1,054,000 (of which $304,000 has been paid through the date
hereof), as adjusted pursuant to Sections 2.2(d) and 10.4 hereof, to reimburse
the Shareholders for income taxes resulting from the inclusion of the Company's
net income (as reduced by any corporate level taxes payable by the Company under
Section 1374 of the Internal Revenue Code of 1986, as amended, and similar state
provisions) for the period May 1, 1996 through June 30, 1996 in the
Shareholders' personal income tax returns (the "Cash Redemption Consideration").
The Cash Redemption Consideration will be allocated among the Shareholders as
specified on Schedule 2.1 hereto;
(b) proceeds from the sale of Debentures and, to the extent
necessary, proceeds from the sale of the Preferred Shares shall be distributed
to the Shareholders pro rata pursuant to a dividend declared by the Company
prior to Closing in an amount equal to the "accumulated adjustments account" of
the Company as that term is defined in Section 1368(e) of the Internal Revenue
Code of 1986, as amended, and as determined immediately after the distributions
pursuant to Section 2.2(a)(i) and (ii) (the "AAA Distribution") and the AAA
Distribution shall reduce the amount considered Cash Redemption Consideration;
(c) subordinated promissory notes in the aggregate principal
amount of $6,000,000 in the form of Exhibit B hereto (the "Redemption Notes").
The Redemption Notes will be allocated among the Shareholders as specified on
Schedule 2.1 hereto; and
(d) after the Closing, the Company shall pay to the Shareholders
an amount sufficient to satisfy their income taxes resulting from the inclusion
of the Company's net income (as reduced by any corporate level taxes payable by
the Company under Section 1374 of the Internal Revenue Code of 1986, as amended,
and similar state provisions) from the period May 1, 1996 through the Closing in
the Shareholders' personal income tax returns, less the $1,054,000 previously
paid to the Shareholders and referred to in Section 2.2(a)(ii) above (with such
payment to be made upon the earlier to occur of the date of such Shareholder's
estimated tax payment to the applicable taxing authority or the date of the
Shareholder's final tax payment). The calculation of the amount of the payment
to the Shareholders under this Section 2.2(d) shall be made in the manner
provided in Section 10.4. The Shareholders shall be obligated to reimburse the
Company for any excess payments made to them with respect to income taxes as
provided in Section 10.4 hereof. Prior to making any payments to the
Shareholders under this
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Section 2.2(d), the Company shall provide a schedule detailing the calculations
of such payments to the Purchasers, which schedule shall be reasonably
acceptable to the Purchasers.
2.3 Description of Redemption Notes. The Redemption Notes shall have
the following terms, and shall be entitled to the following rights and benefits:
(a) The principal amount of the Redemption Notes shall be payable
on July 25, 2001. The Redemption Notes shall be prepaid in full upon
consummation of a Liquidity Event (as defined in the Company's Articles of
Incorporation). The Company may prepay the Redemption Notes from time to time in
whole or in installments of $100,000, without premium or penalty. Any partial
prepayment of the Redemption Notes shall be allocated among all holders of the
Redemption Notes pro rata in proportion to the principal amount of the
Redemption Notes held by each.
(b) Within ninety days after the end of each fiscal year of the
Company, commencing with the fiscal year ended December 31, 1996, an amount
equal to two-thirds of up to fifty percent (50%) of Excess Cash Flow (as defined
below) shall be applied by the Company to the prepayment of the Redemption
Notes. Any such prepayment shall be allocated among all holders of the
Redemption Notes pro rata in proportion to the principal amount of the
Redemption Notes held by each. For purposes of this Section 2.3(b), "Excess Cash
Flow" shall mean, for any period, the remainder of (i) the sum of (A) the
Company's Consolidated Net Income (as defined herein) for such period plus all
non-cash charges (including, without limitation, depreciation and amortization),
and (B) the decrease, if any, in the Company's consolidated working capital
(consolidated current assets less consolidated current liabilities) from the
first day of the period to the last day of such period, minus (ii) the sum of
(A) the amount of capital expenditures made by the Company during such period,
(B) the amount of all principal payments with respect to any Senior Debt (as
defined below) or capitalized lease obligations during such period and (C) the
increase, if any, in consolidated working capital (consolidated current assets
less consolidated current liabilities) from the first day of the period to the
last day of such period. For the fiscal year ended December 31, 1996, Excess
Cash Flow shall be computed based on the Company's results of operations for the
period August 1, 1996 through December 31, 1996. The Purchasers and the
Principal Shareholders hereby covenant and agree that in the event the Company
shall have Excess Cash Flow for any fiscal period commencing with the fiscal
year ended December 31, 1996, for every $1.00 applied by the Company to the
prepayment of the principal amount of the Debentures, $2.00 shall be applied by
the Company to the prepayment of the principal amount of the Redemption Notes in
accordance with the terms of this Section 2.3(b).
(c) The Redemption Notes shall bear interest from the date of
issuance until the date of payment of principal in full. Interest shall be
computed on the basis of a 360-day year and the actual number of days elapsed,
on the unpaid principal amount of the Redemption Notes at the rate of eight
percent (8%) per annum. Interest shall be payable on each March 31, June 30,
September 30, and December 31 for the respective three month
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period ending on such date, commencing on September 30, 1996, or, if any such
day is not a business day, on the next succeeding business day.
(d) If the principal amount of the Redemption Notes is not paid
when due and payable (whether at stated maturity, by acceleration or otherwise),
the interest on such principal amount shall thereafter be increased to ten
percent (10%) per annum, until so paid. Any interest not paid when due and
payable shall thereafter be paid, on demand by the holder, together with a late
charge of two percent (2%) of the amount of interest payment due.
(e) All payments of principal on the Redemption Notes shall be
made by the Company in lawful money of the United States of America in
immediately available federal funds (or at the request of the holder of a
Redemption Note, by certified or bank check or wire transfer) on the date such
payment is due.
(f) The Company, for itself, its successors and assigns, covenants
and agrees, and each holder of the Redemption Notes by his or its acceptance
thereof, likewise covenants and agrees, that notwithstanding any other provision
of this Agreement or the Redemption Notes, the payment of the principal of and
interest on each and all of the Redemption Notes shall be subordinated in right
of payment, to the extent and in the manner which the Debentures are
subordinated, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding. The provisions of this Section 2.3(f) shall
constitute a continuing representation to all Persons who, in reliance upon such
provisions, become the holders of or continue to hold Senior Debt, and such
provisions are made for the benefit of the holders of Senior Debt, and such
holders are hereby made obligees hereunder the same as if their names were
written herein as such, and they or any of them may proceed to enforce such
provisions against the Company or against the holder of any Redemption Note
without the necessity of joining the Company as a party. The term "Senior Debt"
shall mean all indebtedness of the Company at any time outstanding for money
borrowed from banks or other institutional lenders, including any extension or
renewals thereof, whether outstanding on the date hereof or hereafter created or
incurred, which is not by its terms subordinate and junior to or on a parity
with the Redemption Notes and that such subordination is for the benefit of and
may be enforced by the holder(s) of Senior Debt against the Company and any
holder of the Redemption Notes. The holders of the Redemption Notes agree to
enter into any agreement or instrument evidencing the subordination of the
Redemption Notes as may be reasonably requested by holders of Senior Debt. In
the event that the holders of the Debentures shall agree to any amendments or
modifications to the terms of the subordination of the Debentures, then the
holders of the Redemption Notes agree to execute any instruments, agreements or
other documents in favor of the holders of Senior Debt as may be requested by
the Purchasers or the Company in order to make the subordination terms of the
Redemption Notes identical to the subordination terms of the Debentures.
(g) The holders of a majority in principal amount of the
Redemption Notes shall be entitled to amend or modify any of the terms of the
Redemption Notes or waive any
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<PAGE> 12
defaults thereunder (including any defaults in the payment of principal or
interest thereon), and each holder of the Redemption Notes shall be bound by any
such amendments, modifications or waivers.
2.4 Surrender and Exchange of Stock Certificates; Payment of Redemption
Consideration. At the Closing, the Shareholders shall cease to have any rights
as shareholders of the Company relating to their Redemption Shares. At the
Closing, each Shareholder shall be entitled to receive, upon surrender to the
Company of a certificate or certificates or other documents or instruments
(collectively, "Certificates") representing the Redemption Shares, accompanied
by a duly completed and executed stock transfer power, the Cash Redemption
Consideration set forth opposite the Shareholder's name on Schedule 2.1 hereto,
which amount shall be paid by wire transfer of immediately available federal
funds to an account specified by such Shareholder, and a Redemption Note in the
principal amount set forth opposite the Shareholder's name on Schedule 2.1
hereto.
2.5 Stock Transfer Books. From and after the Closing Date, no transfer
of the Redemption Shares shall be registered on the stock transfer books of the
Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDER
In order to induce the Purchasers to purchase the Preferred Shares and
Common Shares, and to agree to the redemption of the Redemption Shares as
provided in Article II, the Company and each Principal Shareholder, jointly and
severally, make the following representations and warranties which shall be
true, correct and complete in all respects on the date hereof and shall be true,
correct and complete in all respects as of the Closing. All references to the
Company in this Article III shall be references to the Company and its wholly
owned subsidiary Triton Systems International, Inc., a Guam Corporation.
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own its properties and to carry on its business as presently
conducted. The Company is duly licensed or qualified to do business as a foreign
corporation in each jurisdiction wherein the character of its property, or the
nature of the activities presently conducted by it, makes such qualification
necessary and where the failure to be so qualified would have a material adverse
effect on the business, condition or results of operations of the Company.
3.2 Authorization. (a) The Company has all necessary corporate power
and has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Shareholders' Agreement referred to in
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Section 8.6, the Registration Rights Agreement referred to in Section 8.7 and
the Redemption Agreement referred to in Section 8.8 (collectively, the "Related
Agreements"), and any other agreements or instruments executed by the Company in
connection herewith or therewith and the consummation of the transactions
contemplated herein or therein, and for the due authorization, issuance and
delivery of the Preferred Shares and Common Shares and the redemption of the
Redemption Shares. The issuance of the Preferred Shares and Common Shares does
not require any further corporate action by the Company and is not and will not
be subject to any preemptive right, right of first refusal or the like. This
Agreement, the Related Agreements and the other agreements and instruments
executed by the Company in connection herewith or therewith will each be a valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity (regardless of
whether such enforcement is considered in proceeding at law or in equity).
(b) Each Principal Shareholder has full legal capacity and
unrestricted power to execute and deliver this Agreement and the Related
Agreements to which he is a party, and any other agreements or instruments
executed by him in connection herewith or therewith and to consummate of the
transactions contemplated herein or therein. This Agreement, the Related
Agreements and the other agreements and instruments executed by the Principal
Shareholders in connection herewith or therewith will each be a valid and
binding obligation of the Principal Shareholders enforceable against each
Principal Shareholder in accordance with its respective terms.
(c) Each Shareholder owns, of record and beneficially, the number
of shares of Common Stock set forth opposite the name of such Shareholder on
Schedule 3.2 hereto, free and clear of any pledges, security interests, liens,
charges or other claims or encumbrances.
3.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company or any
Principal Shareholder in connection with the execution, delivery and performance
by the Company or any Principal Shareholder of this Agreement, any of the
Related Agreements and any other agreements or instruments executed by the
Company or the Principal Shareholders in connection herewith or therewith, or in
connection with the issuance of the Preferred Shares and Common Shares, except
for (i) those which have already been made or granted and (ii) the filing of
registration statements with the Securities and Exchange Commission (the
"Commission") and any applicable state securities commission as specifically
provided for in the Registration Rights Agreement.
3.4 Authorized and Outstanding Stock. At the Closing, after giving
effect to the previously declared stock dividend consisting of shares of Series
B Preferred Stock (as hereinafter defined) and before giving effect to the
transactions to be effected at the Closing, the authorized capital stock of the
Company will consist of (i) 10,000,000 shares of Common Stock,
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of which 7,520,177 shares are validly issued and outstanding and held of record
and owned beneficially by the Shareholders, free and clear of all liens,
security interests, restrictions on transfer, and other encumbrances; (ii)
1,000,000 shares of Non-Voting Common Stock, par value $1.00 per share, of which
no shares are issued and outstanding; and (iii) 214,000 shares of Preferred
Stock of which (x) 114,000 shares will have been designated as Series A
Preferred Stock with the rights, terms and privileges set forth in Exhibit A,
and of which no shares will be issued or outstanding; and 100,000 shares will
have been designated as Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock" and, together with the Series A Preferred Stock, the
"Preferred Stock") with the rights, terms and privileges set forth in Exhibit A,
and of which 100,000 are validly issued and outstanding and held of record and
owned beneficially by the Shareholders, free and clear of all liens, security
interests, restrictions on transfer and other encumbrances. All issued and
outstanding shares of capital stock are, and when issued in accordance with the
terms hereof, all Preferred Shares and Common Shares will be, duly and validly
authorized, validly issued and fully paid and non-assessable and free from any
restrictions on transfer, except for restrictions imposed by federal or state
securities or "blue-sky" laws and except for those imposed pursuant to this
Agreement or any Related Agreement. Except as set forth on Schedule 3.4, there
are no outstanding warrants, options, commitments, preemptive rights, rights to
acquire or purchase, conversion rights or demands of any character relating to
the capital stock or other securities of the Company. All issued and outstanding
shares of capital stock of the Company were issued (i) in transactions exempt
from the registration provisions of the Act, and (ii) in compliance with or in
transactions exempt from the registration provisions of applicable state
securities or "blue-sky" laws.
3.5 Subsidiaries. Except as set forth on Schedule 3.5., the Company
does not have any Subsidiaries or other equity investment in any other Person.
3.6 Financial Information. The Company has previously delivered to the
Purchasers (i) the consolidated financial statements of the Company for the
fiscal years ended December 31, 1994, and (ii) the consolidated financial
statements of the Company for the fiscal year ended December 31, 1995 and the
six months ended June 30, 1996, accompanied by the audit report of Deloitte &
Touche, LLP, the Company's independent certified public accountants
(collectively, the "Financial Statements"). The Financial Statements are in
accordance with the books and records of the Company and present fairly, in all
material respects, in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods the financial condition and
results of operations of the Company as of the dates and for the periods shown.
The Company has no material liability or obligation, contingent or otherwise,
which is not adequately reflected in or reserved against in the Financial
Statements, except for liabilities and obligations incurred in the ordinary
course of business since June 30, 1996. Since December 31, 1995, (i) there has
been no change in the business, assets, liabilities, condition (financial or
otherwise) or operations of the Company except for changes in the ordinary
course of business which, individually or in the aggregate, have not been
materially adverse to the Company, and (ii) none of the business, prospects,
condition (financial or otherwise), operations, property or
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affairs of the Company has been materially adversely affected by any occurrence
or development, individually or in the aggregate, whether or not insured
against.
3.7 Events Subsequent to the Date of the Financial Statements. Except
as set forth on Schedule 3.7, since December 31, 1995, the Company has not (i)
issued any stock, stock options, warrants or other securities convertible into
or exchangeable for capital stock, or any bond or other corporate security
(other than trade credits issued in the ordinary course of business), (ii)
borrowed any money or mortgaged, pledged or subjected to any lien any of its
assets, tangible or intangible, (iii) sold, assigned or transferred any of its
material tangible assets except in the ordinary course of business, or cancelled
any material debt or claim, except in the ordinary course of business, or (iv)
suffered any loss of any material property or waived any right of substantial
value whether or not in the ordinary course of business. Except as set forth on
Schedule 3.7, since December 31, 1995, the Company has not declared or made any
payment or distribution to stockholders or purchased or redeemed any shares of
its capital stock or other securities.
3.8 Litigation. Except as otherwise set forth on Schedule 3.8, there is
no litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company or any Principal Shareholder, threatened, against the
Company or affecting any of its properties or assets, or against any officer,
key employee or shareholder of the Company in his capacity as such. Neither the
Company nor any officer, key employee or shareholder of the Company in his
capacity as such is, to the knowledge of the Company and the Principal
Shareholders, in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency
entered against the Company or him.
3.9 Compliance with Laws and Other Instruments. The Company is in
compliance with all of the provisions of this Agreement and of its charter and
by-laws, and in all material respects with the provisions of each mortgage,
indenture, lease, license, other agreement or instrument, judgment, decree,
judicial order, statute, and regulation by which it is bound or to which it or
its properties are subject. Neither the execution, delivery or performance of
this Agreement and the Related Agreements nor the consummation of the
transactions contemplated hereby and thereby, nor the offer, issuance, sale or
delivery of the Preferred Shares and Common Shares, or the redemption of the
Redemption Shares, with or without the giving of notice or passage of time, or
both, will violate, or result in any breach of, or constitute a default under,
or result in the imposition of any encumbrance upon any asset of the Company
pursuant to any provision of its charter or by-laws, or any statute, rule or
regulation, contract, lease, judgment, decree or other document or instrument by
which is bound or to which it or any of its properties are subject, or, to the
knowledge of the Company or any Principal Shareholder, will cause the Company to
lose the benefit of any right or privilege it presently enjoys or cause any
Person who is expected to normally do business with the Company to discontinue
to do so on the same basis.
3.10 Taxes. The Company is and has been an S corporation within the
meaning of Subtitle A, Chapter 1, Subchapter S of the Internal Revenue Code of
1986, as amended (the
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"Code") for federal income tax purposes and for Mississippi state income tax
purposes since January 1, 1996. The Company has filed all tax returns, reports
and forms (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves on its books and records (net
of estimated tax payments already made) for the payment of all taxes payable in
respect to the period subsequent to the last periods covered by such returns.
All such tax returns, reports and forms are true, correct and complete. Proper
and adequate amounts have been withheld by the Company from its employees and
other persons for all periods in compliance with the tax, social security and
unemployment and other withholding provisions of all federal, state, local and
foreign laws. No deficiencies for any tax are currently assessed against the
Company, and, except for the Company's 1987 federal income tax return (which
audit has been closed), no tax returns of the Company have ever been audited,
and, to the knowledge of the Company and the Principal Shareholders, there is no
such audit pending or contemplated. There is no tax lien, whether imposed by any
federal, state or local taxing authority, outstanding against the assets,
properties or business of the Company, other than any lien for taxes not yet due
and payable. For the purposes of this Agreement, the term "tax" shall include
all federal, state, local and foreign taxes, including income, franchise,
property, sales, use, gross receipts, excise, withholding, payroll and
employment taxes or other similar assessments of any kind whatsoever, including
all interest, penalties and additions imposed with respect to such amounts.
3.11 Real Property; Environmental Matters.
(a) The Company does not currently own and has never owned any
real property. Schedule 3.11 sets forth the addresses and uses of all real
property that the Company leases or subleases, and any lien or encumbrance on
any such leasehold interest, specifying in the case of each such lease or
sublease, the name of the lessor or sublessor, as the case may be, the lease
term and the obligations of the lessee thereunder. There are no defaults by the
Company, or to the knowledge of the Company and the Principal Shareholders, by
any other party thereto, which might curtail in any material respect the present
use by the Company of the property listed on Schedule 3.11. The performance by
the Company of this Agreement and the Related Agreements will not result in the
termination of, or in any increase of any amounts payable under, any lease
listed on Schedule 3.11.
(b) There is no material violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to zoning, environmental, city planning or similar matters) relating to
the operations of the Company at any real property leased or subleased by the
Company.
(c) The operations of the Company at all real property leased by
the Company (the "Leased Parcels") are in compliance, in all material respects,
with all applicable laws, rules, regulations, orders, ordinances, judgments and
decrees of all governmental authorities with respect to all environmental
statutes, rules and regulations. The Company has not received written notice of,
nor does the Company or the Principal Shareholders have
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knowledge of, any past or present events, conditions, circumstances, activities,
practices, incidents or actions which may interfere with or prevent continued
compliance with, or which may give rise to any liability or otherwise form the
basis of any claim, action, suit, proceeding, hearing, or investigation, based
on or related to the disposal, storage, handling, manufacture, processing,
distribution, use, treatment or transport, or the emission, discharge, release
or threatened release into the environment, of any Substance. As used in this
Section 3.11, the term "Substance" or "Substances" shall mean any pollutant,
hazardous substance, hazardous material, hazardous waste or toxic waste, as
defined in any presently enacted federal, state or local statute or any
regulation that has been promulgated pursuant thereto. No part of any of the
Leased Parcels has been listed or, to the knowledge of the Company and the
Principal Shareholders, proposed for listing on the National Priorities List
established by the United States Environmental Protection Agency, or any other
such list by any federal, state or local authorities.
(d) No event has occurred or condition exists that could give
rise to a material liability on the part of the Company, either at the present
time or in the future, for any losses, liabilities, damages (whether
consequential or otherwise), settlements, penalties, interest, expenses and
costs of responses, including any such liability on account of the right of any
governmental or private entity or person, and including closure expenses, costs
of assessment, containment, removal, or response (other than monitoring or
transportation or disposal of materials required to be transported or disposed
of in the ordinary course of business consistent with past practice) arising
under any rule or federal, state, or local statute, or any regulation that has
been promulgated pursuant thereto, or common law, as a result of or in
connection with, or alleged to be as a result of or in connection with, the
following:
(A) the handling, storage, use, transportation or
disposal by the Company of any Substances in or near
or from the Leased Parcels;
(B) the handling, storage, use, transportation or
disposal of any Substances by the Company which
Substances were a product, by-product or otherwise
resulted from the operations conducted by the
Company;
(C) any intentional or unintentional emission, discharge
or release of any Substances in or near or from
facilities by the Company into or upon the air,
surface water, ground water or land or any disposal,
handling, manufacturing, processing, distribution,
use, treatment, or transport of such Substances in or
near or from facilities by the Company; or
(D) the presence of any toxic or hazardous building
materials (including but not limited to asbestos or
similar substances) in the Leased Parcels, including
but not limited to the inclusion of such
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materials in the exterior and interior walls, floors,
ceilings, tile, insulation or any other portion of
building structures.
(e) The Company has obtained and holds all registrations, permits,
licenses, and approvals issued by or on behalf of any federal, state or local
governmental body or agency if any ("Environmental Permits") that are required
in connection with the operation by the Company of the Leased Parcels, the
discharge or emission of Substances by the Company from the Leased Parcels or
the generation, treatment, storage, transportation, or disposal of any such
Substances by the Company, except for those Environmental Permits which the
failure to obtain would not have a material adverse effect on the operations of
the Company or result in a material fine or penalty. Such Environmental Permits
are currently effective and sufficient for the operation of the Leased Parcels
and the business of the Company as currently conducted. The Company is in
compliance, in all material respects, with all terms and conditions of the
Environmental Permits, and is also in compliance, in all material respects, with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in those laws or
provisions or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder and
applicable to the Company.
3.12 Personal Property. Except as set forth on Schedule 3.12 and except
for property sold or otherwise disposed of in the ordinary course of business
since December 31, 1995, the Company owns free and clear of any liens or
encumbrances, all of the personal property reflected as owned by the Company in
the balance sheet contained in the Financial Statements for the fiscal year
ended December 31, 1995, and all other material items of personal property
acquired by the Company through the date hereof, except for liens and
encumbrances which are not material in amount and which do not materially
detract from the value or impair the use of any assets subject thereto. All
material items of such personal property are in normal operating condition,
ordinary wear and tear excepted.
3.13 Patents, Trademarks, etc. Set forth on Schedule 3.13 is a list and
brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company, or
of which the Company is a licensor or licensee or in which the Company has any
right (other than business application software which is licensed by the Company
in the ordinary course of business), and in each case a brief description of the
nature of such right. The Company owns or possesses adequate licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as presently conducted and as proposed to be conducted, and no claim is pending
or, to the knowledge of the Company and the Principal Shareholders, threatened
to the effect that the operations of the Company infringe upon or conflict with
the asserted rights of any other person under any
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Intellectual Property. No claim is pending or, to the knowledge of the Company
and the Principal Shareholders, threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company.
3.14 Agreements of Directors, Officers and Employees. No director,
officer or employee of or consultant to the Company, to the knowledge of the
Company and the Principal Shareholders, is in violation of any terms of any
employment contract, non-competition agreement, non-disclosure agreement, patent
disclosure or assignment agreement or other contract or agreement containing
restrictive covenants relating to the right of any such director, officer,
employee or consultant to be employed or engaged by the Company because of the
nature of the business conducted or proposed to be conducted by the Company, or
relating to the use of trade secrets or proprietary information of others.
3.15 Governmental and Industrial Approvals. The Company has all the
material permits, licenses, orders, franchises and other rights and privileges
of all federal, state, local or foreign governmental or regulatory bodies
necessary for the conduct of its business as presently conducted. All such
permits, licenses, orders, franchises and other rights and privileges are in
full force and effect and, to the knowledge of the Company and the Principal
Shareholders, no suspension or cancellation of any of them is threatened, and
none of such permits, licenses, orders, franchises or other rights and
privileges will be affected by the consummation of the transactions contemplated
in this Agreement and the Related Agreements.
3.16 Federal Reserve Regulations. The Company has not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the sale of the
Preferred Shares and Common Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
3.17 Contracts and Commitments. Except as set forth on Schedule 3.17
attached hereto, the Company has no contract, obligation or commitment which is
material or which involves a potential material commitment or any stock
redemption or stock purchase agreement, stock option plan, shareholders'
agreement, financing agreement, license or real property lease. For purposes of
this Section 3.17, a contract, obligation or commitment shall be deemed material
if it requires future expenditures by the Company in excess of $25,000 or
requires payment to the Company in excess of $25,000 or is not cancelable by the
Company without penalty within 30 days.
3.18 Securities Act. The Company has complied and will comply with all
applicable federal or state securities laws in connection with the issuance and
sale of the Preferred Shares and Common Shares and the redemption of the
Redemption Shares. Neither the Company nor
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anyone acting on its behalf has offered any of the Preferred Shares and Common
Shares, or similar securities, or solicited any offers to purchase any of such
securities to any Person other than the Purchasers.
3.19 Registration Rights. The Company has not granted any rights
relating to registration of its capital stock under the Act or state securities
laws other than those contained in the Registration Rights Agreement referred to
in Section 8.7.
3.20 Insurance Coverage. Schedule 3.20 hereto contains an accurate list
of the insurance policies currently maintained by the Company. Except as listed
on Schedule 3.20, there are currently no claims pending against the Company
under any insurance policies currently in effect and covering the property,
business or employees of the Company, and all premiums due and payable with
respect to the policies maintained by the Company have been paid to date. All
such policies are in full force and effect and provide insurance, including
without limitation, liability insurance, in such amounts and against such risks
as is customary for companies engaged in similar businesses to the Company to
protect employees, properties, assets, businesses and operations of the Company.
3.21 Employee Matters. Except as set forth on Schedule 3.21, the
Company does not have in effect any employment agreements, consulting
agreements, deferred compensation, severance, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company and the
Principal Shareholders have no knowledge that any of the officers or other key
employees of the Company presently intends to terminate his employment. The
Company is in compliance in all material respects with all applicable laws and
regulations relating to labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. The Company is in material
compliance with the terms of all plans, programs and agreements listed on
Schedule 3.21, and each such plan, program or agreement is in material
compliance with all of the requirements and provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). No such plan or
program has engaged in any "prohibited transaction" as defined in Section 4975
of the Code, nor has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA, nor has any reportable event as defined in Section 4043(b)
of ERISA occurred with respect to any such plan or program. With respect to each
plan listed on Schedule 3.21, any required filings, including all filings
required to be made with the United States Department of Labor and Internal
Revenue Service, have been timely filed. The consummation of the transactions
contemplated hereby will not entitle any employee of the Company to receive any
bonus, severance or other payment.
3.22 Customers and Suppliers. Schedule 3.22 attached hereto sets forth
the ten (10) largest suppliers and customers of the Company for the fiscal year
ended December 31, 1995 and the six month period ended June 30, 1996 and the
amount of goods purchased from such suppliers or revenues attributable to such
customers, as the case may be, for the year ended December 31, 1995 (the "Large
Suppliers and Customers"). Except as reflected in Schedule
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3.22, no supplier is a material sole source of supply to the Company. As of the
date of this Agreement, the Company and the Principal Shareholders believe that
the relationships of the Company with its suppliers and customers are good
commercial working relationships. Except as set forth on Schedule 3.22, neither
(i) any of the Large Suppliers and Customers nor (ii) any supplier who at any
time during 1995 or 1996 was or is the sole source of supply of any item, has
cancelled or otherwise terminated, or threatened to cancel or otherwise
terminate, its relationship with the Company or has during the last twelve (12)
months decreased materially or threatened to decrease or limit materially, its
services, supplies or materials to the Company or its usage or purchase of the
services or products of the Company, as the case may be. Neither the Company nor
any Principal Shareholder has any knowledge that any of the Large Suppliers and
Customers intends to cancel or otherwise adversely modify its relationship with
the Company or to decrease materially or limit its services, suppliers or
materials to the Company or its usage or purchase of the services or products of
the Company, and the purchase of the Purchased Shares by the Purchases will not,
to the knowledge of the Company or any of the Principal Shareholder, adversely
affect the relationship of the Company with any of the Large Suppliers and
Customers.
3.23 No Brokers or Finders. Except for the fee payable to Merrill Lynch
& Co., fifty percent (50%) of which shall be paid by the Principal Shareholders
at the Closing, no person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon the
Company for any commission, fee or other compensation as a finder or broker
because of any act or omission by the Company.
3.24 Transactions with Affiliates. Except as set forth on Schedule
3.23, there are no loans, leases or other continuing transactions between the
Company on the one hand, and any officer or director of the Company or any
person owning five percent (5%) or more of the Common Stock of the Company or
any respective family member or affiliate of such officer, director or
shareholder on the other hand.
3.25 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on or for any indebtedness for borrowed money of any
other Person, except guarantees by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
3.26 Disclosures. This Agreement, the Schedules to this Agreement, the
Related Agreements, the Financial Statements and the other agreements, documents
and written statements made by the Company or the Principal Shareholders and
furnished by the Company or the Principal Shareholders to the Purchasers or the
Purchasers' special counsel in connection with the transactions contemplated
hereby, taken as a whole, do not contain any untrue statement of material fact
or omit to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they were made, not
misleading. To the knowledge of the Company and the Principal Shareholders,
there is no fact known to the Company or any Principal Shareholder which has not
been disclosed herein and which may
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<PAGE> 22
materially adversely affect the business, properties, assets or condition
(financial or otherwise) of the Company.
ARTICLE IV
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the Closing Date and until the consummation of the first Qualified Public
Offering for the benefit of the Purchasers:
4.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a system of accounts in accordance with generally
accepted accounting principles consistently applied and the Company will, and
will cause each of its Subsidiaries to, keep full and complete financial
records. The Company will furnish to each Purchaser the information set forth in
this Section 4.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by Deloitte & Touche or another independent
public accountant of national recognition selected by the Board of Directors of
the Company; provided that such consolidating statements need not be certified.
(b) Within thirty (30) days after each month, a preliminary
consolidated and consolidating balance sheet of the Company and its Subsidiaries
as of the end of such month and preliminary consolidated and consolidating
statements of income, shareholders' equity and cash flow for such month and for
the period commencing at the end of the previous fiscal year and ending with the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail.
(c) At the time of delivery of each monthly and annual statement,
a certificate, executed by the either the president or chief financial officer
of the Company stating that such officer has caused this Agreement and the terms
of the Preferred Stock to be reviewed and has no knowledge of any default by the
Company or any Subsidiary in the performance or observance of any of the
provisions of this Agreement or such Preferred Stock or, if such officer has
such knowledge, specifying such default.
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<PAGE> 23
(d) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 4.8, in form
consistent with good business practice.
(e) As soon as reasonably practicable, upon receipt thereof, any
written report, so called "management letter", and any other communication
submitted to the Company or any Subsidiary by its independent public accountants
relating to the business, prospects or financial condition of the Company and
its Subsidiaries;
(f) As soon as reasonably practicable, after the commencement
thereof, notice of (i) all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, against the Company (or any Subsidiary) which, if
successful, could have a material adverse effect on the business, condition or
results of operations of the Company and its Subsidiaries, taken as a whole; and
(ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
(g) Promptly upon sending, making available, or filing the same,
all reports and financial statements as the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the Company as such or
to the Commission; and
(h) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
4.2 Payment of Taxes. The Company will pay and discharge (and cause
any Subsidiary to pay and discharge) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
4.3 Maintenance of Key Man Insurance. Prior to December 31, 1996, the
Company will, at its expense, obtain and maintain life insurance policies with a
responsible and reputable insurance company payable to the Company on the lives
of each of the Principal Shareholders, in the face amount of $1,000,000 each.
The Company will maintain such policies and will not cause or permit any
assignment of the proceeds of such policies and will not borrow against such
policies. The Company will add one designee of the Purchasers as a notice party
to each such policy, and will request that the issuer of each such policy
provide such designee with ten (10) days' notice before such policy is
terminated (for failure to pay premium or otherwise) or assigned, or before any
change is made in the designation of the beneficiary thereof.
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<PAGE> 24
4.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which would have a
material adverse effect on the business, condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
4.5 Inspection. At any reasonable time during normal business hours and
from time to time, but not more frequently than once per calendar quarter for
all Purchasers and transferees of Purchasers as a group, upon ten (10) days
written notice, the Company (and each of its Subsidiaries) will permit any one
or more of the Purchasers (not to exceed three persons at any time) who then
own, of record or beneficially, or have the right to acquire, any of the
Preferred Shares or Common Shares, or any transferee of a Purchaser who owns, of
record or beneficially, or has the right to acquire, at least ten percent (10%)
of the then outstanding Series A Preferred Stock or Common Stock, or any of the
agents or representatives of the foregoing Persons, to examine and make copies
of and extracts from the records and books of account of and visit the
properties of the Company (and any of its Subsidiaries) and to discuss the
Company's affairs, finances and accounts with any of its officers or directors;
provided that any Person or Persons exercising rights under this Section 4.5
shall (i) use all reasonable efforts to ensure that any such examination or
visit results in a minimum of disruption to the operations of the Company and
(ii) shall agree in writing to keep any proprietary information of the Company
disclosed to him in the course of such inspection confidential in a manner
consistent with prudent business practices and treatment of such Person's or
Persons' own confidential information and not use such proprietary information
for any purpose in competition with the Company's business. The rights granted
under this Section 4.5 shall be in addition to any rights which any Purchaser
may have under applicable law in its capacity as a shareholder of the Company.
4.6 Corporate Existence; Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition or results of operations of
the Company and its Subsidiaries, taken as a whole. The Company shall at all
times own of record and beneficially, free and clear of all liens, charges,
restrictions, claims and encumbrances of any nature, all of the issued and
outstanding capital stock of each of its Subsidiaries.
4.7 Compliance with ERISA. The Company will comply, (and cause each of
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will knowingly permit any event or condition to exist which
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<PAGE> 25
could permit any such plan to be terminated under circumstances which cause the
lien provided for in Section 3068 of ERISA to attach to the assets of the
Company or any of its Subsidiaries.
4.8 Board Approval. Prior to the end of each fiscal year, the Company
will prepare and submit to its Board of Directors for its approval prior to such
year end an operating plan and budget, cash flow projections and profit and loss
projections, all itemized in reasonable detail for the immediately following
year.
4.9 Financings. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
4.10 Meetings of the Board of Directors. The Board of Directors shall
schedule regular meetings not less frequently than once every fiscal quarter.
The Company shall reimburse all members of the Board of Directors of the Company
for all reasonable direct out-of-pocket expenses incurred by them in attending
such meetings.
4.11 Compensation Committee. The Board of Directors shall at all times
maintain a compensation committee comprised of three members, one of whom shall
be a Director designated by the Purchasers pursuant to the Shareholders'
Agreement, one of whom shall be a Director who is also a member of management,
and one of whom shall be Director who is not an employee or consultant of the
Company (the "Compensation Committee"). The approval of a majority of the
members of the Compensation Committee shall be required to take action by the
Compensation Committee; provided that no member of the Compensation Committee
may vote on his own compensation. The Compensation Committee shall determine the
compensation of senior management, including that of the Principal Shareholders,
subject, in the case of the Principal Shareholders, to the terms of the
Employment Agreements referred to in Section 8.9.
4.12 Rule 144A Information. The Company shall, upon the written request
of any Purchaser, provide to such Purchaser and to any prospective institutional
transferee of the Preferred Shares and Common Shares designated by such
Purchaser, such financial and other information as is available to the Company
or can be obtained by the Company without material expense and as such Purchaser
may reasonably determine is required to permit such transfer to comply with the
requirements of Rule 144A promulgated under the Act.
4.13 Reincorporation. If requested by the Purchasers, the Company will
use its best efforts to reincorporate under the laws of the State of Delaware
within sixty days of such request; provided that the Company shall not be
required to reincorporate prior to the earlier of (i) the date on which the
Redemption Notes are paid in full; and (ii) immediately prior to an initial
public offering of equity securities of the Company under the Act.
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ARTICLE V
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) for the benefit of the Purchasers with each of the provisions of this
Article V on and after the Closing Date and until the consummation of the first
Qualified Public Offering.
5.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock of any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity
of not more than one year from the date of acquisition issued by a bank
organized in the United States having a combined capital and surplus of
at least $50,000,000;
(iii) loans or advances from the Company to any Subsidiary, a
Subsidiary to the Company or from a Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year
from the date of acquisition; and
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other
financial institutions, provided that such "money market" fund or
"money market" accounts invest principally in investments of the types
described in clauses (i), (ii) or (iv) of this subsection 5.1.
5.2 Distributions. The Company will not declare or pay any dividends,
except dividends payable with respect to the Preferred Stock in accordance with
Exhibit A, purchase, redeem, retire, or otherwise acquire for value any of its
capital stock (or rights, options or warrants to purchase such shares) now or
hereafter outstanding, return any capital to its shareholders as such, or make
any distribution of assets to its shareholders as such, or permit any Subsidiary
to do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends, return capital and make distributions of
assets to the Company and except that nothing herein contained shall prevent the
Company from:
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<PAGE> 27
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of
shares of such class of capital stock;
(ii) complying with any specific provision of the terms of the
Preferred Stock as contained in Exhibit A attached hereto relating to
the payment of dividends, liquidation preferences or redemption
payments on or with respect to the Preferred Stock or redemption of the
Preferred Stock;
(iii) redeeming the Redemption Shares as provided in Article II; or
(iv) making payments to the Shareholders in the manner provided in
Section 2.2(d) hereof.
5.3 Dealings with Affiliates. The Company will not enter into any
transaction with any officer or director of the Company or any Subsidiary or
holder of any class of capital stock of the Company, or any member of their
respective immediate families or any corporation or other entity directly or
indirectly controlling, controlled by or under common control with one or more
of such officers, directors or shareholders or members of their immediate
families, unless the interest of such person is disclosed in advance to the
Board of Directors, such transaction is on arm's-length terms which are no less
favorable to the Company or any Subsidiary than those which could have been
obtained from an unaffiliated third party, and such transaction is approved by a
disinterested majority of the Board of Directors of the Company or such
Subsidiary.
5.4 Merger. The Company shall not, and shall not permit any Subsidiary
to merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereinafter created) at a
discount or with recourse, to any Person, or permit any Subsidiary to do any of
the foregoing, (i) except for sales or other dispositions of assets in the
ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary and (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
5.5 Limitation on Options. The Company shall not grant any options,
warrants or other rights to acquire shares of Common Stock or other equity
securities of the Company, except up to an aggregate of 479,823 shares of
Non-Voting Common Stock (of which options to purchase 159,823 shares of
Non-Voting Common Stock at an exercise price of $2.00 per share will be granted
immediately after the Closing) may be issued to employees of the Company
pursuant to options granted under a stock option plan, which grants after the
date hereof are
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<PAGE> 28
approved by the Compensation Committee of the Company's Board of Directors. All
stock options shall be exercisable for shares of Non-Voting Common Stock.
5.6 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
5.7 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchasers, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchasers of any of their rights under this
Agreement or any of the Related Agreements.
5.8 Amendments to Agreements. The Company will not enter into any
amendment, modification or waiver of the Employment Agreements referred to in
Section 8.9 hereof or, except as contemplated by Section 12.10, the Commercial
Lease, dated February 1, 1995, between Calypso Properties (a partnership
comprised of the Principal Shareholders) and the Company, relating to the
Company's facility at 522 Railroad Avenue, Long Beach, Mississippi without the
prior written consent of the Purchasers.
ARTICLE VI
PREEMPTIVE RIGHT
6.1 Preemptive Right. The Company hereby grants to each Purchaser so
long as it shall own, of record or beneficially, or have the right to acquire
from the Company, any Common Stock, the right to purchase all or part of its pro
rata share of New Securities (as defined in Section 6.2) which the Company, from
time to time, proposes to sell and issue. A Purchaser's pro rata share, for
purposes of this preemptive right, is the ratio of the number of shares of
Common Stock which such Purchaser owns or has the right to acquire from the
Company to the total number of shares of Common Stock then outstanding and the
total number of shares of Common Stock which any Person has the right to acquire
from the Company then outstanding. The Purchasers shall have a right of
over-allotment pursuant to this Article VI such that to the extent a Purchaser
does not exercise its or his preemptive right in full hereunder, such additional
shares of New Securities which such Purchaser did not purchase may be purchased
by the other Purchasers in proportion to the total number of shares of Common
Stock which each such other Purchaser owns or has the right to acquire from the
Company compared to the total number of shares of Common Stock which all such
other Purchasers own or have the right to acquire from the Company.
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6.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (i) Common Stock issued as a stock dividend to holders of Common
Stock or upon any stock split, subdivision or combination of shares of Common
Stock, and (ii) the aggregate number of shares of Common Stock issuable upon
exercise of options permitted under Section 5.5 hereof.
6.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. Each Purchaser
shall have 10 business days from the date of any such notice to agree to
purchase up to the Purchaser's pro rata share of such New Securities (and any
over-allotment amount pursuant to the operation of Section 6.1 hereof) for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
6.4 Sale by the Company. In the event any Purchaser fails to exercise
in full its or his preemptive right (after giving effect to the over-allotment
provision of Section 6.1 hereof), the Company shall have 180 days thereafter to
sell the New Securities with respect to which the Purchaser's option was not
exercised, at a price and upon terms no more favorable to the purchasers thereof
than specified in the Company's notice. To the extent the Company does not sell
all the New Securities offered within said 180 day period, the Company shall not
thereafter issue or sell such New Securities without first again offering such
securities to the Purchasers in the manner provided above.
6.5 Termination of Rights. The rights granted to the Purchasers under
this Article VI shall expire immediately prior to, and shall not apply in
connection with, the issuance of shares in connection with the consummation of
the first Qualified Public Offering.
ARTICLE VII
INVESTMENT REPRESENTATIONS
7.1 Representations and Warranties. Each Purchaser hereby represents
and warrants to the Company as follows on the date hereof and as of the Closing:
(a) Such Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite partnership power and authority and has taken all
necessary partnership action required for the due authorization, execution,
delivery and performance by the Purchaser of this Agreement and the Related
Agreements, and any other agreements or instruments executed by the Purchaser in
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<PAGE> 30
connection herewith or therewith and the consummation of the transactions
contemplated herein or therein;
(b) Assuming due execution and delivery by the Company of the
Agreement and the Related Agreements, this Agreement, the Related Agreements and
the other agreements and instruments executed by the Purchaser in connection
herewith or therewith to which such Purchaser is a party will each constitute
legal, valid and binding obligations of such Purchaser, enforceable against such
Purchaser in accordance with their respective terms;
(c) Such Purchaser has been advised and understands that the
Preferred Shares and Common Shares have not been registered under the Act, on
the grounds that no distribution or public offering of the Preferred Shares or
Common Shares is to be effected, and that in this connection, the Company is
relying in part on the representations of such Purchasers set forth in this
Article VII;
(d) Such Purchaser has been further advised and understands that
no public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Preferred Shares and Common Shares;
(e) Such Purchaser is purchasing the Preferred Shares and Common
Shares for investment purposes, for its own account and not with a view to, or
for sale in connection with, any distribution thereof in violation of Federal or
state securities laws;
(f) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder, and such Purchaser is an "accredited
investor" for purposes of the rules promulgated under the Act;
(g) Such Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Purchased Shares;
provided, however, that nothing in this Section 7.1 shall be deemed to vitiate
or limit the representations, warranties and covenants of the Company and the
Principal Shareholders contained in this Agreement; and
(h) No person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon the
Company or any of its Subsidiaries for any commission, fee or other compensation
as a finder or broker because of any act or omission by such Purchaser.
7.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit (i) a distribution of
Preferred Shares and Common Shares by a partnership to one or more of its
partners, where no consideration is exchanged therefor by such partners, or to a
retired or withdrawn partner who retires or withdraws after the date hereof in
full
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<PAGE> 31
or partial distribution of his interest in such partnership, or to the estate of
any such partner or the transfer by gift, will or intestate succession of any
partner to his spouse or to the siblings, lineal descendants or ancestors of
such partner or his spouse, or to a trust created for the benefit of one or more
of the foregoing, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were an original Purchaser hereunder and (ii)
a sale or other transfer of any of the Preferred Shares and Common Shares upon
obtaining assurance satisfactory to the Company that such transaction is exempt
from the registration requirements of, or is covered by an effective
registration statement under, the Act and applicable state securities or
"blue-sky" laws, including, without limitation, receipt of an unqualified
opinion to such effect of counsel reasonably satisfactory to the Company. The
certificates representing the Preferred Shares and Common Shares shall bear a
legend evidencing such restriction on transfer substantially in the following
form:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933 (the "Act") or the securities laws of any state. The
shares may not be transferred by sale, assignment, pledge or
otherwise unless (i) a registration statement for the shares
under the Act is in effect or (ii) the corporation has received
an opinion of counsel, which opinion and counsel is reasonably
satisfactory to the corporation, to the effect that such
registration is not required under the Act or the securities
laws of any state."
ARTICLE VIII
CONDITIONS OF PURCHASERS' OBLIGATION
8.1 Effect of Conditions. The obligation of the Purchasers to purchase
and pay for the Preferred Shares and Common Shares at the Closing shall be
subject at their election to the satisfaction of each of the conditions stated
in the following Sections of this Article.
8.2 Representations and Warranties. The representations and warranties
of the Company and the Principal Shareholders contained in this Agreement shall
be true and correct in all material respects on the Closing Date with the same
effect as though made on and as of that date, and the Purchasers shall have
received a certificate dated as of such Closing Date and signed on behalf of the
Company and the Principal Shareholders to that effect.
8.3 Performance. The Company and the Principal Shareholders shall have
performed and complied in all material respects with all of the agreements,
covenants and conditions contained in this Agreement required to be performed or
complied with by it and him at or prior to such Closing Date, and the Purchasers
shall have received a certificate dated as of such Closing Date and signed on
behalf of the Company and by the Principal Shareholders to that effect.
- 25 -
<PAGE> 32
8.4 No Material Adverse Change. The business, properties, assets or
condition (financial or otherwise) of the Company shall not have been materially
adversely affected since the date of this Agreement, whether by fire, casualty,
act of God or otherwise, and there shall have been no other changes in the
business, properties, assets, condition (financial or otherwise) or management
of the Company that would have a material adverse effect on the business or
condition (financial or otherwise) of the Company.
8.5 Opinion of Counsel. The Purchasers shall have received an opinion,
dated the Closing Date, from Locke Purnell Rain Harrell, counsel to the Company
and the Principal Shareholders, in the form attached as Exhibit C.
8.6 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit D attached hereto shall have been executed by each Purchaser, the
Company and the Principal Shareholders.
8.7 Registration Rights Agreement. The Company shall have executed the
Registration Rights Agreement in the form of Exhibit E attached hereto.
8.8 Redemption Agreement. A Redemption Agreement in the form of
Exhibit F attached hereto shall have been executed by each Purchaser and the
Company.
8.9 Employment Agreement. The Company and each Principal Shareholder
shall have executed an Employment Agreement in the form of Exhibit G attached
hereto.
8.10 Board Election. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to not more than seven
members, four of whom shall be designees of the Purchasers as provided in the
Shareholders' Agreement.
8.11 Certificate of Incorporation. The Certificate of Incorporation of
the Company shall have been amended to provide for the authorization of the
Preferred Stock with the terms set forth in Exhibit A attached hereto.
8.12 Consents and Waivers. The Company shall have obtained all consents
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Preferred Shares and Common Shares,
and to carry out the transactions contemplated hereby and thereby. All corporate
and other action and governmental filings necessary to effectuate the terms of
this Agreement, the Related Agreements, the Preferred Shares and Common Shares
and other agreements and instruments executed and delivered by the Company in
connection herewith shall have been made or taken.
- 26 -
<PAGE> 33
ARTICLE IX
CONDITIONS OF THE COMPANY'S AND THE
PRINCIPAL SHAREHOLDERS' OBLIGATIONS
9.1 Effect of Conditions. The obligation of the Company to sell the
Preferred Shares and Common Shares at the Closing and the obligation of the
Shareholders to tender the Redemption Shares for redemption at the Closing shall
be subject at their election to the satisfaction of each of the conditions
stated in the following Sections of this Article.
9.2 Representations and Warranties. The representations and warranties
of the Purchasers contained in this Agreement shall be true and correct in all
material respect on the Closing Date with the same effect as though made on and
as of that date and the Company shall have received a certificate dated as of
the Closing Date and signed on behalf of each Purchaser to that effect.
9.3 Execution of Agreements. The Shareholders' Agreement shall have
been executed by the Purchasers, the Registration Rights Agreement shall have
been executed by the Purchasers and the Company, and the Employment Agreements
shall have been executed by the Company.
9.4 Issuance of Series B Preferred Stock. The Company shall have
declared and paid to the Shareholders a stock dividend consisting of 100,000
shares of Series B Preferred Stock with the terms set forth in Exhibit A
attached hereto.
9.5 Employment Agreements. The Company and the Principal Shareholders
shall have executed Employment Agreements in the form of Exhibit G attached
hereto.
9.6 Debentures. The Company, Summit Subordinated Debt Fund, L.P. and
Summit Investors III, L.P. shall have executed the Subordinated Debenture
Purchase Agreement.
9.7 Opinion of Counsel. The Company shall have received an opinion,
dated the Closing Date, from Hutchins, Wheeler & Dittmar, counsel to the
Purchasers in the form attached hereto as Exhibit H.
ARTICLE X
SURVIVAL; INDEMNIFICATION AND LIMITS ON LIABILITY
10.1 Survival of Representations and Warranties. The representations
and warranties contained in this Agreement shall survive the Closing until the
date which is thirty days after audited financial statements of the Company for
the fiscal year ending December 31, 1997 are delivered to the Purchasers;
provided, however, that the time limitation set forth in this
- 27 -
<PAGE> 34
Section 10.1 shall not apply to matters described in Sections 3.2, 3.4, 3.10 and
3.23, which, in each case, shall survive until the termination of the applicable
statute of limitations. The covenants of the Company contained in Articles IV
and V hereof shall survive the Closing until the consummation of a Qualified
Public Offering.
10.2 Indemnification by the Shareholders. Subject to the conditions and
limitations set forth in this Section 10.2, the Principal Shareholders shall,
jointly and severally, defend, indemnify and hold harmless the Company and the
Purchasers, from and against any loss, liability, damage, claim, action or cause
of action, assessment, cost and expense (including reasonable legal and
accounting fees) to the extent not covered by insurance asserted against,
resulting to, imposed upon or incurred by the Company or the Purchasers by
reason of or resulting from the breach of any representation, warranty or
covenant made by the Company or the Principal Shareholders in or pursuant to
this Agreement, or any facts or circumstances constituting such a breach;
provided, however, that the indemnification provided for in this Section 10.2,
except for indemnification for any claim arising from any breach of a
representation or warranty made in Section 3.2, 3.4, 3.10 or 3.23 or in the last
sentence of Section 3.7, shall not apply unless the aggregate damages for which
indemnification is sought (determined on a cumulative basis with all prior
claims) are more than $100,000, and then only to the extent of such excess;
provided, that the Principal Shareholders' aggregate liability for claims in
which indemnification is sought under this Agreement shall be limited to (i)
$6,600,000 for claims arising from the breach of any representation or warranty
made in Section 3.2, 3.4, 3.6, 3.10 or 3.23 or in the last sentence of Section
3.7, and (ii) $4,950,000 for claims arising from the breach of any other
representation or warranty made in Article III hereof, which amount in this
clause (ii) shall be reduced to $3,300,000 for claims arising after April 30,
1997. The indemnity obligation of the Principal Shareholders under this Article
X shall be satisfied through the payment of cash to the Company or the
Purchasers, as the case may be, until the aggregate of all indemnification
payments made by the Principal Shareholders shall equal $3,300,000, plus the
amount of all principal payments made to the Principal Shareholders under the
Redemption Notes (the "Cash Amount"), and for indemnification claims in excess
of the Cash Amount, the Company shall be permitted to set-off the principal
amount of the Redemption Notes and the Series B Liquidation Amount (as defined
in the Articles of Incorporation) of the Series B Preferred Stock by the amount
of such claims, which set-off shall be allocated between the Redemption Notes
and Series B Preferred Stock in proportion to the respective percentages of the
principal amount of the Redemption Notes and the Series B Liquidation Amount of
the Series B Preferred Stock relative to the total amount of principal of the
Redemption Notes and the Series B Liquidation Amount. The set-off of the
Redemption Notes shall be effected through the reduction of the principal amount
of the Redemption Notes equal to the portion of the set-off amount related
thereto and the set-off of the Series B Liquidation Amount shall be effected by
the Principal Shareholder contributing shares of Series B Preferred Stock to the
Company with an aggregate Series B Liquidation Amount equal to the portion of
the set-off amount attributable to the Series B Preferred Stock. The Principal
Shareholders agree that they shall have no right to seek damages, reimbursement,
indemnification, contribution or similar rights from the Company for any
indemnification payments for which the Principal Shareholders are liable
hereunder.
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<PAGE> 35
The Principal Shareholders agree that (a) as among them, the
proportionate share (the "Proportionate Share") of liability for each of them
with respect to any amount for which they are found liable pursuant to a claim
by the Company or the Purchasers under this Section 10.2, or any amount paid in
settlement thereof, together with all expenses incurred in connection with the
defense or settlement of any claim or any action or matter upon which such claim
is based (a "Liability Amount") shall be as set forth below and (b) that each
shall be entitled to contribution from the others, based on their respective
Proportionate Shares, with respect to any amount paid in excess of his
Proportionate Share of any Liability Amount:
Ernest L. Burdette 33 1/3%
Robert E. Sandoz 33 1/3%
Frank J. Wilem, Jr. 33 1/3%
In no event will the foregoing contribution provision limit the right of the
Company or the Purchasers to pursue claims for indemnification against any
Principal Shareholder for the full amount thereof.
10.3 Notice of Claim. The Company or the Purchasers shall give the
Principal Shareholders prompt written notice of any threatened, potential or
actual claim or the commencement of any action in respect of which indemnity may
be sought hereunder, provided that the failure of the Company or the Purchasers
to give notice as provided herein shall not relieve the Principal Shareholders
of their obligations under this Article X except if and to the extent the
Principal Shareholders have been materially prejudiced thereby. In the case any
action is brought against the Company, the Principal Shareholders shall have the
right to participate in or control any such action at their own expense, with
counsel reasonably acceptable to the Company and the Purchasers, and the Company
and the Purchasers shall have the right (but not the duty) to participate in the
defense thereof, which shall be at the Company's and the Purchasers' expense.
Whether or not the Principal Shareholders choose to control the defense of
Company's action, the Company, the Purchasers and the Principal Shareholders
will cooperate in the defense and shall take all actions in connection with such
defense as may be reasonably requested. If the Company shall fail to provide the
Principal Shareholders with notice of any threatened, potential or actual claim
or the commencement of any action in respect of which indemnity may be sought
hereunder, the Purchasers shall be entitled to enforce any rights of the Company
under this Article X on behalf of the Company by providing notice to such effect
to the Principal Shareholders.
10.4 Tax Payments. Each Shareholder shall promptly reimburse the
Company for any tax distributions paid to the Shareholder by the Company
pursuant to Section 2.2(a)(ii) and 2.2(d) (collectively, the "Tax
Distributions") in excess of the Shareholders' federal and state income tax
liability resulting from the inclusion of the Company's net income for the
period May 1, 1996 through Closing and the Company shall pay the Shareholders
such amounts as are necessary to reimburse the Shareholders for the
Shareholders' federal and state income tax liability attributable to the
inclusion of the Company's net income for the period May 1, 1996
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<PAGE> 36
through Closing in excess of such Tax Distributions in the manner set forth in
this Section 10.4. To the extent the federal and state income tax liability
attributable to the inclusion of items of income, gain, loss, deduction or
credit of the Company, including, without limitation, deductions for any
corporate level taxes payable by the Company under Section 1374 of the Code, and
similar state provisions (the "Company Items") in the personal income tax return
of each Shareholder for the period May 1, 1996 through Closing (the "Income Tax
Liability Amount") is greater than or less than such Shareholder's pro rata
portion of the Tax Distribution, an adjustment is required by this Section 10.4.
For the purposes of Section 2.2 and this Section 10.4, Company Items shall be
allocated between the period January 1, 1996 through April 30, 1996 and the
period May 1, 1996 through Closing as if the Company's Subchapter S election
under the Code had terminated and an election was made under the provisions of
Section 1362(e)(3) of the Code. The Income Tax Liability Amount for each
Shareholder shall be computed by (i) treating the Company Items attributable to
such Shareholder as if those were the only items of income, gain, loss,
deduction or credit of the Shareholder for the taxable year and (ii) applying
the sum of the highest federal and Mississippi marginal income tax rates
applicable to such Shareholder in effect for the taxable year ending December
31, 1996 to the taxable income computed under clause (i). In the event a
Shareholder's Income Tax Liability Amount exceeds his or her pro rata portion of
the Tax Distribution, the Company shall make a cash distribution to such
Shareholder in the amount of the excess and such amount shall be considered Cash
Redemption Consideration. In the event the Income Tax Liability Amount of a
Shareholder is less than his or her pro rata portion of the Tax Distributions,
such Shareholder shall make a cash payment to the Company in the amount of the
difference and such amount shall be considered a reduction of Cash Redemption
Consideration. Promptly after the payment of any income taxes by a Shareholder
attributable to the Company's status as an S corporation to any tax authority,
the Principal Shareholder will provide the Company and the Purchasers with
copies of the relevant filings with said tax authority, together with such other
information as may be reasonably requested by the Company or the Purchasers to
verify the payments made to such tax authority. In addition, in the event that
the Company is not a valid S-corporation within the meaning of Subtitle A,
Chapter 1, Subchapter S of the Code, each Principal Shareholder shall promptly
reimburse the Company for all tax distributions paid to such Principal
Shareholder for the period January 1, 1996 to Closing and, to the extent that
the corporate level taxes imposed on the Company by virtue of such determination
exceed the aggregate amount of the tax distributions reimbursed hereunder, the
Principal Shareholders shall promptly pay to the Company the amount of such
deficiency. The reimbursement obligations of the Principal Shareholders and the
Company under this Section 10.4 shall be paid in cash and shall not be subject
to any limitations on liability set forth in Section 10.2.
ARTICLE XI
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
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<PAGE> 37
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Stock Purchase and Redemption Agreement as from
time to time amended and in effect between the parties.
"Closing" shall have the meaning set forth in Section 1.3.
"Closing Date" shall have the meaning set forth in Section 1.3.
"Commission" shall have the meaning set forth in Section 3.3.
"Company" means and shall include Triton Systems, Inc., a Mississippi
corporation, and its successors and assigns.
"Consolidated Net Income" shall mean, for any period, the Company's and
its Subsidiaries' consolidated net income after any income and franchise taxes,
as determined in conformity with generally accepted accounting principles
consistently applied, but excluding: (a) the income of any Person (other than
Subsidiaries of Company) in which the Company or any of its Subsidiaries has an
ownership interest, unless received by the Company or its Subsidiary in a cash
distribution; (b) any after-tax gains or losses attributable to asset
dispositions; and (c) to the extent not included in clauses (a) and (b) above,
any after-tax extraordinary non-cash gains or extraordinary non-cash losses.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 3.4.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate gross proceeds to the Company
equal at least $20,000,000 and in which the Series A Preferred Stock is redeemed
in full.
"Related Agreements" shall have the meaning set forth in Section 3.2.
"Series A Preferred Stock" shall have the meaning set forth in Section
1.1.
"Series B Preferred Stock" shall have the meaning set forth in Section
3.4.
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<PAGE> 38
"Subsidiary" or "Subsidiaries" means any corporation, association or
other business entity of which the Company and/or any of its other Subsidiaries
(as herein defined) directly or indirectly owns at the time more than fifty
percent (50%) of the outstanding voting shares of every class of such
corporation or trust other than directors' qualifying shares.
ARTICLE XII
MISCELLANEOUS
12.1 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the parties
hereto and their respective successors and assigns (including transferees of any
of the Preferred Shares or Common Shares). The parties agree to maintain in
confidence the terms of the purchase of the Preferred Shares and Common Shares
hereunder, except that the Purchasers may disclose such terms to their investors
in the ordinary course and except that the Company may disclose such terms to
its shareholders in the ordinary course; provided, further, that the Company may
disclose such terms as may be required by Federal and state securities laws.
12.2 Shares Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser and any general or limited partner of
a Purchaser. Without limiting the foregoing, each Purchaser shall be considered
an affiliate of each other Purchaser.
12.3 Amendments and Waivers. Amendments or additions to this Agreement
may be made, agreements with any decision of the Company may be made, and
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively) upon the written consent of the
Company and the holders of a majority of each of the Preferred Shares and Common
Shares. Prompt notice of any such amendment or waiver shall be given to any
Person who did not consent thereto. This Agreement (including the Schedules and
Exhibits annexed hereto, which are an integral part of this Agreement)
constitutes the full and complete agreement of the parties with respect to the
subject matter hereof. The Company will reimburse the Purchasers for the
reasonable fees and expenses of counsel for the Purchasers incurred in
connection with any amendment or modification of this Agreement or any of the
Related Agreements or any waiver hereof or thereof.
12.4 Notices. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage
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<PAGE> 39
prepaid, to the Company or to the Purchasers at the address set forth below or
to such other address as may be furnished in writing to the other parties
hereto:
The Company: Triton Systems, Inc.
522 East Railroad Street
Long Beach, MS 39560
Attention: Ernest L. Burdette
with copy to: Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Attention: Dan Busbee, Esquire
The Purchasers: The address set forth opposite the Purchaser's
name on Schedule 1.1 attached hereto.
with copy to: Hutchins, Wheeler & Dittmar,
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: Michael J. Riccio, Jr., Esquire
12.5 Expenses. Immediately upon consummation of the Closing, (i) the
Company shall pay all reasonable costs and expenses of the Purchasers in
connection with the investigation, preparation, execution and delivery of this
Agreement (and due diligence related thereto) and the other instruments and
documents to be delivered hereunder and the transactions contemplated hereby and
thereby, including the reasonable fees and disbursements of Hutchins, Wheeler &
Dittmar, A Professional Corporation, special counsel to the Purchasers, and (ii)
the Company shall pay all reasonable fees and disbursements of legal counsel and
accountants to the Principal Shareholders in connection with the transactions
contemplated hereby. The fees and expenses payable to Merrill Lynch & Co. in
connection with the transactions contemplated hereby will be borne 50% by the
Principal Shareholders and 50% by the Company.
12.6 Counterparts. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
12.7 Effect of Headings. The article and section headings herein are
for convenience only and shall not affect the construction hereof.
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<PAGE> 40
12.8 Adjustments. All provisions of this Agreement shall be
automatically adjusted to reflect any stock dividend, stock split or other such
form of recapitalization.
12.9 Governing Law. This Agreement shall be deemed a contract made
under the laws of the Commonwealth of Massachusetts and together with the rights
and obligations of the parties hereunder, shall be construed under and governed
by the laws of such Commonwealth.
12.10 Lease Matters. In consideration of the payments made to the
Principal Shareholders under this Agreement, the Principal Shareholders agree
that, effective prior to a Liquidity Event (as defined in the Company's Articles
of Incorporation), the Commercial Lease, dated February 1, 1995, between Calypso
Properties (a partnership comprised of the Principal Shareholders) and the
Company, relating to the Company's facility at 522 Railroad Avenue, Long Beach,
Mississippi, shall be amended to adjust the rental payment thereunder to fair
market value, as determined by a real estate appraiser selected jointly by the
Principal Shareholders and the Purchasers. In no event will the rent payable
under the Current Lease be adjusted to an amount which is less than the monthly
mortgage payments relating to the mortgage in the principal amount of $330,000,
plus the amount of the mortgage incurred by Calypso Properties to finance the
expansion of the Company's facility.
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<PAGE> 41
TRITON SYSTEMS, INC.
STOCK PURCHASE AND REDEMPTION AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of acceptance
on the enclosed counterpart of this letter and return the same to the Company,
whereupon, this letter shall become a binding agreement among us.
Very truly yours,
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
---------------------------------
Name: Ernest L. Burdette
Title: President
PRINCIPAL SHAREHOLDERS:
/s/ Ernest L. Burdette
------------------------------------
Ernest L. Burdette
/s/ Robert E. Sandoz
------------------------------------
Robert E. Sandoz
/s/ Frank J. Wilem, Jr.
------------------------------------
Frank J. Wilem, Jr.
S-1
<PAGE> 42
PURCHASERS:
SUMMIT VENTURES IV, L.P.
By: Summit Partners, IV, L.P.,
Its General Partner
By: Stamps, Woodsum & Co. IV,
Its General Partner
By: /s/ Joseph F. Trustey
---------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Joseph F. Trustey
---------------------------------
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.,
Its General Partner
By: /s/ Joseph F. Trustey
---------------------------------
General Partner
S-2
<PAGE> 43
TRITON SYSTEMS, INC.
Schedule 1.1
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PURCHASE PRICE NUMBER OF PURCHASE PRICE TOTAL
SHARES OF SERIES OF SERIES A SHARES OF OF COMMON PURCHASE
A PREFERRED PREFERRED STOCK COMMON STOCK STOCK PRICE
STOCK TO BE TO BE PURCHASED
PURCHASED
<S> <C> <C> <C> <C> <C>
Summit Ventures IV, L.P. 108,300 $10,830,000 3,715,667 $ 89,318 $10,919,318
600 Atlantic Avenue
Boston, MA 02110
Summit Investors III, L.P. 5,700 $ 570,000 199,982 $ 4,814 $ 574,814
600 Atlantic Avenue
Boston, MA 02110
Summit Subordinated Debt 0 0 244,351 $ 5,868 $ 5,868
Fund, L.P.
600 Atlantic Avenue
Boston, MA 02110
TOTALS 114,000 $11,400,000 4,160,000 $100,000 $11,500,000
</TABLE>
<PAGE> 1
Exhibit 10.2
REDEMPTION AGREEMENT
This Redemption Agreement (this "Agreement") is dated as of the 25th day
of July, 1996 by and among Triton Systems, Inc., a Mississippi corporation (the
"Company"), and the persons set forth on Schedule 1.1 (each an "Investor" and
collectively the "Investors").
As of the date of this Agreement, the Investors have purchased an
aggregate of 114,000 shares of the Series A Preferred Stock, par value $.01 per
share, of the Company and 4,160,000 shares of Common Stock, par value $1.00 per
share, of the Company (the "Common Stock"), pursuant to a Stock Purchase and
Redemption Agreement dated the date hereof (the "Purchase Agreement"). The
shares of Common Stock and any other Common Stock now owned or hereafter
acquired by the Investors (together with any shares issued with respect thereto
pursuant to any stock split, stock dividend or the like) are referred to herein
as the "Shares". Capitalized terms used herein and not otherwise defined in this
Agreement shall have the meanings assigned to them in the Purchase Agreement.
In consideration of the execution and delivery of the Purchase Agreement
and the agreements set forth below, the parties agree with each other as
follows:
1. Option to Sell Shares to Company.
(a) In the event that prior to the earlier to occur of (i) the
liquidation, dissolution or winding up of the Company, (ii) the merger or
consolidation of the Company with any Person, or the sale or other disposition
of all or substantially all of the Company's properties and assets to any
Person, or the transfer of ownership of any voting shares of the Company to any
Person as a consequence of which those Persons who held all of the voting shares
of the Company immediately prior to such transfer do not hold a majority of the
voting shares of the Company after the consummation of such transfer (the
"Control Sale") or (iii) July 31, 2002 ((i), (ii) and (iii) being referred to
herein as "Exercise Events"), the Company shall not have consummated a Qualified
Public Offering, the Investors may require the Company to redeem the Shares then
held by them on the terms herein provided. In such event any Investor or
Investors holding an aggregate of not less than twenty percent (20%) of the
total Shares held by the Investors may notify the Company that it or they intend
to offer to the Company any or all of the Shares then held by him or them for
purchase by the Company. The Company shall promptly give notice of such
intention to all other Investors who own Shares, and any Investor may, within
ten (10) days of such notice, give the Company notice that he intends to offer
to the Company any or all of the Shares then held by him. The Company shall
repurchase all Shares so offered under this Agreement as set forth below,
provided that the amount of Shares so offered equals or exceeds twenty percent
(20%) of the total Shares held by the Investors. The option to sell Shares
pursuant to this Section 1 shall be referred to as the "Option."
<PAGE> 2
(b) The Company agrees to provide each Investor 30 days' written
notice of the pendency of an Exercise Event and each Investor shall have the
right to exercise this Option in the manner provided in Section 1(a) above. If
the Exercise Event giving rise to the exercise of the Option is a liquidation,
dissolution or winding up of the Company or a Control Sale, the Option shall be
exercised immediately prior to, or concurrently with, the effective date of the
liquidation, dissolution or winding up of the Company or Control Sale, as the
case may be. The Company agrees that the transaction giving rise to the Exercise
Event shall not be consummated until it has satisfied its obligation to
repurchase the Shares as provided herein. In all other circumstances, the
Investors holding at least twenty percent (20%) of the Shares held by the
Investors which remain outstanding from time to time may exercise the right to
require the Company to purchase the Shares hereunder. In the event that an
Investor elects to exercise the Option in connection with a liquidation,
dissolution or winding up of the Company or Control Sale, any such election
shall be contingent upon the consummation of such event.
(c) The Company shall not be obligated to purchase Shares upon
exercise of Option on more than two occasions.
2. Price.
(a) The price to be paid by the Company for the Shares to be
sold under the Option shall be the fair market value thereof, as of the date of
such proposed repurchase, as agreed upon in good faith by the Company and the
Representative (who shall be a Person selected by the Investors owning a
majority of the Shares to be redeemed hereunder and who shall be hereinafter
referred to as the "Representative"), taking into account, in valuing such
Shares, all relevant facts and circumstances; provided, however, that (i) there
shall be no discount to reflect the fact that the Shares represent a minority
interest in the Company and (ii) in no event (whether by agreement of the
parties or after appraisal as described below) shall the aggregate purchase
price to be paid for such Shares being redeemed be less than the original
purchase price paid by the Investors therefor (as adjusted to reflect any stock
split, stock dividend or other form of recapitalization). If no such agreement
is reached within thirty (30) days after notice is given to the Company of the
Investors' exercise of the Option, the fair market value shall be determined by
appraisal as set forth below.
(b) All appraisals shall be undertaken by two appraisers, one
selected by the Board of Directors of the Company and one selected by the
Representative. No Director whose Shares are being appraised or who is
affiliated with a person whose Shares are being appraised shall vote on the
selection of the appraiser chosen by the Company. The fair market value shall be
the fair market value arrived at by those appraisers within thirty (30) days
following the appointment of the last appraiser to be appointed. In the event
that the two appraisers agree in good faith on such fair market value within
such a period of time, such agreed value shall be used for these purposes. If
the appraisers cannot agree but their valuations are within 10% of each other,
the fair market value shall be the mean of the two
- 2 -
<PAGE> 3
valuations. If the appraisers cannot agree and the differences in the valuations
are greater than 10%, the appraisers shall select a third appraiser who will
calculate fair market value independently, and, except as provided in the next
sentence, the fair market value of the Shares shall be the average of the two
fair market values arrived at by the appraisers who are closest in amount. If
one appraiser's valuation is the mean of the other two valuations, such mean
valuation shall be the fair market value. In the event that the two original
appraisers cannot agree upon a third appraiser within ten (10) days following
the end of the thirty (30) day period referred to above, then the third
appraiser shall be appointed by the American Arbitration Association in Boston,
Massachusetts. If, following the final determination of the purchase price for
the Shares, any Investor previously offering his Shares for repurchase shall
choose not to sell any or all of its Shares, then such Investor shall so notify
the Company within ten (10) days following receipt of the results of the
appraisal. The expenses of the appraiser chosen by the Company will be borne by
it, the expenses of the appraiser chosen by the Investors will be borne by them,
pro rata based on the number of Shares being redeemed, and the expenses of the
third appraiser will be borne 50% by the Company and 50% by the Investors, pro
rata based on the number of Shares being redeemed.
3. Payment.
(a) Within twenty (20) days following either the agreement, as
provided above, of the Company and the Representative concerning the fair market
value of the Shares or the receipt of the results of the last of the appraisals
referred to above, the Company shall purchase the Shares tendered to it at the
price established by this Agreement (the "Redemption Price"), and the Investors
shall deliver to the Company, upon receipt of payment therefor, the certificates
for the Shares duly endorsed by them for transfer.
(b) Notwithstanding the other provisions of this Agreement, the
Company shall not be obligated to repurchase any Shares to the extent such
repurchase would violate applicable law, as determined by an opinion of counsel
to the Company, which opinion and counsel shall be reasonably satisfactory to
the Representative; provided, however, that the Company shall use its best
efforts to comply with such restriction. In the event a repurchase is delayed on
account of the preceding sentence, it shall be made at the first time it would
not violate such law and the Redemption Price shall bear interest at the rate of
fifteen percent (15%) per annum, compounded annually, until such time as the
redemption is completed. If on account of the first sentence of this
subparagraph (b) the Company may purchase fewer than all of the Shares offered
for redemption, the Company shall repurchase all Shares when permitted,
allocated pro rata among those who requested that their Shares be redeemed, in
proportion to the amount which would have been paid to such holder had all
Shares as to which it requested redemption been redeemed. If on account of the
first sentence of this subparagraph (b) the Company may purchase fewer than all
of the Shares offered for redemption, the holders of the Shares not redeemed
shall continue to receive the benefit of the rights and privileges afforded the
Shares under the Purchase Agreement and the Related Agreements.
- 3 -
<PAGE> 4
(c) Payment shall be made by check or wire transfer of funds to
such bank account as each Investor shall direct.
4. Termination of Option. The obligations of the Company to purchase
the Shares as provided in this Agreement shall terminate immediately prior to
the consummation of a Qualified Public Offering.
5. Notices. All notices or other communications required or permitted
to be delivered hereunder shall be in writing signed by the party giving the
notice and sent by telecopier, express delivery service, or regular or certified
mail to the address specified in the Purchase Agreement.
6. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement of the parties with respect to the
matters contemplated herein. This Agreement and such other agreements supersede
any and all prior understandings as to the subject matter of this Agreement.
7. Amendments, Waivers and Consents. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Company shall obtain consent thereto in writing from
Persons holding an aggregate of at least a majority of the Shares owned by the
Investors.
8. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the respective parties
hereto.
9. General; Definitions. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Massachusetts. Terms used as
defined terms herein and not otherwise defined shall have the meanings set forth
in the Purchase Agreement.
10. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, with all the other provisions hereof
continuing in full force and effect.
11. Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
- 4 -
<PAGE> 5
TRITON SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date for first above written.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
_______________________________
Name: Earnest L. Burdette
Title: President
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.,
its general partner
By: Stamps, Woodsum & Co. IV,
its general partner
By: /s/ Joseph F. Trustey
______________________________
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Joseph F. Trustey
_______________________________
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.
Its General Partner
By: /s/ Joseph F. Trustey
_______________________________
General Partner
S-1
<PAGE> 6
SCHEDULE 1.1
INVESTORS
Name and Address
Summit Ventures IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
Summit Investors II, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
Summit Subordinated Debt Fund, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
S-1
<PAGE> 1
Exhibit 10.3
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 25 day of July, 1996, by and among Triton
Systems, Inc., a Mississippi corporation (the "Company"), Ernest L. Burdette,
Robert E. Sandoz and Frank J. Wilem, Jr. (collectively the "Management
Shareholders"), and Summit Ventures IV, L.P., Summit Investors III, L.P. and
Summit Subordinated Debt Fund, L.P. (collectively, the "Investors" and, together
with the Management Shareholders, the "Shareholders").
WHEREAS, the Investors are acquiring an aggregate of 114,000 shares of
Series A Senior Preferred Stock, par value $.01 per share, of the Company, and
4,160,000 shares of Common Stock, par value $1.00 per share, of the Company (the
"Common Stock"), pursuant to the terms of a Stock Purchase and Redemption
Agreement dated as of the date hereof among the Company, the Investors and the
Management Shareholders (the "Purchase Agreement");
WHEREAS, following the redemption contemplated by the Purchase
Agreement, the Management Shareholders will be the owners of an aggregate of
3,279,999 shares of Common Stock and 97,614 shares of Series B Preferred Stock,
par value $.01 per share (the "Series B Preferred Stock"); and
WHEREAS, it is a condition to the obligations of the parties under the
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and to be bound by the
provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall mean
and include all shares of the Common Stock and other equity securities of the
Company with rights to vote for the election of directors now owned or hereafter
acquired by a Shareholder. Other terms used as defined terms herein and not
otherwise defined shall have the meanings set forth in the Purchase Agreement.
2. Prohibited Transfers. No Management Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his Shares except in compliance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (a) a
Management Shareholder may transfer without the necessity of prior approval all
or any of his Shares by way of gift to his spouse, to any of his lineal
descendants or ancestors, or to any trust for the benefit of any one or more of
the Management Shareholder, his spouse or his lineal descendants or ancestors,
and (b) a Management Shareholder may transfer all or any of his Shares by will
or the laws of descent and distribution; provided that any such transferee under
clause (a) or (b) of this Section 2 (referred to herein as
<PAGE> 2
"Permitted Transferees") shall agree in writing with the Company and the other
Shareholders, as a condition to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
Management Shareholder transferring such Shares. In addition, after the
consummation of a Qualified Public Offering, a Management Shareholder and his
Permitted Transferees may transfer without necessity of complying with Section 4
hereof (which shall survive such Qualified Public Offering as to the Management
Shareholders and his Permitted Transferees) all or any of his Shares, provided
that the amount of Shares sold, together with all sales of such Shares by the
Management Shareholder within the preceding three months, shall not exceed the
greater of (i) one percent of the shares of Common Stock then outstanding (as
shown by the most recent report or statement published by the Company), or (ii)
the average weekly reported volume of trading in the Common Stock on all
national securities exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the sale of such Shares.
3. Right of First Refusal on Dispositions.
(a) If at any time a Management Shareholder (a "Selling
Management Shareholder") desires to sell or otherwise transfer all or any part
of his Shares pursuant to a bona fide offer from a third party (the "Proposed
Transferee"), the Selling Management Shareholder shall submit a written offer
(the "Offer") by delivering the Offer to the Company and the Investors, to sell
such Shares (the "Offered Shares") to the Company and the Investors on terms and
conditions, including price, not less favorable than those on which the Selling
Management Shareholder proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Shares
owned by the Selling Management Shareholder, the terms and conditions, including
price, of the proposed sale, and any other material facts relating to the
proposed sale. The Offer shall further state (i) that the Company and the
Investors may acquire, in accordance with the provisions of this Agreement, any
of the Offered Shares for the price and upon the other terms and conditions set
forth therein and (ii) that if all such Offered Shares are not purchased by the
Company and the Investors, the Investors who have not purchased any such Offered
Shares pursuant to this Section 3 may exercise their rights provided pursuant to
Section 4 hereof.
(b) The Company shall have the right to purchase the Offered
Shares. If the Company desires to purchase all or any part of the Offered
Shares, it shall communicate in writing its election to purchase any of the
Offered Shares to the Selling Management Shareholder and the Investors, which
communication shall state the number of Offered Shares that the Company desires
to purchase and the number of Offered Shares, if any, remaining for purchase by
the Investors pursuant to Section (c) below, and shall be given within 20 days
of the date the Offer was made.
(c) If the Company does not elect to purchase all of the Offered
Shares within the time period specified above, each Investor shall have the
right to purchase that number of
- 2 -
<PAGE> 3
remaining Offered Shares as shall be equal to the number of such Offered Shares
multiplied by a fraction, the numerator of which shall be the number of Shares
then owned by such Investor and the denominator of which shall be the aggregate
number of Shares then owned by all of the Investors who elect to purchase the
remaining Offered Shares. The amount of such Offered Shares that each Investor
is entitled to purchase under this Section 3(c) shall be referred to as its "Pro
Rata Fraction".
(d) The Investors shall have a right of oversubscription such
that if any Investor fails to accept the Offer as to its full Investor Pro Rata
Fraction, the remaining Investors shall, among them, have the right to purchase
up to the balance of the remaining Offered Shares not so purchased. Other
Investors may exercise such right of oversubscription by accepting the Offer for
the remaining Offered Shares as to more than their Investor Pro Rata Fraction.
If, as a result thereof, such oversubscriptions exceed the total number of the
Offered Shares available in respect of such oversubscription privilege, the
oversubscribing Investors shall be cut back with respect to over subscriptions
on a pro rata basis in accordance with their respective Investor Pro Rata
Fractions or as they may otherwise agree among themselves.
(e) Those Investors who desire to purchase all or any part of
the remaining Offered Shares shall communicate in writing their election to
purchase to the Selling Management Shareholder, which communication shall state
the number of remaining Offered Shares said Investors desire to purchase and
shall be provided to the Selling Management Shareholder within 30 days of the
date the Offer was made. Such communication, together with the communication of
the Company specified above, shall, when taken in conjunction with the Offer, be
deemed to constitute a valid, legally binding and enforceable agreement for the
sale and purchase of such Offered Shares (subject to the aforesaid limitations
as to the right of the Investors to purchase more than their Pro Rata Fraction).
Sales of such Offered Shares to be sold to the Company and the Investors
pursuant to this Section 3 shall be made at the offices of the Company within 60
days following the date the Offer was made.
(f) If the Company and the Investors do not purchase all of the
Offered Shares, the remaining Offered Shares may be sold by the Selling
Management Shareholder at any time within 120 days after the date the Offer was
made, subject to the provisions of Section 4. Any such sale shall be to the
Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any remaining Offered Shares not sold within such
120-day period shall continue to be subject to the requirements of a prior offer
pursuant to this Section 3. If Offered Shares are sold pursuant to this Section
3 to any purchaser who is not a party to this Agreement, the purchaser of such
Offered Shares shall execute a counterpart of this Agreement as a precondition
of the purchase of such Offered Shares and any Offered Shares sold to such
purchaser shall continue to be subject to the provisions of this Agreement.
- 3 -
<PAGE> 4
4. Right of Participation in Sales.
(a) If at any time any Shareholder desires to sell all or any
part of the Shares owned by him or it to any third party (the "Selling
Shareholder"), and those Shares to be transferred have not been purchased by the
Company and the Investors under Section 3, or the Management Shareholders under
Section 5, as the case may be, each of the Shareholders (other than those who
have elected to purchase Shares pursuant to Section 3 or Section 5, as the case
may be) shall have the right to sell to the third party, as a condition to such
sale by the Selling Shareholder, at the same price per share and on the same
terms and conditions as involved in such sale by the Shareholder, a pro rata
portion of the amount of Shares proposed to be sold to the third party. The "pro
rata portion" of Shares which a Shareholder shall be entitled to sell to the
third party shall be that number of Shares as shall equal the number of Shares
proposed to be sold to the third party multiplied by a fraction, the numerator
of which is the aggregate of all shares of Common Stock which are then held by
the Shareholder wishing to participate in the sale, and the denominator of which
is the aggregate of all shares of Common Stock which are then held by the
Management Shareholder and all Investors wishing to participate in any sale
under this Section 4, including the Selling Shareholder.
(b) If the Selling Shareholder wishes to make a sale to a third
party which is subject to this Section 4, the Selling Shareholder shall, after
complying with the provisions of Section 3 or 5, as the case may be, give to
each Shareholder notice of such proposed sale, and stating that all Shares were
not purchased pursuant to the Offer as discussed in Section 3 or 5. Such notice
shall be given at least 20 days prior to the date of the proposed sale to the
third party. Each Shareholder wishing to so participate in any sale under this
Section 4 shall notify the Selling Shareholder in writing of such intention
within 15 days after such Shareholder's receipt of the notice described in the
preceding sentence.
(c) The Selling Shareholder and each participating Shareholder
shall sell to the third party all, or at the option of the third party, any part
of the Shares proposed to be sold by them at not less than the price and upon
other terms and conditions, if any, not more favorable to the third party than
those in the notice provided by the Selling Shareholder under subparagraph (b)
above; provided, however, that any purchase of less than all of such Shares by
the third party shall be made from the Selling Shareholder and each
participating Shareholder pro rata based upon the relative number of the Shares
that the Selling Shareholder and each participating Shareholder is otherwise
entitled to sell pursuant to Section 4(a).
(d) If any Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
- 4 -
<PAGE> 5
5. Right of First Offer on Dispositions by Investors.
(a) If at any time any of the Investors desire to sell or
otherwise transfer any of the Shares held by such Investor (other than permitted
transfers as specified in Section 5(e)) in a bona fide transaction to a third
party, the Investors wishing to sell Shares (the "Selling Investors") shall
notify in writing the Company and the Management Shareholders of their intent to
sell specifying the aggregate number of Shares which they intend to sell (the
"Investor Offered Shares"). The Management Shareholders shall have 20 days after
receipt of such notice within which to make an offer to purchase all, but not
less than all, of the Investor Offered Shares which the Selling Investors
propose to sell (the "Offer to Buy"). The Offer to Buy shall include a complete
description of the terms of the proposal including the purchase price to be
paid, terms of payment and all other material terms thereof.
(b) In no event will the Selling Investors be under any
obligation to accept the Offer to Buy and the Selling Investors shall be free,
for a period of 120 days after the date of the initial notice of their intent to
sell the Investor Offered Shares, to sell the Investor Offered Shares to a third
party in a bona fide transaction; provided, however, that no such transfer to
any third party may be at a purchase price that is less than, or on other terms
in the aggregate materially less favorable to the Selling Investor than as were
contained in the Offer to Buy.
(c) In the event that the Selling Investors accept the Offer to
Buy, such acceptance shall be made in writing to the Management Shareholders and
the sale contemplated thereby shall be made at the offices of the Company no
later than 90 days from the date of such acceptance. In the event that the
transaction shall fail to close by the 90th day after the date of the Selling
Investors' acceptance of the Offer to Buy, the Selling Investors shall be free
to sell the Investor Offered Shares to any third party without complying with
the provisions of this Section 5.
(d) If the Investor Offered Shares are transferred to a third
party in accordance with the terms of this Section 5, such third party shall
take such Shares free of the restrictions on transfer imposed by this Section 5.
(e) Notwithstanding the terms of this Section 5, the
restrictions on transfer contained in this Section 5 shall not apply to: (i) a
transfer of Shares of an Investor which is a partnership to one or more of its
constituent partners or to any person or institution controlled by or under
common control with such partnership, or to a retired or withdrawn partner who
retires or withdraws after the date hereof in full or partial distribution of
his interest in such partnership, or to the estate of any such partner; or (ii)
a transfer by gift, will or intestate succession of any person to his spouse, to
any of his lineal descendants, or to any trust for the exclusive benefit of one
or more of the foregoing; provided that such transferee under clauses (i) and
(ii) shall agree in writing with the Company and the other Shareholders to be
bound by all of the provisions of this Agreement to the same extent as if such
transferee were the Investor transferring the Shares.
- 5 -
<PAGE> 6
6. Take Along. If, at any time the Investors shall determine to sell or
exchange (in a business combination or otherwise) fifty percent (50%) or more of
the Shares then held by them to a third party, then, upon the written request of
the Investors (the "Sale Request"), each Shareholder shall be obligated to, and
shall (i) sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such third party, that percentage of his or its Shares that is
equal to the percentage of the aggregate holding of the Shares held by the
Investors that is being sold or exchanged to the third party at the same price
per share and on the same terms applicable to the Investors and (ii) if,
stockholder approval of the transaction is required, vote his Shares in favor
thereof.
7. Election of Directors. At each annual meeting of the shareholders of
the Company, and at each special meeting of the shareholders of the Company
called for the purpose of electing directors of the Company, and at any time at
which shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors consisting of
not more than seven directors, designated in the manner designated below.
(a) one director shall be designated by Summit Ventures IV,
L.P. (which designee shall initially be Joseph F. Trustey);
(b) one director shall be designated by Summit Subordinated
Debt Fund, L.P. (which designee shall initially be Kevin P. Mohan);
(c) so long as a Management Shareholder shall own at least
10% of the shares of Common Stock then outstanding, such Management Shareholder
shall be entitled to designate one director, such that on the date hereof the
Management Shareholders shall be entitled to designate three directors (which
designees shall initially be Ernest L. Burdette, Robert E. Sandoz and Frank J.
Wilem, Jr.); and
(d) two directors who are not affiliated with the Company
shall be designated by the Investors after consulting with the Management
Shareholders (which designees shall initially be Scott C. Collins and Faraz
Daneshgar).
8. Compensation Committee. There shall be established at all times
during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of three
directors as follows: one of whom shall be one of the directors designated under
Section 7(a) or 7(b); one of whom shall be one of the directors designated under
Section 7(c); and one of whom shall be one of the directors designated under
Section 7(d). The Compensation Committee will determine the compensation of all
senior employees and consultants of the Company (including salary, bonus, equity
participation and benefits), provided that no member of the Compensation
Committee may vote on his own compensation. The compensation of senior employees
and consultants shall be reviewed by the
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<PAGE> 7
Compensation Committee on an annual basis, and the decision by a majority of the
members of the Compensation Committee will control the Committee's actions.
9. Term. This Agreement shall terminate immediately prior to (a) the
consummation of the first Qualified Public Offering, or (b) the tenth
anniversary of the date of this Agreement whichever occurs first, except that
the provisions of Section 4 hereof shall continue after a Qualified Public
Offering until the tenth anniversary of the date of this Agreement with respect
to the sale of any Shares by the Management Shareholders.
10. Failure to Deliver Shares. If any Shareholder becomes obligated to
sell any Shares to another Shareholder under this Agreement and fails to deliver
such Shares in accordance with the terms of this Agreement, such other
Shareholder may, at its option, in addition to all other remedies it may have,
send to the defaulting Shareholder the purchase price for such Shares as is
herein specified. Thereupon, the Company, upon written notice to the defaulting
Shareholder, (a) shall cancel on its books the certificate or certificates
representing the Shares to be sold and (b) shall issue, in lieu thereof, in the
name of such other Shareholder, a new certificate or certificates representing
such Shares, and thereupon all of the defaulting Shareholder's rights in and to
such Shares shall terminate.
11. Specific Enforcement. Each Shareholder expressly agrees that the
other Shareholders and the Company may be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Shareholder, the other
Shareholders and the Company shall, in addition to all other remedies, each be
entitled to apply for a temporary or permanent injunction, and/or a decree for
specific performance, in accordance with the provisions hereof.
12. Legend. Each certificate evidencing any of the Shares now owned or
hereafter acquired by the Shareholders shall bear a legend substantially as
follows:
"Any sale, assignment, transfer or other disposition of the shares
represented by this certificate is restricted by, and subject to, the
terms and provisions of a certain Shareholders' Agreement dated as of
July 25, 1996. A copy of said Agreement is on file with the Secretary of
the Corporation."
13. Notices. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark if mailed by
certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on Schedule I hereto or such other
address as the addressee may subsequently notify the other parties of in
writing.
14. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written
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<PAGE> 8
agreement signed by the parties hereto; provided, however, that Investors owning
at least a majority of the Shares owned by all Investors may effect any such
waiver, modification, amendment or termination on behalf of all of the Investors
and Management Shareholders owning at least a majority of the Shares owned by
all Management Shareholders may effect any such waiver, modification, amendment
or termination on behalf of all of the Management Shareholders. Each of the
Shareholders represents that he or it is not a party to any other agreement
which would prevent him or it from performing his or its obligations hereunder.
No waiver of any breach or default hereunder shall be considered valid unless in
writing, and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
15. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the State of Mississippi (or the laws of such
other state in which the Company is then incorporated) without giving effect to
the conflicts of laws principles thereof and, except as otherwise provided
herein, shall be binding upon the heirs, personal representatives, executors,
administrators, successors and assigns of the parties, provided that no
Management Shareholder shall be permitted to assign its rights to designate a
director under Section 8(c) hereof.
16. Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
17. Captions. Captions are for convenience only and are not deemed to
be part of this Agreement.
18. Counterparts. This Agreement may be executed 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.
* * *
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<PAGE> 9
TRITON SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
MANAGEMENT SHAREHOLDERS: COMPANY:
TRITON SYSTEMS, INC.
/s/ Ernest L. Burdette
_______________________________
Ernest L. Burdette By: /s/ Ernest L. Burdette
________________________________
Name: Ernest L. Burdette
Title: President
/s/ Robert E. Sandoz
_______________________________
Robert E. Sandoz INVESTORS:
SUMMIT VENTURES IV, L.P.
/s/ Frank J. Wilem, Jr.
_______________________________
Frank J. Wilem, Jr. By: Summit Partners IV, L.P.,
its general partner
By: Stamps, Woodsum & Co. IV,
its general partner
By: /s/ Joseph F. Trustey
_______________________________
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Joseph F. Trustey
_______________________________
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.
Its General Partner
By: /s/ Joseph F. Trustey
_______________________________
General Partner
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<PAGE> 10
SCHEDULE 1
COMPANY
Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
Attn: President
MANAGEMENT SHAREHOLDERS
Ernest L. Burdette
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
Robert E. Sandoz
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
Frank J. Wilem, Jr.
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
INVESTORS
Summit Investors III, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
Summit Ventures IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
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<PAGE> 11
Summit Subordinated Debt Fund, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
- 11 -
<PAGE> 1
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the 25 day of July, 1996, by and among TRITON
SYSTEMS, INC., a Mississippi corporation (the "Company"), those persons set
forth on Schedule I as Investors (each an "Investor" and collectively the
"Investors") and those persons set forth on Schedule I as Management
Shareholders (each a "Management Shareholder" and collectively the "Management
Shareholders").
WHEREAS, the Investors are acquiring an aggregate of 114,000 shares of
Series A Senior Preferred Stock, par value $.01 per share, of the Company (the
"Series A Preferred Stock") and 4,160,000 shares of Common Stock, par value
$1.00 per share, of the Company (the "Common Stock"), pursuant to the terms of a
Stock Purchase and Redemption Agreement dated as of the date hereof among the
Company, the Investors and certain shareholders of the Company (the "Purchase
Agreement"); and
WHEREAS, it is a condition to the obligations of the Investors and the
Management Shareholders under the Purchase Agreement that this Agreement be
executed by the parties hereto in order to provide the Investors and the
Management Shareholders with certain registration rights with respect to the
shares of Common Stock being purchased by the Investors under the Purchase
Agreement and with respect to the shares of Common Stock held by the Management
Shareholders, and the parties are willing to execute this Agreement and to be
bound by the provisions hereof;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE> 2
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public, provided that for purposes of
Section 2 hereof, the term "Holder" shall not include the Management
Shareholders.
"Initiating Holders" means any Investors and their assignees who in the
aggregate are holders of at least twenty-five percent (25%) of the outstanding
Registrable Securities held by the Investors and their assignees.
"Registrable Securities" means (i) all shares of Common Stock now owned
or hereafter acquired by any Investor; (ii) all shares of Common Stock issuable
with respect to securities of the Company convertible into or exercisable for
shares of Common Stock now owned or hereafter acquired by any Investor; (iii)
for purposes of Section 3 hereof, all shares of Common Stock now owned or
hereafter acquired by any Management Shareholder; and (iv) any Common Stock
issued in respect of the shares described in clauses (i) and (iii) upon any
stock split, stock dividend, recapitalization or other similar event.
The terms "register" means to register under the Act and applicable
state securities laws for the purpose of effecting a public sale of securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 2, 3 or 5 hereof, including, without limitation, all
registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue-sky fees and expenses, fees of
transfer agents and registrars, reasonable fees and disbursements of one counsel
for all the selling Holders, and the expense of any special audits incident to
or required by any such registration.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. Requested Registrations
(a) If on any two occasions, the Company shall receive from one
or more Initiating Holders a written request that the Company effect the
registration of Registrable Securities representing at least twenty five percent
(25%) of the Registrable Securities held by the Investors (or any lesser
percentage if the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed
$10,000,000, in connection with a firm commitment underwriting managed by a
nationally recognized underwriter, the Company will:
(i) promptly give written notice of the proposed registration to
all other Holders; and
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<PAGE> 3
(ii) as soon as practicable, use all commercially reasonable
efforts to effect such registration as may be so requested and as would
permit or facilitate the sale and distribution of such portion of such
Registrable Securities as are specified in such request, together with
such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given
within thirty days after receipt of such written notice from the
Company. If the underwriter managing the offering advises the Holders
who have requested inclusion of their Registrable Securities in such
registration that marketing considerations require a limitation on the
number of shares offered, such limitation shall be imposed pro rata
among such Holders who requested inclusion of Registrable Securities in
such registration according to the number of Registrable Securities then
held by such Holders. Neither the Company nor any other shareholder
(including, without limitation, the Management Shareholder) may include
shares in a registration effected under this Section 2 without the
consent of the Investors holding a majority of the Registrable
Securities sought to be included in such registration by the Investors
if the inclusion of shares by the Company or the other shareholders
would limit the number of Registrable Securities sought to be included
by the Investors or reduce the offering price thereof. No registration
initiated by the Holders hereunder shall count as a registration under
this Section 2 unless and until it shall have been declared effective
and the Holders shall have sold all of the Registrable Securities
included in such registration.
(b) Selection of Underwriter. The underwriter of any
underwriting requested under this Section 2 shall be selected by the Holders
holding a majority of the Registrable Securities included therein; provided that
such underwriter must be reasonably acceptable to the Company.
3. "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights (other than pursuant to Section 2),
other than a registration relating solely to employee benefit plans, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of
the proposed underwriter); and
(ii) Use its best efforts to include in such registration all the
Registrable Securities specified in a written request or requests, made
by any Holder within twenty (20) days after the date of delivery of the
written notice from the Company described in clause (i) above. If the
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant to any registration
statement,
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<PAGE> 4
then the Company may offer all of the securities it proposes to register
for its own account and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed: (a)
first, so as to exclude all Registrable Securities of Holders other than
the Investors and their assignees until the sum of all dividends
received on the Series A Preferred Stock and the aggregate net proceeds
received by the Investors and their assignees from any redemption of
their Series A Preferred Stock or sale to the public of any Common Stock
(including proceeds to be received in connection with the requested
registration) equal the sum of $11,400,000 plus a compound return
thereon through the date of such registration of 10%; (b) next, so as to
exclude all Registrable Securities of Holders other than the Management
Shareholders and their assignees until the sum of all dividends received
on the Series B Preferred Stock and the aggregate net proceeds received
by the Management Shareholders and their assignees from any redemption
of their Series B Preferred Stock or sale to the public of any Common
Stock (including proceeds to be received in connection with the
requested registration) equal the sum of $10,000,000 plus a compound
return thereon through the date of such registration of 10%; and (c)
thereafter, pro rata among the Holders who requested inclusion of
Registrable Securities in such registration according to the number of
Registrable Securities then held by each of them.
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 3; provided that such underwriter must be reasonably
acceptable to the Holders of a majority of the Registrable Securities being
registered in such offering.
4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2, 3, or 5 shall be paid by the Company. All Selling Expenses incurred
in connection with any such registration, qualification or compliance shall be
borne by the holders of the securities registered, pro rata on the basis of the
number of their shares so registered.
5. Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of the
Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of
Registrable Securities shall have the right to request registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Holder or Holders), provided that the Company shall not
be obligated to effect any such registration pursuant to this Section 5 more
than once in any twelve month period, and in no event shall the Company be
required to register shares with an aggregate market value of less than
$5,000,000.
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<PAGE> 5
6. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will do the following for the benefit of such Holders:
(a) Keep such registration effective for a period of 120 days or
until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs, and amend or
supplement such registration statement and the prospectus contained therein from
time to time to the extent necessary to comply with the Act and applicable state
securities laws;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holder and provided
further that, if the underwriter so requests, the underwriting agreement will
contain customary contribution provisions on the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, use its best efforts to obtain a comfort letter from
the Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters and an opinion from
the Company's counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case addressed
to the Holders, and provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders whose
expenses are being paid pursuant to Section 4 hereof to inspect and copy such
corporate documents as he may reasonably request.
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<PAGE> 6
7. Indemnification.
(a) The Company will, and hereby does, indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder within the meaning of the Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Act or the Exchange Act or securities act of any state or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of its officers, directors
and partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, whether or not resulting in any
liability, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement (or alleged untrue statement) or omission (or
alleged omission) based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each other such Holder and each of their officers, directors and
partners, and each person controlling such Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, each person controlling
the Company, each underwriter and each person who controls any such underwriter,
each Holder and each person controlling such Holder, and their respective
directors, officers, partners, persons, underwriters and control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, whether or not
resulting in liability, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance
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<PAGE> 7
upon and in conformity with written information furnished to the Company by such
Holder and stated to be specifically for use therein; provided, however that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds received by such Holder upon sale of his securities.
(c) Each party entitled to indemnification under this Section 7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 2 or 3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 2 or 3 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
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<PAGE> 8
8. Information by Holder. Each Holder of Registrable Securities included
in any registration shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Agreement
or otherwise required by applicable state or federal securities laws.
9. Limitations on Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Investors, enter into any agreement with any holder or prospective holder of any
securities of the Company which would give any such holder or prospective holder
(a) the right to require the Company, upon any registration of any of its
securities, to include, among the securities which the Company is then
registering, securities owned by such holder, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of its securities will
not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.
10. Exception to Registration. The Company shall not be required to
effect a registration under this Agreement if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of Registrable Securities, such Holders may
sell without registration under the Act all Registrable Securities for which
they requested registration under the provisions of the Act and in the manner
and in the quantity in which the Registrable Securities were proposed to be
sold, or (ii) the Company shall have obtained from the Commission a "no-action"
letter to that effect; provided that this Section 10 shall not apply to sales
made under Rule 144(k) or any successor rule promulgated by the Commission until
after the effective date of the Company's initial registration of shares under
the Act. Notwithstanding the foregoing, in no event shall the provisions of this
Section 10 be construed to preclude a Holder of Registrable Securities from
exercising rights under Section 3 for a period of three years after the
effective date of the Company's initial registration of shares under the Act.
11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 under the Act, at all times from and
after ninety days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
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<PAGE> 9
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as an Investor owns any restricted securities,
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as an Investor may reasonably request in availing itself of
any rule or regulation of the Commission allowing an Investor to sell any such
securities without registration.
12. Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Investor.
13. Damages. The Company recognizes and agrees that the Holder of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance.
14. Representations and Warranties of the Company. The Company
represents and warrants to the Investors as follows:
(a) The execution, delivery and performance of this Agreement by
the Company have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government by which the Company or any of its properties or assets is bound, the
Articles of Incorporation or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which the Company or any or its
properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
- 9 -
<PAGE> 10
15. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Registrable Securities), whether so expressed or
not, provided that the Management Shareholders shall not be permitted to assign
their rights hereunder, except to Permitted Transferees (as defined in the
Shareholders' Agreement dated as of the date hereof).
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telecopied or sent by other
facsimile method addressed as follows:
If to the Company or any Investor, at the address of such party
set forth on Schedule I hereto or the most recent address as is shown on
the stock records of the Company; and
If to any subsequent Holder of Registrable Securities, to it at
such address as may have been furnished to the Company in writing by
such Holder; or, in any case, at such other address or addresses as
shall have been furnished in writing to the Company (in the case of a
Holder of Registrable Securities) or to the Holders of Registrable
Securities (in the case of the Company) in accordance with the
provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the of the Commonwealth of Massachusetts.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least a majority of the then outstanding Registrable
Securities held by the Investors, except that any amendment or waiver to Section
3 hereof which does not similarly affect all Holders will require the written
consent of all Holders of at least two-thirds of the outstanding Registrable
Securities.
(e) This Agreement may be executed 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.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
* * * * * * * * * *
- 10 -
<PAGE> 11
TRITON SYSTEMS, INC.
REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
MANAGEMENT SHAREHOLDERS: COMPANY:
TRITON SYSTEMS, INC.
/s/ Ernest L. Burdette
_______________________________
Ernest L. Burdette By: /s/ Ernest L. Burdette
________________________________
Name: Ernest L. Burdette
Title: President
/s/ Robert E. Sandoz
_______________________________
Robert E. Sandoz INVESTORS:
SUMMIT VENTURES IV, L.P.
/s/ Frank J. Wilem, Jr.
_______________________________
Frank J. Wilem, Jr. By: Summit Partners IV, L.P.,
its general partner
By: Stamps, Woodsum & Co. IV,
its general partner
By: /s/ Joseph F. Trustey
_______________________________
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Joseph F. Trustey
_______________________________
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.
Its General Partner
By: /s/ Joseph F. Trustey
_______________________________
General Partner
S-1
<PAGE> 12
SCHEDULE 1
COMPANY
Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
Attn: President
INVESTORS
Name and Address
Summit Ventures IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
Summit Investors III, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
Summit Subordinated Debt Fund, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey
MANAGEMENT SHAREHOLDERS
Name and Address
Ernest L. Burdette
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
Robert E. Sandoz
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
<PAGE> 13
Frank J. Wilem, Jr.
c/o Triton Systems, Inc.
522 East Railroad Street
Long Beach, Mississippi 39560
<PAGE> 1
EXHIBIT - 10.5
----------------------------------------------------------------
----------------------------------------------------------------
CREDIT AGREEMENT
by and between
TRITON SYSTEMS, INC.
and
THE FIRST NATIONAL BANK OF BOSTON
Dated As of September 26, 1996
----------------------------------------------------------------
----------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
1. DEFINITIONS AND RULES OF INTERPRETATION............................ 1
1.1 Definitions............................................... 1
1.2 Rules of Interpretation................................... 14
2. THE REVOLVING CREDIT FACILITY...................................... 14
2.1 Commitment to Lend........................................ 14
2.2 Commitment Fee............................................ 16
2.3 Reduction of Commitment................................... 16
2.4 The Revolving Credit Note................................. 16
2.5 Interest on Revolving Credit Loans........................ 17
2.6 Requests for Revolving Credit Loans; Type of Loan......... 17
2.7 One Loan.................................................. 18
2.8 Letter of Credit Arrangements............................. 18
3. REPAYMENT OF THE LOANS............................................. 19
3.1 Maturity.................................................. 19
3.2 Mandatory Repayments of Revolving Credit Loans............ 19
3.3 Optional Repayments of Loans.............................. 19
4. CERTAIN GENERAL PROVISIONS......................................... 20
4.1 Facility Fee.............................................. 20
4.2 Funds for Payments........................................ 20
4.3 Computations.............................................. 20
4.4 Additional Costs, Etc..................................... 21
4.5 Capital Adequacy.......................................... 22
4.6 Certificate............................................... 22
4.7 Interest on Overdue Amounts............................... 22
4.8 Inability to Determine LIBOR.............................. 22
4.9 Illegality................................................ 23
4.10 Indemnity................................................. 23
5. COLLATERAL SECURITY................................................ 24
6. REPRESENTATIONS AND WARRANTIES..................................... 24
6.1 Corporate Authority; Etc.................................. 24
6.2 Governmental Approvals.................................... 25
6.3 Title to Properties; Leases............................... 25
6.4 Financial Statements...................................... 25
6.5 No Material Changes, Etc.................................. 26
6.6 Intellectual Property Rights.............................. 26
6.7 Litigation................................................ 26
6.8 No Materially Adverse Contracts, Etc...................... 27
6.9 Compliance With Other Instruments, Laws, Etc.............. 27
6.10 Tax Status................................................ 27
6.11 No Event of Default....................................... 27
6.12 Holding Company and Investment Company Acts............... 27
6.13 Absence of UCC Financing Statements, Etc.................. 27
6.14 Setoff, Etc............................................... 28
6.15 Certain Transactions...................................... 28
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<PAGE> 3
6.16 Employee Benefit Plans; Multiemployer Plans;
Guaranteed Pension Plans.................................. 28
6.17 Regulations U and X....................................... 28
6.18 Environmental Compliance.................................. 28
6.19 Subsidiaries.............................................. 30
6.20 Loan Documents............................................ 30
6.21 Acquisition Agreement..................................... 30
6.22 Real Property; Leases..................................... 30
6.23 Chief Place of Business; Locations of Property............ 31
6.24 Authorized and Outstanding Stock.......................... 31
7. AFFIRMATIVE COVENANTS OF THE BORROWER.............................. 31
7.1 Punctual Payment.......................................... 32
7.2 Maintenance of Office; Business Name...................... 32
7.3 Records and Accounts...................................... 32
7.4 Financial Statements, Certificates and
Information............................................... 32
7.5 Notices................................................... 34
7.6 Existence; Maintenance of Properties...................... 35
7.7 Insurance................................................. 35
7.8 Taxes..................................................... 36
7.9 Inspection of Properties and Books........................ 36
7.10 Compliance with Laws, Contracts, Licenses, and
Permits................................................... 37
7.11 Use of Proceeds........................................... 37
7.12 Further Assurances........................................ 37
7.13 Maintenance of Liens of Security Documents................ 37
7.14 Equipment Not to Become Fixtures.......................... 38
7.15 Verification of Accounts.................................. 38
7.16 Key Man Life Insurance.................................... 38
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER......................... 38
8.1 Restrictions on Indebtedness.............................. 38
8.2 Restrictions on Liens, Etc................................ 39
8.3 Restrictions on Investments............................... 41
8.4 Merger, Consolidation..................................... 42
8.5 Sale and Leaseback........................................ 42
8.6 Compliance with Environmental Laws........................ 42
8.7 Distributions............................................. 42
8.8 Change to Fiscal Year..................................... 43
9. FINANCIAL COVENANTS OF THE BORROWER................................ 43
9.1 Minimum Net Income........................................ 43
9.2 Total Debt Service Coverage............................... 43
9.3 Leverage Ratio............................................ 43
9.4 Capital Expenditures...................................... 43
10. CLOSING CONDITIONS................................................. 44
10.1 Loan Documents............................................ 44
10.2 Certified Copies of Organization Documents................ 44
10.3 By-laws; Resolutions...................................... 44
10.4 Incumbency Certificate; Authorized Signers................ 44
10.5 Validity of Liens......................................... 44
10.6 UCC Searches.............................................. 44
- ii -
<PAGE> 4
10.7 Leases.................................................... 44
10.8 Lease Collateral Agreements............................... 45
10.9 Certificates of Insurance................................. 45
10.10 Opinion of Counsel Concerning Organization and
Loan Documents............................................ 45
10.11 Payment of Fees........................................... 45
10.12 Permit Assurances......................................... 45
10.13 Other Documents........................................... 45
11. CONDITIONS TO ALL BORROWINGS....................................... 45
11.1 Representations True; No Event of Default................. 45
11.2 No Legal Impediment....................................... 46
11.3 Governmental Regulation................................... 46
11.4 Proceedings and Documents................................. 46
12. EVENTS OF DEFAULT; ACCELERATION; ETC............................... 46
12.1 Events of Default and Acceleration........................ 46
12.2 Termination of Commitment................................. 48
12.3 Remedies.................................................. 49
12.4 Distribution of Collateral Proceeds....................... 49
12.5 Event of Default Waiver................................... 50
13. SETOFF............................................................. 50
14. [Intentionally blank.]............................................. 50
15. EXPENSES........................................................... 50
16. INDEMNIFICATION.................................................... 51
17. SURVIVAL OF COVENANTS, ETC......................................... 52
18. SUCCESSORS......................................................... 52
19. NOTICES, ETC....................................................... 52
20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE................. 53
21. HEADINGS........................................................... 53
22. COUNTERPARTS....................................................... 53
23. ENTIRE AGREEMENT, ETC.............................................. 54
24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS..................... 54
25. CONSENTS, AMENDMENTS, WAIVERS, ETC................................. 54
26. SEVERABILITY....................................................... 54
- iii -
<PAGE> 5
EXHIBITS AND SCHEDULES:
Exhibit A - Revolving Credit Note
Exhibit B - Officer's Certificate
Exhibit C - NOTICE OF BORROWING
Exhibit D
Schedule 1 - Statement of Cash Flows
Schedule 6.2 - Government Approvals
Schedule 6.3 - Title to Properties; Leases
Schedule 6.6 - Intellectual Property
Schedule 6.7 - Litigation
Schedule 6.10 - Tax Status
Schedule 6.15 - Certain Transactions
Schedule 6.16 - Employee Benefit Plans
Schedule 6.18 - Environmental Compliance
Schedule 6.22 - Real Property; Leases
Schedule 6.24 - Stock Ownership
Schedule 8.1 - Restrictions on Indebtedness
Schedule 8.2 - Restrictions on Liens, Etc.
Schedule 8.3 - Restrictions on Investments
- iv -
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is made as of the 26th day of September, 1996, by
and between TRITON SYSTEMS, INC., a Mississippi corporation (the "Borrower"),
having its principal place of business at 522 East Railroad Street, Long Beach,
Mississippi, and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association (the "Bank"), having an office at 100 Federal Street, Boston,
Massachusetts 02110.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1 Definitions. The following terms shall have the meanings set forth
in this Section 1 or elsewhere in the provisions of this Agreement referred to
below:
Accounts and Accounts Receivable. See Security Agreement.
Account Debtor. A Person who is an obligor to Borrower under any
Account.
Acquisition Agreement. Stock Purchase and Redemption Agreement by and
among the Borrower, Summit Ventures IV, L.P., Summit Investors III, L.P., Summit
Subordinated Debt Fund, L.P. and the Borrower Key Officers dated as of July 25,
1996.
Affiliate means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such Person, and shall include (i) any officer or director or
general partner of such Person and (ii) any Person of which such Person or any
Affiliate (as defined in clause (i) above) of such Person shall, directly or
indirectly, beneficially own either at least 10% of the outstanding equity
securities having the general power to vote or at least 10% of all equity
interests.
Agreement. This Credit Agreement, including the Schedules and Exhibits
hereto.
Balance Sheet Date. The balance sheet of the borrower dated as of
August 31, 1996.
Bank. The First National Bank of Boston, its successors and assigns,
and any other Person who becomes an assignee of any rights thereof.
Bank's Head Office. The Bank's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Bank may
designate in writing from time to time.
Bank's Special Counsel. Kirkpatrick & Lockhart, LLP.
Base Maximum Amount. Section 2.1(b).
1
<PAGE> 7
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by Bank at its head office in Boston, Massachusetts as its "base
rate" and (b) one half of one percent (1/2%) above the overnight Federal Funds
Effective Rate as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time (rounded upwards, if necessary, to the
next one-eighth of one percent).
Base Rate Applicable Margin. The percentage determined as set forth
below, at any time during the period the Leverage Ratio is at the level set
forth below:
<TABLE>
<CAPTION>
Leverage Ratio Base Rate Applicable Margin
-------------- ---------------------------
<S> <C>
greater than or equal to 2.50:1.0 0.25%
less than 2.50:1.0 0.0
</TABLE>
Base Rate Loan. Any Revolving Credit Loans bearing interest determined
with reference to the Base Rate.
Book Value. As defined by generally accepted accounting principles.
Borrower. As defined in the preamble hereto.
Borrower's Key Officers: Ernest L. Burdette, Robert E. Sandoz, and
Frank J. Wilem, Jr.
Business Day. Any day (other than a Saturday or Sunday) on which
banking institutions in Boston, Massachusetts, are open for the transaction of a
substantial part of their commercial banking business and with respect to all
notices and determinations in connection with and payments of principal and
interest on LIBOR Rate Loans, any day that is a London Banking Day.
Calculation Date. April 1 of each calendar year.
Capital Expenditures. For any period, amounts added or required to be
added to the fixed assets account on the consolidated balance sheet of the
Borrower, prepared in accordance with generally accepted accounting principles,
in respect of (i) the acquisition, construction, improvement or replacement of
land, buildings, machinery, equipment, leaseholds and any other real or personal
property, and (ii) to the extent not included in clause (i) above, expenditures
on account of materials, contract labor and direct labor relating thereto
(excluding expenditures properly expensed as repairs and maintenance in
accordance with generally accepted accounting principles).
Capitalized Lease Obligations. The amount of the liability reflecting
the aggregate discounted amount of future payments under all Capitalized Leases
calculated in accordance with generally accepted accounting principles.
2
<PAGE> 8
Capitalized Leases. Any lease that is capitalized on the balance sheet
of the lessee in accordance with generally accepted accounting principles.
Cash Flow Commitment Reduction. An amount equal to the greater of:
(a) the difference between (i) seventy-five percent (75%) of Net Cash
Provided by Operating Activities for the applicable Fiscal Year and
(ii) the sum of;
(x) $1,000,000.00;
(y) any other scheduled payments of principal on
the Senior Debt and any Subordinated Debt and
any voluntary principal payments to
irrevocably reduce the Commitment under
Section 2.3;
(z) up to $700,000 in Capital Expenditures
actually made with respect to each Fiscal Year;
and
(b) $0.00.
CERCLA. See Section 6.18.
Closing Date. The first date on which the conditions set forth in
Sections 10 and 11 have been satisfied and any Revolving Credit Loan is made.
Code. The Federal Internal Revenue Code of 1986 and the rules and
regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remains in effect.
Collateral. All of the property, rights and interests of the Borrower
that are or are intended to be subject to the security interests and liens and
mortgages created by the Security Documents, as more particularly defined in the
Security Agreement.
Commitment. $15,000,000.00 as such amount shall be reduced in
accordance with Section 2.1 and as such amount may be irrevocably reduced by the
Borrower pursuant to Section 2.3.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of any Person, after deduction of all expenses, taxes, and other proper
charges, determined in accordance with generally accepted accounting principles,
after eliminating therefrom all extraordinary items of income which include,
without limitation, (i) any net gain or net loss resulting from the
3
<PAGE> 9
sale was in the ordinary course of business), (ii) any gain arising from any
write-up of assets, (iii) any gain arising from the acquisition of any
securities of Borrower, and (iv) any extraordinary and nonrecurring gains.
Contract Assignment. That certain collateral assignment and security
agreement dated September 26, 1996 by and between the Borrower and the Lender in
respect of the Acquisition Agreement.
Creditor(s). Holder(s) of any Subordinated Debt.
Cumulative Cash Flow Commitment Reduction. An amount equal to the sum
of each annual Cash Flow Commitment Reduction which shall be recalculated as of
each Calculation Date and the Stated Maximum shall be reduced accordingly.
Default. See Section 12.1., provided that the application of the
Default Rate shall not be construed as a waiver of or limitation of the Bank's
rights under this Agreement, the Security Documents or any of the other Loan
Documents.
Default Rate. See Section 4.7.
Distribution means, with respect to any Person:
(i) the declaration or payment of any dividend, including
dividends payable in shares of capital stock of such Person, on or in
respect of any shares of any class of capital stock of such Person;
(ii) the purchase or redemption of any shares of any class of
capital stock of such Person (or of options, warrants or other rights
for the purchase of such shares), directly, indirectly through a
Subsidiary of such Person or otherwise;
(iii) any other distribution on or in respect of any shares of
any class of equity of or beneficial interest in such Person;
(iv) any payment of principal or interest with respect to, or
any purchase or redemption of, any Indebtedness of such Person which by
its terms is subordinated to the payment of the Senior Debt; and
(v) any payment, loan or advance (including any salary,
management fee or other fee, benefit, bonus or any other compensation
in respect of services provided to such Person) by the Borrower to, or
any other Investment by the Borrower in, the holder of any shares of
any class of the capital stock of or equity interest in the Borrower
but excluding (a) payments made to employees in the ordinary course of
business for salaries and benefits and (b) bonuses to employees other
than Borrower's Key Officers, in the ordinary course of business and
(c) payments to the shareholders of Borrower
4
<PAGE> 10
under Section 2.2(d) of the Acquisition Agreement to enable such
shareholders to pay their income taxes resulting from the inclusion of
the Borrower's net income in the shareholders' personal income tax
returns by virtue of the Borrower's status as a Subchapter S
corporation under the Internal Revenue Code of 1986, as amended.
Dollars or $. Dollars in lawful currency of the United States of
America.
Drawdown Date. The date on which any Revolving Credit Loan is made or
is to be made.
EBITDA. For any period, the sum of (x) the Consolidated Net Income (or
deficit) of the Borrower and its Subsidiaries for such period plus (y) all
amounts deducted in computing such Consolidated Net Income in respect of (i)
taxes based upon or measured by income, (ii) Total Interest Expense, (iii)
depreciation and amortization, and (iv) other non-cash charges reducing
Consolidated Net Income.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 6.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Event of Default. See Section 12.1.
Excess Cash Flow Commitment Reduction. See Section 2.1(c)
Federal Funds Effective Rate means, for any day, (i) the fluctuating
rate equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve Bank arranged by federal funds
brokers, as such weighted average is published for such day (or, if such day is
not a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York or (ii) if such rate is not so published for such
Business Day, the average of the quotations for such day on such transactions
received by the Bank from three federal funds brokers of recognized standing
selected by the Bank.
5
<PAGE> 11
Fiscal Year. The Borrower's fiscal year ending on December 31.
Generally accepted accounting principles. (a) When used herein, whether
directly or indirectly through reference to a capitalized term used therein,
means (i) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect as of June 30, 1996, and (ii) to the extent consistent with such
principles, the accounting practices of the Borrower reflected in its financial
statements as of June 30, 1996 and (b) when used in general, other than as
provided above, means principles that are (i) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time and (ii) consistently applied with
past financial statements of the Borrower adopting the same principles; provided
that in each case referred to in this definition of "generally accepted
accounting principles" a certified public accountant would, insofar as the use
of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See Section 6.18(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, including in any event and
whether or not so classified: (i) liabilities secured by any Lien existing on
property owned or acquired by the Borrower, whether or not the liability secured
thereby shall have been assumed; (ii) Capitalized Lease Obligations; (iii)
liabilities in respect of mandatory redemption, repurchase or dividend
obligations with respect to capital stock (or other evidence of beneficial
interest); (iv) obligations under the Series A Preferred Stock and the Series B
Preferred Stock; and (v) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including, without limitation, any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
indebtedness, or to assure the owner of indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner or otherwise,
and the obligations to reimburse the issuer in respect of any letters of credit.
6
<PAGE> 12
Intellectual Property. All of the following: domestic and foreign
letters patent and patent applications; inventions, discoveries, and
improvements, whether or not patentable; trade names, trademarks, trademark
applications and registrations, service marks, and service mark applications and
regulations; copyrights and copyright applications and registrations; and trade
secrets and other proprietary information, including without limitation, the
patents and patent applications listed on Schedule 6.6.
Interest Payment Date. October 1, 1996 and the first day of each
succeeding calendar month.
Interest Period with respect to each LIBOR Rate Loan, a period of one,
two and three or six consecutive months (commencing on the date of such
borrowing and ending on the numerically corresponding day, or if there is no
numerically corresponding day, on the last day) as selected or deemed selected
by the Borrower at least three (3) Business Days prior to a Drawdown Date for a
Revolving Credit Loan; or if a Revolving Credit Loan is already outstanding, at
least three (3) Business Days prior to the end of the then current Interest
Period. However, no Interest Period may be selected which would end beyond the
Maturity Date of the Note. If the last day of an Interest Period would otherwise
occur on a day which is not a Business Day, such last day shall be extended to
the next succeeding Business Day, except, if such Interest Period is for a LIBOR
Rate Loan and such extension would cause such last day to occur in a new
calendar month, then such last day shall occur on the next preceding Business
Day. The term Interest Period with respect to each Base Rate Loan shall mean
consecutive period of one (1) day each.
Inventory. See Security Agreement.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time:
(a) the amount of any Investment represented by a guaranty shall be
taken at not less than the principal amount of the obligations guaranteed and
still outstanding;
(b) there shall be included as an Investment all interest accrued with
respect to Indebtedness constituting an Investment unless and until such
interest is paid;
(c) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution);
7
<PAGE> 13
(d) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest
or otherwise, except that accrued interest included as provided in the foregoing
clause (b) may be deducted when paid; and
(e) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Key Man Life Insurance Policies. See Section 7.16.
Lease Collateral Agreements. With respect to each Lease, (i) an
estoppel certificate executed by the Borrower and each lessor; (ii) a Landlord's
Waiver and Agreement from each lessor, pursuant to which such lessor agrees to
subordinate its rights under the Lease and any lessor's or landlord's lien with
respect to property of the Borrower to the lien of the Security Documents and
agrees not to terminate the Lease for Borrower's default without notice and an
opportunity to cure given to the Bank and to recognize the Bank or its successor
in interest as tenant under the Lease in the event of a sale or transfer of
Borrower's interest under the Lease; and (iii) a Mortgagee's Waiver and
Agreement from each holder of a mortgage or deed of trust encumbering the
premises subject to a Lease, pursuant to which such mortgagee agrees to
subordinate its rights under its mortgage, and if it succeeds to the landlord's
interest under the Lease, any lessors's or landlord's lien with respect to
property of the Borrower to the lien of the Security Documents and agrees if it
becomes landlord, not to terminate the Lease for Borrower's default without
notice and an opportunity to cure given to the Bank and to recognize the Bank or
its successor in interest as tenant under the Lease in the event of a sale or
transfer of Borrower's interest under the Lease, such certificates and
agreements to be in form and substance satisfactory to the Bank.
Leases. Leases, licenses and agreements whether written or oral,
relating to the use or occupation of space by the Borrower, including but not
limited to the leases listed on Schedule 6.22.
Leverage Ratio. Defined in Section 9.3 hereof.
LIBO Rate or LIBOR. The term "LIBO Rate" or "LIBOR" shall mean: with
respect to each Interest Period, the per annum rate of interest determined on
the basis of the offered rates for deposits in Dollars for a period equal to
such Interest Period as quoted by the principal London office of Bank as of
11:00 a.m. (London time) on the day that is two London Banking Days prior to the
first day of such Interest Period; provided, however, that if such office is not
offering such deposits at such time, "LIBOR", with respect to such Interest
Period, shall mean the rate of interest (expressed as an annual rate) equal to
the simple average (rounded up to the nearest 1/16 of 1%) of the rates shown on
the display referred to as the "LIBO page" (or any display substituted therefor)
of the Reuters U.S. Domestic Money Service transmitted through the Reuters
monitor system as being the respective rates at which deposits in
8
<PAGE> 14
Dollars would be offered by the principal London offices of each of the banks
named thereon to major banks in the London interbank market at approximately
11:00 a.m. (London time) on the second London Banking Day before the first day
of such Interest Period for a period substantially coextensive with such
Interest Period; provided further, however, that if Bank is unable after
reasonable efforts to ascertain such rate, "LIBOR", with respect to such
Interest Period, shall mean the lowest lending rate (expressed as an annual
rate) that the Bank's Head Office of Bank in Boston is quoting at approximately
11:00 a.m. (Boston time) on the first day of such Interest Period to leading
European banks for loans in Dollars for such period and in such amount.
LIBOR Rate Applicable Margin. The percentage determined as set forth
below, at any time during the period the Leverage Ratio is at the level set
forth below:
<TABLE>
<CAPTION>
=============================================
Leverage Ratio LIBOR Rate
Applicable
Margin
- ---------------------------------------------
<S> <C>
greater than or equal to 2.5:1.0 2.25%
- ---------------------------------------------
greater than or equal to 1.50:1.0 2.00%
but less than 2.50:1.0
- ---------------------------------------------
greater than or equal to 0.50:1.0 1.75%
but less than 1.50:1.0
- ---------------------------------------------
less than 0.50:1.0 1.50%
=============================================
</TABLE>
LIBOR Rate Loan. Any Revolving Credit Loans bearing interest determined
with reference to LIBOR.
Lien. With respect to any Person, (i) any encumbrance, mortgage,
pledge, lien, charge or security interest of any kind upon any property or
assets of such Person, whether now owned or hereafter acquired, or upon the
income or profits therefrom; (ii) any arrangement or agreement that prohibits
such Person from creating encumbrances, mortgages, pledges, liens, charges or
security interests; (iii) the acquisition of, or the agreement or option to
acquire, any property or assets upon conditional sale or subject to any other
title retention agreement, device or arrangement (including a Capitalized
Lease); and (iv) the sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of such Person, with or without
recourse.
Loan Documents. This Agreement, the Note, the Security Agreement, the
Contract Assignment and any other Security Documents, and each of the other
documents, agreements and certificates executed by Borrower or any Subsidiary or
Affiliate, thereof and delivered to Bank in connection with or with regard to
the Revolving Credit Loans.
9
<PAGE> 15
Loan Request. See Section 2.6.
Loan(s). The Revolving Credit Loans to be made by the Bank hereunder.
London Banking Day means any day on which dealings in deposits in
Dollars are transacted in the London interbank market.
Maturity Date. September 26, 2001, or such earlier date on which the
Loans shall become due and payable pursuant to the terms hereof, including,
without limitation, after acceleration.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Net Cash Provided by Operating Activities. The net cash provided by
operating activities of the Borrower and its subsidiaries on a consolidated
basis determined based on Financial Statements prepared in accordance with
generally accepted accounting principles and in any case consistent with the
computation, presentation and treatment in that certain audit of the Borrower
prepared by Deloitte & Touche, LLP for the six months ending June 30, 1996 and
shown as "net cash provided by operating activities" on the statement of cash
flows all as set forth in Schedule 1 annexed.
Note. See Section 2.4.
Note(s). The Revolving Credit Note or Notes.
Notice of Borrowing. See Section 2.6.
Obligations. All indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries to the Bank under this Agreement or any of the
other Loan Documents or in respect of any of the Loans or the Note or other
instruments at any time evidencing any thereof, whether existing on the date of
this Agreement or arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law of
otherwise.
Operating Cash Flow means for any period on a consolidated basis, the
total of: (i) EBITDA minus (ii) income taxes paid in cash for such period, minus
(iii) Capital Expenditures.
Outstanding or outstanding. With respect to the Loans, the aggregate
unpaid principal thereof as of any date of determination.
Paydown Restriction Agreement. That paydown restriction agreement dated
the date hereof by and among the Bank and Summit and Borrower's Key Officers.
10
<PAGE> 16
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Property. All interests of the Borrower in real or personal property
now owned or hereafter acquired, including, without limitation, all property in
which the Borrower grants a security interest in the Security Agreement.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by the
Bank with respect to any Revolving Credit Loan.
Release. See Section 6.18(c)(iii).
Reserve Adjusted LIBOR. Applicable to any Interest Period, shall mean a
rate per annum determined pursuant to the following formula:
[LIBOR]
-----------
RAL = [1.00- RP]
The amount in brackets shall be rounded upwards, if necessary, to the
next higher 1/100 of 1%.
RAL = Reserved Adjusted LIBOR
LIBOR = as defined herein
RP = Reserve Percentage
Reserve Adjusted Libor shall be adjusted automatically as of the
effective date of any change in the Reserve Percentage.
"Reserve Percentage" applicable to any Interest Period means the rate
(expressed as a decimal) applicable to the Bank during such Interest Period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System for determining the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency or marginal
reserve requirement) of the Bank with respect to "Eurocurrency Liabilities" as
that term is defined under such regulations.
11
<PAGE> 17
Revolving Credit Loans. Revolving credit loans made or to be made by
the Bank to the Borrower pursuant to Section 2.
Revolving Credit Note Record. A Record with respect to the Revolving
Credit Note.
Security Agreement. The Pledge and Security Agreement - All Assets by
and between the Borrower and the Bank, pursuant to which the Borrower has
conveyed the Collateral as security for the Obligations.
Security Documents. The Security Agreement, the Contract Assignment,
and the Lease Collateral Agreements, including, without limitation, UCC-1
financing statements, executed and delivered in connection therewith.
Senior Debt shall mean:
(i) Indebtedness in respect of borrowed money other than the
Subordinated Debt;
(ii) Indebtedness in respect of Capitalized Lease Obligations;
(iii) Indebtedness in respect of the deferred purchase price of assets
(other than normal trade accounts payable in the ordinary course of business);
and
(iv) Indebtedness in respect of unfunded pension liabilities.
Senior Debt Service means, for any period, (i) the sum of Senior
Interest Expense for such period, plus (ii) $1,000,000.00, plus (iii) the
aggregate amount of principal other than that referred to in (ii) immediately
preceding, paid or to be paid under the Senior Debt for such period, but
excluding the Cash Flow Commitment Reduction Payments.
Senior Interest Expense means, for any period, the aggregate amount of
interest paid or to be paid in cash under the Senior Debt for such period.
Series A Preferred Stock. The Series A Redeemable Preferred Stock
issued by the Borrower.
Series B Preferred Stock. The Series B Redeemable Preferred Stock
issued by the Borrower.
Stated Maximum. See Section 2.1(c).
Subordinated Debt. Any Indebtedness of Borrower or any Subsidiaries
(including, for purposes of determining payments which are subordinate to the
Senior Debt, any payments made or to be made under the Series A Preferred Stock
or the Series B Preferred Stock) which is permitted hereunder or otherwise
permitted, in writing, by the Bank, and is expressly made subordinate to and
made junior to the payment and performance in full of the Obligations and
12
<PAGE> 18
evidenced as such by a written instrument containing subordination provisions in
form and substance approved by the Bank in writing.
Subsidiary. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes or controlling interests) of the outstanding Voting Interests.
Summit. Collectively, Summit Ventures IV, L.P., Summit Investors III,
L.P. and Summit Subordinated Debt Fund, L.P.
Total Debt shall mean total Indebtedness minus the redemption price
(including all accrued and unpaid dividends) of the Series A Preferred Stock and
the Series B Preferred Stock.
Total Debt Service. For any period, the sum of (i) Total Interest
Expense for such period plus (ii) $1,000,000.00, (iii) the aggregate amount of
principal other than that referred to in (ii) immediately preceding, paid or to
be paid under the Senior Debt for such period, but excluding the Cash Flow
Commitment Reduction Payments and any voluntary principal payments to
irrevocably reduce the Commitment under Section 2.3 plus (iv) all payments made
or required to be made under the Subordinated Debt including, without
limitation, any Distributions made or required to be made under any preferred
stock of the Borrower or otherwise permitted hereunder for such period
(excluding those already included in Total Interest Expense).
Total Interest Expense. For any period, the aggregate amount of (i)
Senior Interest Expense paid or to be paid in cash, including payments in the
nature of interest under Capitalized Leases, accrued by the Borrower on a
consolidated basis (whether such interest is reflected as an item of expense or
capitalized) and (ii) interest on any Subordinated Indebtedness, including,
without limitation, under the Subordinated Debt, but excluding any dividends
accrued on the Series A Preferred Stock and the Series B Preferred Stock which
are not paid in cash.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a LIBOR Rate Loan.
UCC. The Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts or any other applicable jurisdiction, provided, however, that with
respect to the perfection of the Bank's Lien in the Collateral and the effect or
non-perfection thereof, the term Uniform Commercial Code shall mean the Uniform
Commercial Code as in effect in any jurisdiction, the laws of which are made
applicable by Section 9-103 of the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts.
Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association,
partnership, trust or
13
<PAGE> 19
conduct the business of the corporation, partnership, association, trust or
other business entity involved.
1.2 Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the Commonwealth of Massachusetts, have the meanings assigned to
them therein.
(h) Reference to a particular "section" or "Section" refers to that
numbered section of this Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
2. THE REVOLVING CREDIT FACILITY.
2.1 Commitment to Lend.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and in reliance upon the representations and warranties and covenants
of the Borrower herein, and so long as no Default exists, the Bank agrees to
lend to the Borrower and the Borrower may borrow, repay, and reborrow from time
to time between the Closing Date and the Maturity Date upon notice by the
Borrower to the Bank given in accordance with Section 2.6, such sums as are
requested by the Borrower up to a maximum aggregate principal amount outstanding
(after giving effect to all amounts requested) at any one time in an amount
equal to the lesser of (a) the Stated
14
<PAGE> 20
Maximum (defined below) for the applicable period as set forth below, and (b)
the reduced Commitment amount specified by Borrower pursuant to Section 2.3,
provided that the sum of the outstanding amount of the Revolving Credit Loans
shall not at any time exceed the Commitment. Each request for a Revolving Credit
Loan hereunder shall constitute a representation and warranty by the Borrower
that the conditions set forth in Sections 10 and 11, in the case of the initial
Revolving Credit Loan, and Section 11, in the case of all other Revolving Credit
Loans, have been satisfied on the date of such request.
(b) The term "Base Amount" shall mean, during any period, an amount
equal to the amount specified in the table below for such period.
<TABLE>
<CAPTION>
Period Base Amount
------ -----------
<S> <C>
the Closing Date -
September 25, 1997 $15,000,000.00 ("Base Amount 1")
("Period One")
September 26, 1997 -
September 25, 1998 $14,000,000.00 ("Base Amount 2")
("Period Two")
September 26, 1998 -
September 25, 1999 $13,000,000.00 ("Base Amount 3")
("Period Three")
September 26, 1999 -
September 25, 2000 $12,000,000.00 ("Base Amount 4")
("Period Four")
September 26, 2000 -
September 26, 2001 $11,000,000.00 ("Base Amount 5")
("Period Five")
</TABLE>
(c) The term "Stated Maximum" shall mean, during any period, an amount
set forth as follows:
Stated Maximum for Period One shall equal Base Amount 1;
Stated Maximum for Period Two shall equal Base Amount 2, minus the Cash
Flow Commitment Reduction for Fiscal Year ending December 31, 1997 effective the
Calculation Date thereof;
Stated Maximum for Period Three shall equal the lesser of (x) Base
Amount 3 and (y) the Stated Maximum for Period Two, minus the Cash Flow
Commitment Reduction for Fiscal Year ending December 31, 1998 effective the
Calculation Date thereof;
Stated Maximum for Period Four shall equal the lesser of (x) Base
Amount 4 and (y) the Stated Maximum for Period Three, minus
15
<PAGE> 21
the Cash Flow Commitment Reduction for Fiscal Year ending December 31, 1999
effective the Calculation Date thereof;
Stated Maximum for Period Five shall equal the lesser of (x) Base
Amount 5 and (y) the Stated Maximum for Period Four, minus the Cash Flow
Commitment Reduction for Fiscal Year ending December 31, 2000 effective the
Calculation Date thereof.
(d) Effective on each Calculation Date a Cash Flow Commitment Reduction
amount for the Fiscal Year then ending shall be determined. The Stated Maximum
for each applicable period set forth above shall be reduced on each Calculation
Date and a mandatory repayment made on each Calculation Date in the amount
necessary to reduce the outstanding amount of the Loan to the Stated Maximum
then determined. Such payment reflects the reduced amount of the Commitment. The
Commitment in any period shall not exceed the applicable Base Amount for such
period. The payment which reduces the Commitment shall not relieve the Borrower
of the obligation to pay any future Cash Flow Commitment Reduction payment.
2.2 Commitment Fee. The Borrower shall pay to the Bank a commitment fee
calculated at the rate of one-quarter of one percent (0.25%) per annum on the
average daily amount during each calendar quarter or portion thereof from the
date hereof to the Maturity Date by which the Commitment exceeds the outstanding
amount of Revolving Credit Loans during such calendar quarter. The commitment
fee shall be payable quarterly in arrears on the first day of each calendar
quarter for the immediately preceding calendar quarter commencing on the first
such date following the date hereof (meaning, the first payment is due on
January 1, 1997), with a final payment on the Maturity Date or any earlier date
on which the Commitment shall terminate.
2.3 Reduction of Commitment.
Subject to the payment of any fees indemnitees, costs and expenses
required hereunder for prepaying any LIBOR Rate Loans, the Borrower shall have
the right at any time and from time to time upon five (5) Business Days' prior
written irrevocable notice to the Bank to reduce by $250,000.00 or an integral
multiple of $100,000.00 in excess thereof or terminate entirely the unborrowed
portion of the Commitment, whereupon the Commitment shall irrevocably be reduced
by the amount specified in such notice or, as the case may be, terminated. Upon
the effective date of any such reduction or termination, the Borrower shall pay
to the Bank the full amount of any commitment fee derived pursuant to Section
2.2 and then accrued on the amount of the reduction. No reduction or termination
of the Commitment may be reinstated.
2.4 The Revolving Credit Note. The Revolving Credit Loans shall be
evidenced by a promissory note of the Borrower in substantially the form of
Exhibit A hereto (the "Note"), dated as of the Closing Date and completed with
appropriate insertions. The Borrower irrevocably authorizes the Bank to make or
cause to be
16
<PAGE> 22
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal on the Note, an appropriate
notation on the Bank's Record reflecting the making of such Revolving Credit
Loan or (as the case may be) the receipt of such payment. The outstanding amount
of the Revolving Credit Loans set forth on the Bank's Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount on such
Bank's Record shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Note to make payments of principal of or
interest on any Note when due.
2.5 Interest on Revolving Credit Loans.
Unless an Event of Default shall have occurred and the Default Rate
applies as provided in Section 4.7, and subject to the limitation as to the
number of different maturities of LIBOR Rate Loans outstanding at any one time,
set forth in Section 2.6, all Revolving Credit Loans shall bear interest per
annum, at the election of the Borrower, of either:
(i) the Base Rate plus the Base Rate Applicable Margin; or
(ii) Reserve Adjusted LIBOR plus the LIBOR Rate Applicable Margin.
2.6 Requests for Revolving Credit Loans; Type of Loan.
(a) Whenever Borrower desires to obtain or continue a Revolving Credit
Loan hereunder or convert an outstanding Revolving Credit Loan into a Revolving
Credit Loan of another type pursuant to Section 2.1(c), Borrower shall notify
("Notice of Borrowing) in the form annexed hereto as Exhibit C as of the date of
the Notice of Borrowing, Bank by written notice (which notice shall be
irrevocable and may be provided by telecopy) received no later than 12:00 p.m.
noon Boston time on the Business Day on which the requested Revolving Credit
Loan is to be made or continued as or converted to a Base Rate Loan and in the
case of a LIBOR Rate Loan received no later than 10:00 a.m. Boston time on the
date three (3) Business Days before the day on which the requested Revolving
Credit Loan is to be made or continued as or converted to a LIBOR Rate Loan. For
purposes of the Notice of Borrowing for a LIBOR Rate Loan, such notice must
specify: (i) the Interest Period of one, two, three or six months, provided
LIBOR Rate Loans shall be limited to not more than six (6) different maturities
at any time; and (ii) the minimum of the outstanding principal Borrower wishes
the LIBOR Rate to apply to, provided such borrowing shall be in the minimum
amounts of $500,000.00 and in integrals of $50,000.00 above such amount. If Bank
does not receive a Notice of Borrowing containing an Interest Period for a LIBOR
Rate Loan within the applicable time limits set forth herein, or if when a
Notice of Borrowing must be given, a Default exists, Borrower shall be deemed to
have elected to borrow or to convert such Revolving Credit Loan,
17
<PAGE> 23
in whole, into a Base Rate Loan on the last day of the then current Interest
Period. Each Notice of Borrowing shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Bank on the applicable Drawdown Date. Each Revolving Credit
Loan will be made at the Bank's Head Office by depositing the amount thereof to
a demand deposit account of the Borrower with the Bank.
(b) Provided that no Default shall have occurred and be continuing or
no Event of Default has occurred, Borrower may convert all or any part of (in
the minimum amount of $500,000.00 and in integral multiples of $50,000.00 above
such amount) of any Base Rate Loan into a LIBOR Rate Loan (provided no more than
six (6) Interest Periods for a LIBOR Rate Loan shall be outstanding at any
time), or any LIBOR Rate Loan into a Base Rate Loan on any Business Day (which,
in the case of a conversion of a LIBOR Rate Loan shall be the last day of the
Interest Period applicable to such LIBOR Rate Loan).
2.7 One Loan. All extensions of credit by the Bank to Borrower under
the Revolving Credit Note and all other Obligations to the Bank under this
Agreement and any of the Loan Documents shall constitute one general obligation
secured by the security interest in all of the Collateral and by all other
security interests, liens, claims, and encumbrances heretofore, now, or at any
time or times hereafter granted by Borrower and its Subsidiaries to the Bank.
Borrower agrees that all of the rights of the Bank set forth in this Agreement
shall apply to any modification of or supplement to this Agreement, any
supplements or exhibits hereto, and other agreements, unless otherwise agreed in
writing.
2.8 Letter of Credit Arrangements.
(a) Subject to the terms and conditions set forth in this Agreement, if
the Borrower desires the Bank to issue a standby letter of credit on the
Borrower's behalf, the Borrower shall make such request in writing to the Bank
on such forms as the Bank then requires and Bank may, in its sole discretion, at
any time thereafter issue, standby letter of credit applied for. In connection
with the issuance of any standby letter of credit, the Bank shall require the
Borrower and the Borrower shall execute and deliver to the Bank, the Bank's
standard and customary documentation then in effect and deliver any other
documentation reasonably requested by the Bank. The Borrower shall, prior to the
issuance of any standby letter of credit, pay the customary fees for issuance of
any standby letter of credit then charged by the Bank. Any draws on any issued
outstanding standby letters of credit made after the Maturity Date shall be paid
by the Borrower to the Bank on demand.
(b) Prior to the Maturity Date, the face amount of all issued and
outstanding standby letters of credit and all amounts drawn thereunder, shall
constitute Advances and principal amounts outstanding under the Revolving Note,
provided, however, interest
18
<PAGE> 24
shall be paid by the Borrower only on the amounts drawn. For any standby letter
of credit application requesting the Bank to issue a letter of credit with an
expiry date which would be a date after the Maturity Date, the Borrower shall,
at the time of such application, pledge and deposit with the Bank, in cash, U.S.
Dollars, the full face amount of such letter of credit and execute such
additional pledge agreements and documents as the Bank then reasonably requests.
The liability of the Borrower under this Agreement or under any other
documentation executed by the Borrower to repay the Bank in respect of drawings
under letters of credit shall be Obligations secured by the Security Documents
and shall be absolute and unconditional under any and all circumstances. Without
limiting the generality of the foregoing, the Borrower's obligation in respect
of drawings under any letters of credit shall not be subject to any defense
based upon any dispute, alleged or actual, between the beneficiary and the
Borrower or the non-application or misplacement by the beneficiary of the
proceeds of any such payment, or the legality, validity, regularity or
enforceability of the letter of credit or any renewal or extension thereof. The
Borrower's request for issuance of each letter of credit hereunder shall
constitute a representation by the Borrower that the applicable conditions set
forth in Section 10 and 11 have been satisfied on the date of such request.
3. REPAYMENT OF THE LOANS.
3.1 Maturity. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of the
Revolving Credit Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon and costs, expenses and charges due under
the Loan Documents.
3.2 Mandatory Repayments of Revolving Credit Loans. If at any time the
sum of the outstanding amount of the Revolving Credit Loans exceeds the
Commitment (as the same may be reduced by changes in the Stated Maximum,
including, without limitation, by reductions in the Commitment as provided in
Section 2.3), then the Borrower shall immediately, without demand therefor, pay
the amount of such excess to the Bank for application to the Revolving Credit
Loans.
3.3 Optional Repayments of Loans. The Borrower shall have the right, at
its election, to repay the outstanding amount of the Base Rate Loans, as a whole
or in part, at any time without penalty or premium. Not later than 1:00 p.m.
(Boston time) on the requested date of prepayment, the Borrower shall give to
the Bank notice (which may be given by a telephone call and promptly confirmed
in writing) of any prepayment pursuant to this Section
19
<PAGE> 25
3.3, specifying the proposed date of payment and the principal amount to be
paid. Each such partial prepayment of the Base Rate Loans shall be in an
integral multiple of $50,000.00. Borrower shall not be permitted to prepay, in
whole or in part, any LIBOR Rate Loans unless Borrower shall simultaneously with
such prepayment pay to the Bank the breakage fee set forth in Section 4.10.
4. CERTAIN GENERAL PROVISIONS.
4.1 Facility Fee. The Borrower agrees to pay to the Bank at the Closing
a facility fee in the amount of Fifty-Six Thousand Two Hundred Fifty Dollars
($56,250.00). Such amount shall be deemed fully earned at the Closing and shall
not be subject to rebate or return, in whole or in part.
4.2 Funds for Payments.
(a) All payments of principal, interest, commitment fees, facility fees
and any other amounts due hereunder or under any of the other Loan Documents
shall be made to the Bank at Bank's Head Office, in each case in immediately
available funds.
(b) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrower is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon the Borrower with respect to any amount payable by it hereunder
or under any of the other Loan Documents, the Borrower will pay to the Bank on
the date on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be necessary to enable
the Bank to receive the same net amount which the Bank would have received on
such due date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Bank certificates or other valid vouchers
for all taxes or other charges deducted from or paid with respect to payments
made by the Borrower hereunder or under such other Loan Document.
4.3 Computations. All computations of interest on the Loans and of
other fees to the extent applicable shall be based on a 360-day year and paid
for the actual number of days elapsed. Whenever a payment hereunder or under any
of the other Loan Documents becomes due on a day that is not a Business Day, the
due date for such payment shall, except as otherwise provided in the case of a
LIBOR Rate Loan, be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Revolving
Credit Loans as reflected on the Revolving Credit Note Records from time to time
shall be considered correct and binding on the Borrower unless within ten (10)
Business Days
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after receipt by the Borrower of any notice from the Bank of such outstanding
amount, the Borrower shall notify the Bank to the contrary.
4.4 Additional Costs, Etc. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to the Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall:
(a) subject the Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Agreement, the other
Loan Documents, the Bank's Commitment or the Loans (other than taxes based upon
or measured by the income or profits of the Bank or taxes in lieu thereof), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to the Bank of the principal of or the
interest on any Loans or any other amounts payable to the Bank under this
Agreement or the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or loans by, or commitments of an office of the Bank, or
(d) impose on the Bank any other conditions or requirements with
respect to this Agreement, the other Loan Documents, the Loans, the Commitment,
or any class of loans or commitments of which any of the Loans or the Commitment
forms a part;
and the result of any of the foregoing is
(i) to increase the cost to the Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or the
Commitment, or
(ii) to reduce the amount of principal, interest or other amount
payable to the Bank hereunder on account of the Commitment or
any of the Loans, or
(iii) to require the Bank to make any payment or to forego any
interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is
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calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank from the Borrower
hereunder,
then, and in each such case, the Borrower will, upon demand made by the Bank at
any time and from time to time and as often as the occasion therefor may arise,
pay to the Bank such additional amounts as will be sufficient to compensate the
Bank for such additional cost, reduction, payment or foregone interest or other
sum. The Bank shall allocate such cost increases among its customers in good
faith and on an equitable basis.
4.5 Capital Adequacy. If any present or future law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) or the interpretation thereof by a court or governmental authority with
appropriate jurisdiction affects the amount of capital required or expected to
be maintained by the Bank or any corporation controlling the Bank determines
that the amount of capital required to be maintained by it is increased by or
based upon the existence of such Loans made or deemed to be made pursuant hereto
or the issuance of any letter of credit, then the Bank may notify the Borrower
of such fact, and the Borrower shall pay to the Bank from time to time on
demand, as an additional fee payable hereunder, such amount as the Bank shall
determine in good faith and certify in a notice to the Borrower to be an amount
that will adequately compensate the Bank in light of these circumstances for its
increased costs of maintaining such capital. The Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
4.6 Certificate. A certificate setting forth any additional amounts
payable pursuant to Sections 4.4 or 4.5 and a brief explanation of such amounts
which are due, submitted by the Bank to the Borrower, shall be prima facie
evidence that such amounts are due and owing.
4.7 Interest on Overdue Amounts. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear interest
payable on demand at a rate ("Default Rate") per annum equal to four percent
(4%) above the Base Rate until such amount shall be paid in full (after as well
as before judgment).
4.8 Inability to Determine LIBOR. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the Bank
shall determine that adequate and reasonable methods do not exist for
ascertaining the LIBOR that would otherwise determine the rate of interest to be
applicable to any LIBOR Rate Loan during any Interest Period, the Bank shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrower) to the Borrower. In such event (a) any Loan Request
with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be
deemed a request for Base Rate Loans, (b) each LIBOR Rate Loan will
automatically, on the last day of the
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then current Interest Period thereof, become a Base Rate Loan, and (c) the
obligations of the Bank to make LIBOR Rate Loans shall be suspended until the
Bank determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Bank shall so notify the Borrower.
4.9 Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for Bank to make or maintain LIBOR
Rate Loans, Bank shall forthwith give notice of such circumstances to the
Borrower and thereupon (a) the commitment of Bank to make LIBOR Rate Loans or
convert Loans of another Type to LIBOR Rate Loans shall forthwith be suspended
and (b) the LIBOR Rate Loans then outstanding shall be converted automatically
to Base Rate Loans on the last day of each Interest Period applicable to such
LIBOR Rate Loans or within such earlier period as may be required by law. The
Borrower hereby agrees promptly to pay the Bank for the account of Bank, upon
demand by Bank, any additional amounts necessary to compensate the Bank for any
costs incurred by such Bank in making any conversion as such payments are
described in accordance with 4.10, including any interest or fees payable by
Bank to lenders of funds obtained by it in order to make or maintain its LIBOR
Rate Loans hereunder.
4.10 Indemnity. If the Borrower shall at any time (a) repay or prepay
any principal of any LIBOR Rate Loan on a date other than the last day of an
Interest Period with respect thereto (as a consequence of acceleration, a
mandatory repayment to reduce the principal outstanding to the Stated Maximum,
or otherwise) or (b) for any reason fail to borrow or convert a LIBOR Rate Loan
on the date specified therefor in any notice delivered by the Borrower to the
Bank pursuant to Section 2.6. The Borrower shall indemnify the Bank, on demand
made by the Bank, at any time and as often as the occasion therefor may arise,
against all losses, costs or expenses which the Bank may at any time or from
time to time occur as a consequence of such repayment, prepayment or failure to
borrow. The amount of such losses, costs or expenses shall be an amount equal to
the remainder, if any, of:
(a) the total amount of interest which would otherwise have
accrued hereunder on the principal so paid, not borrowed or
converted at a rate equal to the interest rate which otherwise
would have been applicable to such principal during the period
(the "Reemployment Period").
(i) in the case of any such repayment or prepayment,
beginning on the date of such payment and ending on the last
day of the applicable Interest Period of the amount so paid,
or
(ii) in the case of any such failure to borrow or
convert, beginning on the date for the borrowing or conversion
that shall have been requested in any notice of borrowing
relating thereto and ending on the date that
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would have been the applicable last day of the Interest Period
if such amount had been borrowed or converted; minus
(b) an amount equal to the aggregate interest to be earned by the
Bank by reinvesting the amount prepaid, repaid or not borrowed
or converted, or the Reemployment Period at the yield to
maturity on a United States treasury security selected by the
Bank equal in amount to the amount prepaid, repaid, or not
borrowed or converted and having a maturity approximately
equal to the Reemployment Period.
5. COLLATERAL SECURITY. The Obligations shall be secured by a perfected
first priority security interest to be held by the Bank (subject only to
Permitted Liens) in the Property of the Borrower, pursuant to the terms of the
Security Documents.
6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank as follows (except as set forth on the respective Schedules attached
hereto).
6.1 Corporate Authority; Etc.
(a) Incorporation; Good Standing. The Borrower (i) is a Mississippi
corporation, duly organized and existing pursuant to articles of incorporation
as amended filed with the Mississippi Secretary of State on July 24, 1996, and
is validly existing and in good standing under the laws of the State of
Mississippi, (ii) has all requisite power to own its property and conduct its
business as now conducted and as presently contemplated, and (iii) is in good
standing as a foreign entity and is duly authorized to do business in each other
jurisdiction, including, without limitation, Mississippi where such
qualification is necessary except where a failure to be so qualified in such
other jurisdiction would not have a materially adverse effect on the business,
assets or financial condition of the Borrower.
(b) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is to become a
party and the repayment of the Loan (i) are within the authority of the
Borrower, (ii) have been duly authorized by all necessary proceedings on the
part of Borrower, (iii) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which the
Borrower is subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower, and (iv) do not conflict with any provision of the
restated articles of organization or bylaws of, or any material agreement or
other material instrument binding upon, the Borrower.
(c) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which the Borrower is or is to become a party will
result in valid and legally binding obligations of the Borrower enforceable
against it in accordance
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<PAGE> 30
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that availability of the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
6.2 Governmental Approvals. The execution, delivery and performance by
the Borrower of this Agreement and the other Loan Documents to which the
Borrower is or is to become a party and the transactions contemplated hereby and
thereby do not require the approval or consent of, or filing with, any
governmental agency or authority other than those already obtained and the
filing of financing statements in the appropriate records offices with respect
thereto and other than set forth in Schedule 6.2 hereof.
6.3 Title to Properties; Leases. Except as indicated on Schedule 6.3
hereto, the Borrower owns all of the assets relating to the Property reflected
in the consolidated balance sheet of the Borrower as at the Balance Sheet Date
or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date), subject to no
rights of others, including any mortgages, leases, conditional sales agreements,
security interests, title retention agreements, liens or other encumbrances
except Permitted Liens.
6.4 Financial Statements. The following shall be furnished to the Bank:
(a) a consolidated balance sheet of the Borrower and its Subsidiaries
(if any) as of the Balance Sheet Date and consolidated financial statements of
the Borrower for the Fiscal Year ended December 31, 1995 and the six months
ended June 30, 1996, accompanied by an auditor's report prepared without
qualification by Borrower's independent certified public accountant together
with such other information as set forth on Schedule 6.4 attached. Such balance
sheet and statement of income have been prepared in accordance with generally
accepted accounting principles and fairly present in all material respects the
financial condition of the Borrower as at the close of business on the date
thereof and the results of operations for the period covered by such financial
statements. There are no Contingent Liabilities of the Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the officers
of the Borrower or any of its Subsidiaries not disclosed in the balance sheet
and the related notes thereto of a nature required by generally accepted
accounting principles to be disclosed on a balance sheet and the notes thereto;
(b) the Borrower (after giving affect to the transactions contemplated
by the Loan Documents) (i) is "solvent" as such term is defined in the United
States Bankruptcy Code, (ii) the aggregate value of all assets and properties of
Borrower, at a fair valuation, will be greater than the total amount of its
liabilities on claims, including contingent claims, and (iii) the aggregate
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<PAGE> 31
present fair saleable value of its assets will be greater than the amount that
will be required to pay its probable liabilities on its debts, including
Contingent Liabilities, as they become absolute and mature. Borrower has (and
has no reason to believe it will not have) sufficient capital or access to
adequate capital for the conduct of its business. Borrower does not intend to
incur, and does not believe it has incurred, debts beyond its ability to pay as
they mature.
6.5 No Material Changes, Etc. Since August 31, 1996, there has occurred
no materially adverse change in the financial condition or business of the
Borrower or its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Borrower as of August 31, 1996, other than changes in the
ordinary course of business that have not had any materially adverse effect
either individually or in the aggregate on the business or financial condition
of the Borrower.
6.6 Intellectual Property Rights. Except as listed on Schedule 6.6: (a)
Borrower owns all "Intellectual Property" necessary for the conduct of its
business, subject to no third party rights, license of any interest therein, or
other agreement and has listed on Schedule 6.6 each such trademark, patent or
other item of Intellectual Property so owned; (b) no Intellectual Property is
subject to any pending or, to Borrower's knowledge, threatened challenge; (c) no
claims, demands, suits, or proceedings are pending or, to Borrower's knowledge,
threatened which challenge, or may impair Borrower's rights in, any Intellectual
Property used in the conduct of Borrower's business; (d) as of the date of this
Agreement, to the best of Borrower's knowledge Borrower is not infringing any
Intellectual Property of other rights of any person, and the present conduct of
Borrower's business does not infringe any Intellectual Property or rights of any
Person; (e) all patents, patent applications, registered trademarks (including
service marks), and trademark applications for the United States or other
jurisdictions owned by Borrower are listed on Schedule 6.6 and Borrower's Key
Officers own no such patents, patent applications, registered trademarks or
trademark applications.
6.7 Litigation. Except as stated on Schedule 6.7, there are no actions,
suits, proceedings or investigations of any kind pending or threatened against
the Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, might, either in
any case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of the Borrower or materially impair the
right of the Borrower and its Subsidiaries to carry on business substantially as
now conducted by it, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
balance sheet of the Borrower, or which question the validity of this
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<PAGE> 32
Agreement or any of the other Loan Documents, or any action taken or to be taken
pursuant hereto or thereto.
6.8 No Materially Adverse Contracts, Etc. Neither the Borrower nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower. Neither the Borrower nor any of
its Subsidiaries is a party to any contract or agreement that has or is
expected, in the judgment of the Borrower's officers, to have any materially
adverse effect on the business of the Borrower or its Subsidiaries.
6.9 Compliance With Other Instruments, Laws, Etc. Neither the Borrower
nor any of its Subsidiaries is in violation of any provision of its articles of
organization, charter or other organization documents, or by-laws, or any
material agreement or material instrument to which it may be subject or by which
it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a manner
that could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Borrower
or its Subsidiaries.
6.10 Tax Status. The Borrower (a) has made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings and (c) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction other than those set forth on Schedule 6.10.
6.11 No Event of Default. No Default or Event of Default has occurred
and is continuing.
6.12 Holding Company and Investment Company Acts. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
6.13 Absence of UCC Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or
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other public office, that purports to cover, affect or give notice of any
present or possible future lien on, or security interest in, any Collateral of
the Borrower or rights thereunder.
6.14 Setoff, Etc. The Collateral and the rights of the Bank with
respect to the Collateral are not subject to any setoff, claims, withholdings or
other defenses. The Borrower is the owner of the Collateral free from any lien,
security interest, encumbrance and any other claim or demand, except for
Permitted Liens.
6.15 Certain Transactions. Except as set forth on Schedule 6.15, none
of the officers, directors, or employees of the Borrower or any of its
Subsidiaries is presently a party to any transaction with the Borrower or any of
its Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
trustee, director or such employee or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any officer, trustee,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
6.16 Employee Benefit Plans; Multiemployer Plans; Guaranteed Pension
Plans. Except as set forth on Schedule 6.16, neither the Borrower nor any ERISA
Affiliate maintains or contributes to any Employee Benefit Plan, Multiemployer
Plan or Guaranteed Pension Plan.
6.17 Regulations U and X. No portion of any Loan is to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
6.18 Environmental Compliance. The Borrower has taken all necessary
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and, based upon such diligent
investigation, makes the following representations and warranties.
(a) None of the Borrower, its Subsidiaries or any operator of the Real
Estate, or any operations thereon is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "Environmental Laws"), which
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<PAGE> 34
violation involves any of the Real Estate and would have a material adverse
effect on the environment or the business, assets or financial condition of the
Borrower or its Subsidiaries.
(b) Neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal, state or
local governmental authority, (i) that it has been identified by the United
States Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as
defined by 42 U.S.C. 9601(5), any hazardous substances as defined by 42 U.S.C.
9601(14), any pollutant or contaminant as defined by 42 U.S.C. 9601(33) or any
toxic substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which it has
generated, transported or disposed of have been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that the Borrower or any of its Subsidiaries conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law; or (iii)
that it is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the release of
Hazardous Substances.
(c) The Borrower further represents and warrants with respect to any
Real Estate:
(i) no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws; and no
underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of the Real
Estate;
(ii) in the course of any activities conducted by the Borrower, its
Subsidiaries or the operators of its properties, no Hazardous
Substances have been generated or are being used on the Real
Estate except in accordance with applicable Environmental
Laws;
(iii) there has been no release i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (a
"Release") or threatened Release of Hazardous Substances on,
upon, into or from the Real Estate, which Release would in the
case of such other properties have a material adverse effect
on the value of any of the Real Estate or adjacent properties
or the environment;
(iv) there have been no Releases on, upon, from or into any real
property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may
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<PAGE> 35
have come to be located on, and which would have a material
adverse effect on the value of, the Real Estate; and
(v) any Hazardous Substances that have been generated on any
of the Real Estate have been transported off-site only by
carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and
facilities have been and are operating in compliance with such
permits and applicable Environmental Laws.
(d) Neither the Borrower nor the Real Estate currently leased or used
by Borrower is subject to any applicable Environmental Law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any governmental
agency or the recording or delivery to other Persons of an environmental
disclosure document or statement by virtue of the transactions set forth herein
and contemplated hereby, or as a condition to the effectiveness of any
transactions contemplated hereby.
6.19 Subsidiaries. The Borrower has one Subsidiary which is Triton
Systems International, Inc. which Subsidiary conducts no business.
6.20 Loan Documents. All of the representations and warranties of the
Borrower made in the Security Agreement and the other Loan Documents or any
document or instrument delivered to the Bank pursuant to or in connection with
any of such Loan Documents are true, accurate and correct in all material
respects.
6.21 Acquisition Agreement; Debenture Agreement. The representations
and warranties of the Borrower in the Acquisition Agreement and the Debenture
Agreement were true, accurate and complete in all material respects as of the
date they were made.
6.22 Real Property; Leases. Neither the Borrower, nor any of its
Subsidiaries is the fee owner of any real property or has any beneficial
interest in any fee owner. Borrower is the lessee under the Leases as described
on Schedule 6.22. The Leases reflected on such schedule constitute the sole
agreements and understandings relating to leasing or licensing of space by the
Borrower or its Subsidiaries. The Borrower has delivered to the Bank a true and
complete copy of all Leases. Except as set forth in Schedule 6.22, the Leases
are in full force and effect, in accordance with their respective terms, without
any payment default or any other material default by the Borrower thereunder,
and the Borrower has not given or made, or received, any notice of default, or
any claim, which remains uncured or unsatisfied, with respect to any of the
Leases and, to the best of the Borrower's knowledge there is no basis for any
such claim or notice of default by any lessor. No leasing, brokerage or like
commissions, fees or payments are due from the Borrower in respect of the
Leases.
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6.23 Chief Place of Business; Locations of Property. As of the date
hereof (i) the chief executive office of Borrower is located at 522 East
Railroad Street, Long Beach, Mississippi; (ii) the principal place of business
of Borrower is at 522 East Railroad Street, Long Beach, Mississippi; (iii) the
principal books and records of the Borrower and all records of Accounts are
located at 522 East Railroad Street, Long Beach, Mississippi; (iv) all other
property of the Borrower, including, without limitation, all Inventory and
Equipment are located at 522 East Railroad Street, Long Beach, Mississippi and
at such locations as set forth on Schedule 6.22 annexed; and (v) there is no
other office or place of business at which Borrower conducts business.
6.24 Authorized and Outstanding Stock. The authorized capital stock of
the Borrower consists of (i) 10,000,000 shares on Common Stock, of which
7,520,177 shares are validly issued and outstanding and held of record and owned
beneficially by the shareholders as set forth on Schedule 6.24 attached hereto,
free and clear of all liens, security interests, restrictions on transfer, and
other encumbrances; (ii) 1,000,000 shares of Non-Voting Stock, par value, $1.00
per share, of which no shares are issued and outstanding; and (iii) 214,000
shares of preferred Stock of which (x) 114,000 shares have been designated as
Series A Preferred Stock with the rights, terms and privileges set forth in
Exhibit A to the Acquisition Agreement, and of which 114,000 shares are issued
and outstanding; and 100,000 shares have been designated as Series B Preferred
Stock, par value $.01 per share with the rights, terms and privileges set forth
in Exhibit A to the Acquisition Agreement, and of which 100,000 are validly
issued and outstanding and held of record and owned beneficially by the
shareholders of the Borrower as set forth on Schedule 6.24, free and clear of
all liens, security interests, restrictions on transfer and other encumbrances.
All issued and outstanding shares of capital stock are duly and validly
authorized, validly issued and fully paid and non-assessable and free from any
restrictions on transfer, except for restrictions imposed by federal or state
securities or "blue-sky" laws and except for those imposed pursuant to the
Acquisition Agreement or any Related Agreement (as defined in the Acquisition
Agreement). Except as set forth on Schedule 6.24, there are no outstanding
warrants, options, commitments, preemptive rights, rights to acquire or
purchase, conversion rights or demands of any character relating to the capital
stock or other securities of the Borrower. All issued and outstanding shares of
capital stock of the Borrower were issued (i) in transactions exempt from the
registration provisions of the Act (as defined in the Acquisition Agreement),
and (ii) in compliance with or in transactions exempt form the registration
provision of applicable state securities or "blue-sky" laws.
7. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and
agrees that, so long as any Revolving Credit Loan shall remain in effect or the
Note is outstanding or the Bank has any obligation to make any Revolving Credit
Loans and the principal of and interest on each Revolving Credit Loan, all fees
and all other expenses or amounts payable under any Loan Documents shall have
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<PAGE> 37
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder shall have been reimbursed in full:
7.1 Punctual Payment. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans and all interest and
fees provided for in this Agreement, all in accordance with the terms of this
Agreement and the Note, as well as all other sums owing pursuant to the Loan
Documents.
7.2 Maintenance of Office; Business Name. The Borrower will maintain
its chief executive office in at 522 East Railroad Street, Long Beach,
Mississippi, or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Bank, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents may be given or made. As of the date of this Agreement, the Borrower
conducts business only under its own name. Except as provided below, the
Borrower will not change its name, identity or structure in any manner which
might make any financing or continuation statement filed in respect of the
Collateral ineffective or misleading within the meaning of Section 9-402(7) (or
any other applicable provision) of the UCC, unless the Borrower shall have given
the Bank at least thirty (30) days' prior written notice thereof.
7.3 Records and Accounts. The Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles and (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation and amortization of its
properties and the properties of its Subsidiaries, contingencies, and other
reserves.
7.4 Financial Statements, Certificates and Information. The Borrower
will deliver to the Bank:
(a) as soon as practicable, but in any event not later than one hundred
twenty (120) days after the end of each Fiscal Year, the audited consolidated
balance sheet of the Borrower and its Subsidiaries at the end of such year, and
the related audited consolidated statements of income and changes in
shareholders' equity and cash flows for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
statements to be in reasonable detail, prepared in accordance with generally
accepted accounting principles, and accompanied by an auditor's report prepared
without qualification by an independent certified public accountant acceptable
to the Bank, together with a written statement from such accountants to the
effect that they have read a copy of Sections 8.1 (Restrictions on Indebtedness,
8.2 (Restrictions on Liens), 8.3 (Restrictions on Investments), 8.4 (Merger;
Consolidation), 8.5 (Sale Leaseback), 8.7 (Distributions), 8.8 (Change to Fiscal
Year), 9.1 (Minimum Net Income), 9.2 (Total Debt Service Coverage), 9.3
(Leverage Ratio) and 9.4 ("Capital Expenditures") (collectively, the "Accounting
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Review Sections") of this Agreement (and such other provisions of this Agreement
to which reference is made in such sections or which define terms used therein
and the definitions of "Default" and "Event of Default"), and that, in making
the examination necessary to said certification, they have obtained no knowledge
of any Default or Event of Default with respect to the provisions of the
Accounting Review Sections, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default with respect to the
Accounting Review Sections they shall disclose in such statement any such
Default or Event of Default, together with a certification by the Borrower's
chief financial officer, substantially in the form annexed as Exhibit B, that
the information contained in such statements is true, correct and complete and
fairly presents the operations of the Borrower in all material respects for such
period;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three (3) fiscal quarters of each
Fiscal Year of the Borrower, copies of the unaudited consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such quarter, and the
related unaudited consolidated statements of income and cash flows for the
portion of the Borrower's fiscal year then elapsed, all in reasonable detail and
prepared in a manner as will fairly and consistently state the financial
condition and operations of Borrower consistent with the annual audited balance
sheets and statement and previously-submitted quarterly statements, together
with a certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements fairly
presents the financial position of the Borrower and its Subsidiaries in all
material respects on the date thereof (subject to year-end accruals and
adjustments);
(c) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three (3) fiscal quarters of each
Fiscal Year and within ninety (90) days after the end of Borrower's Fiscal Year,
copies of a statement of Consolidated Net Income and Operating Cash Flow for
such fiscal quarter, prepared on a basis consistent with the statement furnished
pursuant to Section 6.4(c) together with a certification by the Borrower's chief
financial officer, substantially in the form annexed as Exhibit B, that the
information contained in such statement is true, correct, and complete in all
material respects, and fairly presents the operations of the Borrower for such
period;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement in form and substance
reasonably acceptable to the Bank signed by the principal financial or
accounting officer of the Borrower and setting forth in reasonable detail
computations evidencing compliance with the covenants contained in Sections 9.1
through 9.4 (as applicable) and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since June 30, 1996;
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<PAGE> 39
(e) contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the Securities and Exchange Commission
or sent to the shareholders of the Borrower; and
(f) from time to time such other financial data and information
(including accountants' management letters) as the Bank may reasonably request.
7.5 Notices.
(a) Defaults. The Borrower will promptly notify the Bank in writing of
the occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Agreement or under any note,
evidence of indebtedness, indenture or other obligation to which or with respect
to which the Borrower or any of its Subsidiaries is a party or obligor, whether
as principal or surety, and such default would permit the holder of such note or
obligation or other evidence of indebtedness to accelerate the maturity thereof,
which acceleration would have a material adverse effect on the Borrower, the
Borrower shall forthwith give written notice thereof to the Bank, describing the
notice or action and the nature of the claimed default.
(b) Environmental Events. The Borrower will promptly give notice to the
Bank (i) of any violation of any Environmental Law that the Borrower or any of
its Subsidiaries reports in writing or is reportable by such Person in writing
(or for which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (ii) of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, or any federal, state or local
environmental agency or board, that in either case involves the Real Estate or
has the potential to materially affect the assets, liabilities, financial
conditions or operations of the Borrower and its Subsidiaries taken as a whole,
or the Bank's security interests pursuant to the Security Documents.
(c) Notification of Claims against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Bank in writing of any
setoff, claims (including, with respect to the Real Estate, environmental
claims), withholdings or other defenses to which any of the Collateral, or the
rights of the Bank with respect to the Collateral, are subject.
(d) Notice of Litigation and Judgments. The Borrower will, and will
cause each of its Subsidiaries to, give notice to the Bank in writing within
fifteen (15) days of becoming aware of any litigation or proceedings threatened
in writing or any pending litigation and proceedings affecting the Borrower or
any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is
or is to become a party involving an uninsured claim against the Borrower or any
of its Subsidiaries that could reasonably be expected to have a materially
adverse effect on the Borrower and
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<PAGE> 40
its Subsidiaries taken as a whole, and stating the nature and status of such
litigation or proceedings. The Borrower will, and will cause each of its
Subsidiaries to, give notice to the Bank, in writing, in form and detail
reasonably satisfactory to the Bank, within ten (10) days of any judgment not
covered by insurance, final or otherwise, against the Borrower or any of its
Subsidiaries in an amount in excess of $50,000.00.
7.6 Existence; Maintenance of Properties. The Borrower will do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence as a Mississippi corporation. The Borrower will do or cause to be
done all things necessary to preserve and keep in full force all of its rights
and franchises and those of its Subsidiaries material to the business and
financial affairs of the Borrower. The Borrower (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order, reasonable wear and tear excepted, and
supplied with all necessary equipment, (b) will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (c) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by it and in related businesses.
7.7 Insurance. The Borrower shall keep adequately insured by
financially sound and responsible insurers (a) all property owned or leased by
it and all property of an insurable nature, such insurance to be in at least
such amounts and covering loss or damage from at least such risks and hazards
(including, without limitation, business interruption insurance and use and
occupancy insurance) as are usually insured against in the same geographic areas
by companies engaged in similar businesses and such other insurance as is
reasonably required by the Bank, (b) all liabilities of Borrower for damage to
property, death or bodily injury, including, without limitation, product
liability insurance, insurance required under all applicable workmen's
compensation laws, and insurance for such liabilities resulting from, caused by
or arising out of any product manufactured or sold by any predecessor of
Borrower or by Borrower, all such insurance to be in at least such amounts as
are usually insured against by companies engaged in the same or similar
businesses and in any event as reasonably required by the Bank. (The Bank
acknowledges that the insurance coverage maintained by the Borrower on the date
hereof is acceptable to the Bank for closing the transaction.)
All property, fire and casualty policies of insurance shall (i)
provide that no cancellation, reduction in amount or change in coverage thereof
shall be effective until at least thirty (30) days after receipt by the Bank of
written notice thereof; (ii) waive any right of subrogation of the insurer
against, or any right of set-off, counterclaim or any other deduction in respect
of any liability of, the Bank to such insurer; and (iii) be otherwise
<PAGE> 41
satisfactory in all respects to the Bank. The Borrower shall provide the Bank
promptly copies of all notices to the Borrower of any default or other act or
omission by the Borrower which might invalidate or render unenforceable, in
whole or in part, such policy or result in the lapse thereof.
Each liability policy shall be primary without right of
contribution from any other insurance policy which is carried by the Borrower or
any other Person to the extent that such other insurance policy provides the
Borrower or other Person with contingent or excess insurance with respect to its
interest in the insured property and shall expressly provide that all of the
provisions thereof, except the limits on liability, shall operate in the same
manner as if there were a separate policy covering each insured. Borrower shall,
if so requested by the Bank, deliver to the Bank as often as the Bank may
reasonably request a report of a reputable insurance broker with respect to the
insurance on the property insured. Borrower shall upon request of the Bank at
any time furnish to Bank insurance certificates for such insurance.
The Borrower shall name the Bank, its successors and assigns,
ATIMA, as loss-payee on such policies of insurance.
7.8 Taxes. The Borrower will duly pay and discharge, or cause to be
paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income or
profits therefrom, as well as all claims for labor, materials, or supplies that
if unpaid might by law become a lien or charge upon any of its property;
provided that any such tax, assessment, charge, levy or claim with respect to
real property need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
7.9 Inspection of Properties and Books. The Borrower shall permit the
Bank, through the Bank or any of the Bank's other designated representatives, at
the Borrower's expense to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries during normal business hours of the Borrower
as the Bank may reasonably request, to examine the books of account of the
Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom), and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its officers,
all at such reasonable times and intervals as the Bank may reasonably request,
provided, however, that so long as no Event of Default shall have occurred, the
Bank shall conduct a commercial field audit exam at Borrower's expense, no more
frequently than once every twelve (12) consecutive months.
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7.10 Compliance with Laws, Contracts, Licenses, and Permits. The
Borrower will comply with, and will cause each of its Subsidiaries to comply in
all material respects with (a) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, including all
Environmental Laws, (b) the provisions of its articles of organization and other
charter documents and by-laws, (c) all agreements and instruments to which it is
a party or by which it or any of its properties may be bound and (d) all
applicable decrees, orders, and judgments. If at any time while any Revolving
Credit Loan or the Note is outstanding or the Bank shall have any obligation to
make Loans hereunder, any authorization, consent, approval, permit or license
from any officer, agency or instrumentality of any government shall become
necessary or required in order that the Borrower may fulfill any of its
obligations hereunder, the Borrower will immediately take or cause to be taken
all reasonable steps within the power of the Borrower to obtain such
authorization, consent, approval, permit or license and furnish the Bank with
evidence thereof.
7.11 Use of Proceeds. The Borrower will use the proceeds of the Loans
solely for working capital and other corporate purposes, to support the issuance
of Letters of Credit and for the repayment of Six Million Dollars
($6,000,000.00) in the aggregate of the Redemption Notes, (as defined in the
Acquisition Agreement) and Five Million Five Hundred Thousand Dollars
($5,500,000.00) of the Borrowers 12% Subordinated Debentures issued as of July
25, 1996.
7.12 Further Assurances. The Borrower will cooperate with, and will
cause each of its Subsidiaries to cooperate with the Bank and execute such
further instruments and documents as the Bank shall reasonably request to carry
out to its satisfaction the transactions contemplated by this Agreement and the
other Loan Documents. In the event that Borrower registers any trademark or
service mark or any other Intellectual Property with any federal or state
office, Borrower shall promptly thereafter notify Bank, in writing, and Borrower
shall include with such written notice a copy of such filing. Borrower shall
execute and deliver to the Bank documentation in such form as reasonably
requested by Bank necessary or convenient for the Bank to perfect is lien in
such Intellectual Property.
7.13 Maintenance of Liens of Security Documents. Without limitation on
the provisions of the Security Agreement: Borrower shall promptly, upon the
reasonable request of the Bank and at Borrower's expense, execute, acknowledge
and deliver, or cause the execution, acknowledgment and delivery of, and
thereafter register, file or record in an appropriate governmental office, any
document or instrument supplemental to or confirmatory of the Security Documents
or otherwise necessary or desirable in the opinion of the Bank for the creation,
preservation and/or perfection of the liens purported to be created by the
Security Documents, if any. If any of Borrower's property shall be or become
evidenced by any negotiable document of title, promissory note or other
instrument, such document, note or instrument shall immediately be delivered to
the Bank, duly endorsed in a manner satisfactory to the Bank.
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Borrower shall, at the Bank's request, defend the right, title and interest of
the Bank in and to any of the property which is the subject of the Security
Documents against the claims and demands of all Persons except claims of Persons
with liens permitted hereunder.
7.14 Equipment Not to Become Fixtures. At the request of the Bank,
Borrower will use its best efforts to obtain waivers or subordinations of lien,
in form satisfactory to the Bank, from each lessor and each lessor's mortgagee
of real property on which any material amount of the equipment is or may be
located.
7.15 Verification of Accounts. After the occurrence of an Event of
Default, the Bank shall have the right, at any time or times, to verify the
validity, amount or any other matter relating to any Account, by mail,
telephone, or in person.
7.16 Key Man Life Insurance. The Borrower, if it purchases any key man
life insurance ("Key Man Life Insurance Policies") on the lives of Borrower's
Key Officers or any other employee of the Borrower, shall forthwith assign, on
such forms as reasonably requested by the Bank, the Key Man Life Insurance
Policies as additional collateral for the Obligations. The Borrower shall within
sixty (60) days thereafter deliver the acknowledgment of such assignment by the
insurance carrier. The Borrower shall pay all premiums when such are due and
payable and maintain and preserve the Key Man Life Insurance Policies. The
proceeds of the Key Man Life Insurance shall be applied by the Bank to reduce
the amount outstanding under the Loan.
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and
agrees that, so long as any Revolving Credit Loan shall remain in effect or the
Note is outstanding or the Bank has any obligation to make any Revolving Credit
Loans and the principal of and interest on each Revolving Credit Loan, all fees
and all other expenses or amounts payable under any Loan Documents shall have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder shall have been reimbursed in full:
8.1 Restrictions on Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) the Obligations;
(b) current liabilities of the Borrower or its Subsidiaries incurred in
the ordinary course of business but not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;
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(c) Indebtedness in respect of taxes, assessments, governmental charges
or levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in accordance with
the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower shall at
the time in good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending such
appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by the Borrower or any Subsidiary
of the Borrower or in respect of any Capitalized Leases, provided that the
aggregate principal amount of such Indebtedness of the Borrower and its
Subsidiaries shall not exceed the aggregate amount of $500,000.00 outstanding at
any one time.
(g) Indebtedness in respect of obligations outstanding on the Closing
Date and described on Schedule 8.1 and any refinancing or extension thereof
which is no more onerous in any material respect to the Borrower than the then
outstanding Indebtedness and which does not increase the principal amount of
such Indebtedness.
(h) Indebtedness with respect to deferred compensation in the ordinary
course of business and Indebtedness with respect to employee benefit programs
(including liabilities in respect of deferred compensation, pension or severance
benefits, early termination benefits, disability benefits, vacation benefits and
tuition benefits) incurred in the ordinary course of business;
(i) Indebtedness in respect of customer advances and deposits, deferred
income, deferred taxes and other deferred credits arising in the ordinary course
of business;
(j) Indebtedness relating to deferred gains and deferred taxes existing
as of the Closing Date or arising in connection with sales of assets which are
permitted hereunder; and
(k) Subordinated Debt acceptable to the Bank.
8.2 Restrictions on Liens, Etc.
A. The Borrower will not, and will not permit any of its Subsidiaries
to:
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(a) create or incur or suffer to be created or incurred or to exist any
lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits therefrom;
(b) transfer any of its property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors;
(c) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement (except as permitted in Section 8.1 above);
(d) subject to Section 7.8, suffer to exist for a period of more than
thirty (30) days after the same shall have been incurred any Indebtedness or
claim or demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or
(e) sell, assign, pledge or otherwise transfer any accounts, contract
rights, general intangibles, chattel paper or instruments, with or without
recourse;
B. Provided that the Borrower and any Subsidiary of the Borrower may
create or incur or suffer to be created or incurred or to exist:
(i) liens created in favor of the Bank;
(ii) liens to secure taxes, assessments and other government
charges or claims for labor, material or supplies in respect
of obligations not overdue or being contested in accordance
with Section 7.8;
(iii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance,
old age pensions or other social security obligations;
(iv) landlord's or lessor's liens under leases to which the
Borrower or a Subsidiary of the Borrower is a party;
(v) presently outstanding Liens listed on Schedule 8.2 hereto and
renewals and extensions thereof, but not any increase thereof
and on terms no more onerous than existing on the date hereof,
provided, however, that the perfecting of any security
interest by any Person listed on Schedule 8.2 is not
permitted;
(vi) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date
hereof to secure purchase money Indebtedness of the
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type and amount permitted by Section 8.1(f), incurred in
connection with the acquisition of such property, which
security interests or mortgages cover only the real or
personal property so acquired and renewals and extensions
thereof, but not any increase thereof and on terms no more
onerous than existing on the date hereof;
(vii) liens of carriers, warehouseman, mechanics and similar Liens
or deposits to secure the release thereof;
(viii) capitalized lease obligations incurred after the Closing Date
and purchase money security interests in or purchase money
mortgages on real or personal property acquired after the
Closing Date to secure purchase money Indebtedness to the
extent permitted by Section 8.1(f) incurred in connection with
the acquisition of such property, which security interests or
mortgages cover only the real or personal property so acquired
and proceeds thereof and reasonable attachments and accessions
thereto.
(ix) other liens and encumbrances expressly permitted under the
terms of the Security Agreement; and
(x) Liens in respect of endorsements, utility and other deposits
and bonds posted in the ordinary course of business.
8.3 Restrictions on Investments. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase by the
Borrower;
(b) demand deposits, certificates of deposit and time deposits of: (x)
any United States Bank that is a commercial bank having capital and surplus in
excess of $1,000,000,000.00 and whose short-term commercial paper rating from
Standard & Poor's Corporation is at least A-1 or the equivalent thereof or from
Moodys Investors Services, Inc. of at least P-1 or the equivalent thereof;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for which are not less than "P 1" if rated by Moody's Investors
Services, Inc., and not less than "A 1" if rated by Standard and Poor's;
(d) trade or customer accounts or notes receivable for inventory sold
or leased or services rendered in the ordinary course of business;
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<PAGE> 47
(e) advances to employees, agents and consultants in the ordinary
course of business, including, but not limited to, travel, payroll and other
expenses incurred in the ordinary course of business, up to an aggregate amount
at any one time outstanding of $200,000.00; and
(f) money market and similar funds that invest exclusively in the
securities referred to in clauses (a), (b) and (c) of this Section 8.3.
8.4 Merger, Consolidation. The Borrower will not, and will not permit
any of its Subsidiaries to, become a party to any merger or consolidation, or
agree to or effect any asset acquisition or stock acquisition or disposition
(other than the acquisition or disposition of assets in the ordinary course of
business consistent with past practices) except (i) the merger or consolidation
of one or more of the Subsidiaries of the Borrower with and into the Borrower,
or (ii) the merger or consolidation of two or more Subsidiaries of the Borrower.
The Borrower shall not create any Subsidiaries without the prior written consent
of the Bank which shall not be unreasonably withheld, conditioned or delayed.
8.5 Sale and Leaseback. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property that the Borrower or any Subsidiary of the Borrower intends
to use for substantially the same purpose as the property being sold or
transferred.
8.6 Compliance with Environmental Laws. The Borrower will not, and will
not permit any of its Subsidiaries to, do any of the following: (a) use any of
the Real Estate or any portion thereof as a facility for the handling,
processing, storage or disposal of Hazardous Substances, (b) cause or permit to
be located on any of the Real Estate any underground tank or other underground
storage receptacle for Hazardous Substances except in compliance in all material
respects with Environmental Laws, (c) generate any Hazardous Substances on any
of the Real Estate except in compliance in all material respects with
Environmental Laws, or (d) conduct any activity at any Real Estate or use any
Real Estate in any manner so as to cause a Release.
8.7 Distributions.
Borrower shall not make any Distributions, provided, however, that so
long as no Default exists or would be created thereby, and no Event of Default
has occurred, the Borrower may make the following:
(a) Distributions on Subordinated Debt to the extent permitted by the
Bank.
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(b) Distributions in respect of the redemption of capital stock of the
Borrower from management employees of the Borrower; provided, however, that the
amount of all such Distributions shall not exceed in the aggregate $200,000.00
in any Fiscal Year.
(c) Intentionally Deleted.
(d) Distribution of dividends payable only in shares of common stock of
the Borrower;
(e) Distributions to employees for travel expenses and related business
entertainment and business expenses incurred in the ordinary course of business
not to exceed in the aggregate $50,000.00 at any one time.
(f) Distributions to Borrower's Key Officers for bonuses in the
ordinary course of business or under any employee agreements with the Borrower.
8.8 Change to Fiscal Year. The Borrower shall not change its Fiscal
Year without the prior consent of the Bank.
9. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants and agrees
that, so long as any Revolving Credit Loan shall remain in effect or the Note is
outstanding or the Bank has any obligation to make any Revolving Credit Loans
and until the principal or any interest on each Revolving Credit Loan, all fees
and all other expenses on amounts payable under any Loan Documents shall have
been in full and all Letters of Credit have been canceled or expired and all
amounts drawn thereunder shall have been paid in full:
9.1 Minimum Net Income. The Borrower shall have Consolidated Net Income
for each of its fiscal quarters commencing with the fiscal quarter ending
September 30, 1996 (treated as a single accounting period) of at least $1.00.
9.2 Total Debt Service Coverage. On the last day of each fiscal quarter
of the Borrower, the ratio of Operating Cash Flow to Total Debt Service for the
period of the four (4) consecutive quarters of Borrower then ending (including,
to the extent necessary, fiscal quarters that shall have ended prior to the date
hereof) shall not be less than 1.75:1.0.
9.3 Leverage Ratio. At all times, the ratio of (x) Total Debt to (y)
the sum of EBITDA for the period of the twelve (12) consecutive months of the
Borrower ending with the month immediately preceding the month of the
calculation, shall not be more than 3.0:1.0 (including, to the extent necessary,
fiscal quarters that shall have ended prior to the date hereof).
9.4 Capital Expenditures. The Borrower shall not spend in excess of
Seven Hundred Thousand Dollars ($700,000.00) on Capital Expenditures during any
Fiscal Year.
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10. CLOSING CONDITIONS. The obligations of the Bank to make the initial
Revolving Credit Loans shall be subject to the satisfaction of the following
conditions precedent.
10.1 Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto and, shall be in full
force and effect and shall be in form and substance satisfactory to the Bank,
and the Bank shall have received a fully executed original of each such
document.
10.2 Certified Copies of Organization Documents. The Bank shall have
received from the Borrower a copy, certified as of a recent date by the
appropriate officer of the Secretary of State of Mississippi to be true and
complete, of the articles of organization and any other organization documents
of Borrower as in effect on such date of certification.
10.3 By-laws; Resolutions. All action on the part of the Borrower
necessary for the valid execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents to which it is or is to become a
party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Bank shall have been provided to the Bank. The Bank shall
have received from the Borrower true copies of its by-laws and the resolutions
adopted by its shareholders and board of directors authorizing the transactions
described herein, each certified by its secretary as of a recent date to be true
and complete.
10.4 Incumbency Certificate; Authorized Signers. The Bank shall have
received from the Borrower an incumbency certificate, dated as of the Closing
Date, signed by a duly authorized officer of the Borrower and giving the name
and bearing a specimen signature of each individual who shall be authorized: (a)
to sign, in the name and on behalf of the Borrower, each of the Loan Documents
to which the Borrower is or is to become a party; (b) to make Loan Requests; and
(c) to give notices and to take other action on behalf of the Borrower under the
Loan Documents.
10.5 Validity of Liens. The Security Documents shall be effective to
create in favor of the Bank a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Bank to protect and
preserve such security interests shall have been duly effected. The Bank shall
have received evidence thereof in form and substance satisfactory to the Bank.
10.6 UCC Searches. The Bank shall have received UCC searches of records
of applicable jurisdictions with respect to the Borrower, satisfactory to the
Bank and showing no liens or encumbrances on the Collateral other than Permitted
Liens.
10.7 Leases. The Bank shall have received from the Borrower true copies
of all Leases.
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10.8 Lease Collateral Agreements. The Bank shall have received the
Lease Collateral Agreements, in form and substance satisfactory to the Bank.
10.9 Certificates of Insurance. The Bank shall have received (a)
certified copies of all policies of insurance maintained by Borrower evidencing
such insurance (or certificates therefor signed by the insurer or an agent
authorized to bind the insurer, identifying insurers, types of insurance,
insurance limits, and policy terms) which name the Bank as Loss Payee; and (b)
such further information and certificates from Borrower, its insurers and
insurance brokers as the Bank may request.
10.10 Opinion of Counsel Concerning Organization and Loan Documents.
(a) The Bank shall have received a favorable opinion from Borrower's
counsel addressed to the Bank and dated as of the Closing Date, in form and
substance satisfactory to the Bank and its counsel, as to the matters requested
by the Bank.
(b) The Bank shall have received a favorable opinion from Mississippi
counsel addressed to the Bank and dated as of the Closing Date, in form and
substance satisfactory to the Bank, and its counsel, as to the matters requested
by the Bank.
10.11 Payment of Fees. The Borrower shall have paid to the Bank the
facility fee pursuant to Section 4.1, the Bank's Special Counsel fees and
expenses and any expenses of the Bank's local counsel.
10.12 Permit Assurances. The Bank shall have received evidence
satisfactory to the Bank that all activities being conducted by the Borrower and
its Subsidiaries which require federal, state or local licenses or permits have
been duly licensed and that such licenses or permits are in full force and
effect.
10.13 Other Documents. The Borrower shall have executed and delivered
or caused others to execute and deliver such other certificates, affidavits,
agreements or documents as the Bank or its counsel may reasonably require.
11. CONDITIONS TO ALL BORROWINGS. The obligations of the Bank to make any
Loan, whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
11.1 Representations True; No Event of Default. Each of the
representations and warranties of the Borrower and its Subsidiaries contained in
this Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Agreement shall be true in all
material respects as of the date as of which they were made and shall also be
true in all material respects at and as of the time of the making of such Loan,
with the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or
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permitted by this Agreement and the other Loan Documents and changes occurring
in the ordinary course of business that singly or in the aggregate are not
materially adverse, and except further for matters about which the Borrower has
previously given the Bank adequate written notice and further except to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
The Bank, if requested, shall have received a certificate of the Borrower signed
by an authorized officer of the Borrower to such effect substantially in the
form annexed hereto as Exhibit C.
11.2 No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of the Bank would make it illegal for the Bank to make such Loan.
11.3 Governmental Regulation. The Bank shall have received such
statements in substance and form reasonably satisfactory to the Bank as the Bank
shall require for the purpose of compliance with any applicable regulations of
the Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
11.4 Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement, the other Loan Documents and all
other documents incident thereto shall be satisfactory in substance and in form
to the Bank and to the Bank's counsel, and the Bank and such counsel shall have
received all information and such counterpart originals or certified or other
copies of such documents as the Bank may reasonably request.
12. EVENTS OF DEFAULT; ACCELERATION; ETC.
12.1 Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to make any payment in respect of:
(i) interest or any fee on or in respect of any of the Loan
Documents, including, without limitation, the Note, as the
same shall become due and payable, and such failure shall
continue for a period of three (3) Business Days; or
(ii) principal of any of the Loan Documents owed by it as the same
shall become due and payable, whether at the Maturity Date, or
after acceleration, or the pay-down of amounts outstanding
under the Note to the Stated Maximum;
(b) [intentionally not used];
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(c) the Borrower shall fail to comply with any of its covenants
contained in 7.4, 7.5, 7.6, 7.7, 7.9, 7.11, 7.12, 7.13, 7.14, 8.1, 8.2, 8.3,
8.4, 8.5, 8.7, 9.1, 9.2, 9.3, or 9.4, or any of the covenants contained in the
Security Agreement within any applicable grace period contained in the Security
Agreement;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
other term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this Section 12), and such
failure shall not be rectified or cured to the written satisfaction of the Bank
within thirty (30) days after notice thereof by the Bank to the Borrower;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Agreement or any of the other Loan Documents or in any
other document or instrument delivered pursuant to or in connection with this
Agreement shall prove to have been false in any material respect upon the date
when made or deemed to have been made or repeated;
(f) [Intentionally not used];
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian, liquidator or
receiver of the Borrower or any of its Subsidiaries or of any substantial part
of the assets of the Borrower or any of its Subsidiaries or shall commence any
case or other proceeding relating to the Borrower or any of its Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in furtherance of
any of the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against the Borrower or any
of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate
its approval thereof, consent thereto or acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of the
Borrower or any Subsidiary of the Borrower in an involuntary case under federal
bankruptcy laws as now or hereafter constituted, which remains undischarged for
a period of sixty (60) days;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive, any
uninsured final judgment against the Borrower or any of its Subsidiaries that,
with other outstanding uninsured final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate of $100,000.00;
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(j) if any of the Loan Documents shall be canceled, terminated, revoked
or rescinded otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Bank, or any action
at law, suit or in equity or other legal proceeding to cancel, revoke or rescind
any of the Loan Documents shall be commenced by or on behalf of the Borrower or
any of its Subsidiaries, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or issue a judgment, order, decree or ruling to the effect that, any one or more
of the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof (but the foregoing shall not apply to any such determination,
judgment, order, decree or ruling invalidating any provision of the Loan
Documents or severing such provision from such Loan Documents, provided that it
does not materially adversely affect the rights, remedies and relationships
established by the Loan Documents);
(k) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Bank shall have determined in its reasonable
discretion that such event reasonably could be expected to result in liability
of the Borrower or any of its Subsidiaries to the PBGC or such Guaranteed
Pension Plan in an aggregate amount exceeding $100,000.00 and such event in the
circumstances occurring reasonably could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan; and
(l) one or more changes in the capital stock of the Borrower which
would result in Summit having beneficial ownership and control of less than a
majority of the Voting Interests of the Borrower except for changes resulting
from a public offering of equity securities of the Borrower; and
then, and in any such event, so long as the same may be continuing, the Bank may
by notice in writing to the Borrower declare all amounts owing with respect to
this Agreement, the Note and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; provided that in the event of any Event of Default
specified in Sections 12.1(g) or 12.1(h), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from the Bank.
12.2 Termination of Commitment. If any one or more Events of Default
specified in Sections 12.1(g) or 12.1(h) shall occur, any unused portion of the
credit hereunder shall forthwith terminate and the Bank shall be relieved of all
obligations to make Loans to the Borrower. If any other Event of Default shall
have occurred, then the Bank may by notice to the Borrower, terminate the unused
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portion of the credit hereunder, and upon such notice being given such unused
portion of the credit hereunder shall terminate immediately and the Bank shall
be relieved of all further obligations to make Loans. No termination of the
credit hereunder shall relieve the Borrower of any of the Obligations or any of
its existing obligations to the Bank arising under other agreements or
instruments.
12.3 Remedies. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Bank shall have
accelerated the maturity of the Loans pursuant to Section 12.1, the Bank may
proceed to protect and enforce its rights and remedies under this Agreement, the
Note or any of the other Loan Documents by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which the Obligations to the Bank are evidenced,
including to the full extent permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Bank. No remedy herein conferred upon the Bank
or the holder of any Note is intended to be exclusive of any other remedy and
each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or any other provision of law.
12.4 Distribution of Collateral Proceeds. In the event that, following
the occurrence or during the continuance of any Default or Event of Default, the
Bank receives any monies in connection with the enforcement of any of the
Security Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the reimbursement
of, the Bank for or in respect of all reasonable costs, expenses, disbursements
and losses which shall have been incurred or sustained by the Bank in connection
with the collection of such monies by the Bank, for the exercise, protection or
enforcement by the Bank of all or any of the rights, remedies, powers and
privileges of the Bank under this Agreement or any of the other Loan Documents
or in respect of the Collateral or in support of any provision of adequate
indemnity to the Bank against any taxes or liens which by law shall have, or may
have, priority over the rights of the Bank to such monies;
(b) Second, to all other Obligations in such order or preference as the
Bank may determine; and provided, further that the Bank may in its discretion
make proper allowance to take into account any Obligations not then due and
payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Bank of all of
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the Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the UCC; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.
12.5 Event of Default Waiver. If an Event of Default has occurred and
the Bank waives by waiver or amendment, in its sole discretion, the occurrence
of such Event of Default in writing to the Borrower, it shall be treated as in
the same manner for purposes of the Loan Documents as a Default which the
Borrower has cured within an applicable grace period. The foregoing provision
does not obligate the Bank to provide any waivers of any Event of Default to the
Borrower at any time and from time to time.
13. SETOFF. Regardless of the adequacy of any collateral, after the
occurrence of any Event of Default, any deposits (general or specific, time or
demand, provisional or final, regardless of currency, maturity, or the branch of
where such deposits are held) or other sums credited by or due from the Bank to
the Borrower and any securities or other property of the Borrower in the
possession of such Bank may be applied to or set off against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of the
Borrower to such Bank.
14. [Intentionally blank.]
15. EXPENSES. The Borrower agrees to pay:
(a) reserved;
(b) any taxes payable on or with respect to the transactions
contemplated by this Agreement (including any interest and penalties in respect
thereto) payable by the Bank (other than taxes based upon the Bank's income or
profits), including any filing, recording, mortgage, documentary or intangibles
taxes in connection with the Security Agreement and other Loan Documents, or
other taxes payable on or with respect to the transactions contemplated by this
Agreement, including any taxes payable by the Bank after the Closing Date (the
Borrower hereby agreeing to indemnify the Bank with respect thereto);
(c) all title insurance premiums, appraisal fees, engineer's fees, and
the reasonable fees, expenses and disbursements of the Bank's Special Counsel
incurred in connection with the preparation, administration or interpretation of
the Loan Documents and other instruments mentioned herein, each closing
hereunder, and amendments, modifications, approvals, consents or waivers hereto
or hereunder;
(d) the fees, expenses and disbursements of the Bank incurred by the
Bank in connection with the preparation, administration or interpretation of the
Loan Documents and other instruments mentioned herein;
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(e) all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and costs, which attorneys may be employees of the Bank and the
fees and costs of appraisers, engineers, investment bankers or other experts
retained by the Bank in connection with any such enforcement proceedings)
incurred by the Bank in connection with:
(i) the enforcement of or preservation of rights under any of the
Loan Documents against the Borrower or any of its
Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default; and
(ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Bank's
relationship with the Borrower or any of its Subsidiaries;
and
(f) all reasonable fees, expenses and disbursements of the Bank
incurred in connection with UCC searches, UCC filings or mortgage recordings.
The covenants of this Section 15 shall survive payment or satisfaction of
payment of amounts owing with respect to the Note.
16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the
Bank from and against any and all claims, actions and suits whether groundless
or otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Agreement or any of
the other Loan Documents or the transactions contemplated hereby (except to the
extent such claims, damages, liabilities and expenses result from the Bank's
gross negligence, bad faith or willful misconduct) including, without limitation
(subject to the exceptions set forth above):
(a) any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the Loans;
(b) any actual or alleged infringement of any patent, copyright,
trademark, service mark or similar right of the Borrower or any of its
Subsidiaries comprised in the Collateral;
(c) the Borrower or any of its Subsidiaries entering into or performing
this Agreement or any of the other Loan Documents; or
(d) with respect to the Borrower and its Subsidiaries and their
respective properties and assets, the violation of any Environmental Law, the
Release or threatened Release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or
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other proceeding. In litigation, or the preparation therefor, the Bank shall be
entitled to select its own counsel and, in addition to the foregoing indemnity,
the Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrower under this
Section 16 are unenforceable for any reason, the Borrower hereby agrees to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The provisions of this Section 16
shall survive the repayment of the Loans and the termination of the obligations
of the Bank hereunder.
17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations
and warranties made herein, in the Notes, in any of the other Loan Documents or
in any documents or other papers delivered by or on behalf of the Borrower or
any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon
by the Bank, notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Bank of any of the Loans, as
herein contemplated, and shall continue in full force and effect so long as any
amount due under this Agreement or the Notes or any of the other Loan Documents
remains outstanding or the Bank has any obligation to make any Loans. The
indemnification obligations of the Borrower provided herein and the other Loan
Documents shall survive the full repayment of amounts due and the termination of
the obligations of the Bank hereunder and thereunder to the extent provided
herein and therein. All statements contained in any certificate or other paper
delivered to the Bank at any time by or on behalf of the Borrower or any of its
Subsidiaries pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by the Borrower or such
Subsidiary hereunder.
18. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of Borrower, Bank and all future holders of the Note, and their
respective successors and assigns, except that Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Bank. Borrower acknowledges that the Bank may, from time to time, sell
participation interests in the Loan and Borrower's other obligations hereunder,
to third parties, on such terms and conditions as the Bank may determine, and
Borrower specifically consents thereto. The Bank may also from time to time
assign its rights and delegate its obligations, including its obligation to make
part or all of the Loans or grant part or all of any other financial
accommodation under this Agreement, in which event Borrower shall only have
recourse to the assignee for the performance of the Bank's obligation that have
been so delegated. For these purposes the Bank may disclose to an intended or
actual participant or assignee all or any information supplied to the Bank by or
on behalf of Borrower, provided that the Bank shall inform such recipients that
such information is to be held in confidence.
19. NOTICES, ETC. Except as otherwise expressly provided in this
Agreement, all notices and other communications made or required to
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be given pursuant to this Agreement or the Note shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first class
mail, postage prepaid, sent by overnight courier, or sent by telegraph,
telecopy, telefax or telex and confirmed by delivery via courier or postal
service, addressed as follows:
(a) if to the Borrower, at 522 East Railroad Street, Long Beach,
Mississippi, Attention: President, or at such other address for notice as the
Borrower shall last have furnished in writing to the Person giving the notice
(and Bank also shall use good-faith efforts to provide a copy of any such notice
to Borrower to the following additional address: Attn: Joseph F. Trustey, Summit
Partners, 600 Atlantic Avenue, Boston, Massachusetts 02210, but the failure to
give such additional notice shall not affect the effect or validity of any
notice or other communication given to Borrower at the first address set forth
above); and
(b) if to the Bank, at 100 Federal Street, Boston, Massachusetts 02110,
Attention: Gregory G. O'Brien, Managing Director, or such other address for
notice as the Bank shall last have furnished in writing to the Borrower.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND
EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH
OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION
19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN
AN INCONVENIENT COURT.
21. HEADINGS. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
22. COUNTERPARTS. This Agreement and any amendment hereof may be executed
in several counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, and all of which
together shall constitute one
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instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
23. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated,
except as provided in Section 25.
24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. THE BORROWER HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (B) ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER
THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly
provided in this Agreement, any consent or approval required or permitted by
this Agreement may be given, and any term of this Agreement or of any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower of any terms of this Agreement or such
other instrument or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Bank. No waiver
shall extend to or affect any obligation not expressly waived or impair any
right consequent thereon. No course of dealing or delay or omission on the part
of the Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
26. SEVERABILITY. The provisions of this Agreement are severable, and if
any one clause or provision hereof 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 Agreement in any
jurisdiction.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first set forth above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
----------------------------------------
Name: Ernest L. Burdette
Title: President
Hereunto Duly Authorized
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Gregory G. O'Brien
----------------------------------------
Name: Gregory G. O'Brien
Title: Managing Director
55
<PAGE> 1
Exhibit 10.6
REVOLVING CREDIT NOTE
$15,000,000.00 September 26, 1996
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, TRITON SYSTEMS, INC., a
Mississippi corporation, having an address of 522 Railroad Street, Long Beach,
Mississippi (the "Borrower"), promises to pay to the order of THE FIRST NATIONAL
BANK OF BOSTON, a national banking association (hereinafter, together with its
successors in title and assigns the "Bank") at the head office of the Bank, at
100 Federal Street, Boston, Massachusetts, on September 26, 2001 or such earlier
date on which this Note shall become due and payable pursuant to the terms
hereof (the "Maturity Date"), the aggregate unpaid principal amount of the loans
made by the Bank to the Borrower pursuant to the "Loan Agreement" (defined
below), together with all accrued and unpaid interest and costs, expenses and
charges due hereunder.
The Borrower further promises to pay interest from the date hereof on
the principal amount hereof from time to time unpaid at the rates and times and
in all cases in accordance with the terms of the Loan Agreement.
In addition, the Borrower further promises in accordance with the terms
of the Loan Agreement to make principal repayments as and when provided therein.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Revolving Credit Agreement of even
date herewith between the Borrower and the Bank (the "Loan Agreement"). Unless
otherwise provided herein, the rules of interpretation set forth in Section 1.2
of the Loan Agreement shall be applicable to this Note.
All loans made by the Bank pursuant to the Loan Agreement and all
repayments of the principal thereof shall be recorded by the Bank and, prior to
any transfer hereof, appropriate notations to evidence the foregoing information
with respect to each such loan then outstanding shall be endorsed by the Bank on
the schedule attached hereto or on a continuation of such schedule attached to
and made a part hereof; provided, however, that the failure of the Bank to make
any such recordation or endorsement shall not affect the obligations of the
Borrower under this Note, such Loan Agreement, or any other Loan Documents.
<PAGE> 2
This Note is issued pursuant to, is entitled to the benefits of, and is
subject to the provisions of the Loan Agreement. This Note is secured by the
Security Documents. The principal of this Note is subject to prepayment in whole
or in part in the manner and to the extent specified in the Loan Agreement.
In case an Event of Default shall occur, the entire unpaid principal
amount of this Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Loan Agreement.
The Borrower and all endorsers hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note and assent to the
extensions of the time of payment or forbearance or other indulgence without
notice.
THIS NOTE AND THE OBLIGATIONS OF BORROWER HEREUNDER SHALL BE GOVERNED
BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
THE MAKER OF THIS NOTE HAS WAIVED A JURY TRIAL IN THE LOAN AGREEMENT
REGARDING DISPUTES ARISING FROM OR IN CONNECTION WITH THIS NOTE AND THE
TRANSACTION IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its corporate name as an instrument under seal by its duly authorized officer on
the date and in the year first above written.
TRITON SYSTEMS, INC.
By: /s/Ernest L. Burdette
-----------------------------------
Name: Ernest L. Burdette
Title: President
Hereunto Duly Authorized
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<PAGE> 3
LOANS AND PAYMENTS OF PRINCIPAL
Loans or payments of principal of this Note were made on the dates and
in the amounts specified below:
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- --------------------------------------------------------------------------------
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<PAGE> 1
Exhibit 10.7
PLEDGE AND SECURITY AGREEMENT - ALL ASSETS
THIS PLEDGE AND SECURITY AGREEMENT - ALL ASSETS is entered into as of
September 26, 1996 by and between TRITON SYSTEMS, INC., a Mississippi
corporation (the "Borrower") and The First National Bank of Boston, a national
banking association (the "Secured Party").
WHEREAS, Borrower and Secured Party are parties to a Credit Agreement
dated as of the date hereof (as it may be amended, supplemented or otherwise
modified, the "Credit Agreement"), pursuant to which Secured Party may from time
to time, as provided therein, make loans and otherwise extend credit to
Borrower; and
WHEREAS, Secured Party's willingness to make such loans and credit
available to Borrower is subject to the condition, among others, that Borrower
executes and delivers this Security Agreement;
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower hereby agrees for the benefit of Secured Party, as
follows:
1. Defined Terms. The following terms when used herein shall
have the respective meanings set forth in this Section. Unless
otherwise defined herein, capitalized terms set forth herein shall
have such defined meanings as are in the Credit Agreement.
"Accounts;" "Accounts Receivable" means all "accounts", as
such term is defined in Section 9-106 of the UCC, now or hereafter
owned by Borrower, and also means and includes any right of Borrower to
payment for goods sold or leased or for services rendered that Borrower
may now have or hereafter acquire, whether or not such right has been
earned by performance, including, without limitation, all accounts,
account receivable, book debts, instruments and chattel paper, leases,
notes, drafts, acceptances, payments under leases of Inventory or
Equipment or sale of Inventory or Equipment and other forms of
obligations now or hereafter received by or belonging or owing to
Borrower for goods sold or leased and/or services rendered, all
guaranties and security therefor, all goods giving rise thereto and all
rights pertaining to such goods, including, without limitation, the
rights of a seller under the UCC to reclaim such goods or stop them in
transit, and all of Borrower's rights in, to and under all purchase
orders, instruments and other documents now or hereafter delivered by
or to it evidencing obligations for and representing payment for goods
sold or leased and/or services rendered, and all monies due or to
become due to Borrower under all contracts for the sale or lease of
goods and/or the performance of
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<PAGE> 2
services, now in existence or hereafter arising, including, without
limitation, the right to receive the Proceeds of such purchase orders
and contracts.
"Collateral" means all of the Borrower's tangible and
intangible personal property and fixtures, now owned or hereafter
acquired, including, without limitation, (a) all Accounts, Instruments
and Documents, and General Intangibles in which Borrower now or
hereafter has any right, title or interest, including, without
limitation, (i) all moneys, residues and property of any kind due and
to become due under any contract or in any depository account, (ii) any
damages arising out of or for breach or default in respect of any such
Accounts, Instruments and Documents, or General Intangibles, and (iii)
all other amounts from time to time paid or payable under or in
connection therewith; (b) all Equipment now owned or hereafter
acquired; (c) all Inventory now owned or hereafter acquired; (d) all
farm products as that term is defined in Section9-109(3) of the UCC;
and (e) to the extent not otherwise included, all accessions to and
additions to, substitutions for, and replacements, Proceeds and
products of any and all of the foregoing.
"Encumbrance" means any mortgage, lease, conditional sales
agreement, title retention agreement, security interest, Lien or other
encumbrance.
"Equipment" means all "equipment", as such term is defined in
Section 9-109(2) of the UCC, now or hereafter owned by Borrower, and
also means and includes all personal property constituting machinery,
equipment, plant, furnishings, fixtures, and other fixed assets now
owned or hereafter acquired by Borrower, including, without limitation,
all items of machinery and equipment of any kind, nature and
description, as well as trucks and vehicles of every description,
trailers, handling and delivery equipment and office furniture, and all
additions to, substitutions for, replacements of or accessions to any
of the foregoing items and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or
affixed thereto, and all fuel for any thereof.
"General Intangibles" means all "general intangibles", as such
term is defined in Section 9-106 of the UCC, and all intangible
personal property not included in Accounts, or in Instruments and
Documents, now or hereafter owned or acquired by Borrower, and also
means and includes all right, title and interest of Borrower now or
hereafter owned or acquired in intellectual property, patents, patent
applications, goodwill, trademarks, trademark applications, trade
names, service marks, copyrights, permits, licenses, federal, state, or
local tax refunds, claims under insurance policies (whether or not
Proceeds), other rights (if any) to payment, rights of set
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<PAGE> 3
off, chooses in action, rights under judgments, computer programs and
software, customer lists, and all contracts and agreements to, or of
which Borrower is a party or beneficiary, and all leasehold interests
of Borrower in real estate to the extent considered personal property
under applicable law and includes, without limitation, all contract
rights in that certain Stock Purchase and Redemption Agreement dated
July 25, 1996 by and among the Borrower, Summit and Borrower's Key
Officers.
"Instruments and Documents" means all "instruments,"
"documents," "deposit accounts," and "chattel paper," as defined in
Section 9-105 of the UCC, all securities, and includes, without
limitation, all warehouse receipts and other documents of title,
policies and certificates of insurance, checking, savings, and other
bank accounts, certificates of deposit, checks, notes and drafts, now
or hereafter acquired, to the extent not included in Accounts.
"Inventory" means all "inventory", as such term is defined in
Section 9-109(4) of the UCC, now owned or hereafter acquired by
Borrower, and also means and includes all inventory, wherever located,
now owned or hereafter acquired by Borrower, or in which Borrower now
has or hereafter may acquire any right, title or interest, including,
without limitation, all consigned goods and all goods and other
personal property now or hereafter owned by Borrower that are held for
sale or lease or are furnished or are to be furnished under a contract
of service or that constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Borrower's
business, or in the processing, packaging or shipping of the same, and
all finished goods.
"Proceeds" has the meaning given such term under the UCC and,
in any event, includes (but is not limited to) (a) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable from time to
time with respect to any of the Collateral, (b) any and all payments
(in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental authority),
(c) whatever is received upon any collection, exchange, sale, lease or
other disposition of any of the Collateral and any property into which
any of the Collateral is converted, whether cash or non-cash proceeds,
and (d) any and all other products of, or any rents, profits or other
amounts from time to time paid or payable under, or in connection with,
any of the Collateral.
"Security Agreement" or "Agreement" means this Pledge and
Security Agreement - All Assets, as it may be amended, supplemented or
otherwise modified, from time to time.
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<PAGE> 4
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of all the Obligations and to induce Secured Party
to enter into the Credit Agreement and make the Loans in accordance with the
terms thereof, Borrower hereby sells, assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party, and hereby grants to Secured Party
a security interest in, all of Borrower's right, title and interest in, to and
under the Collateral.
3. Representations and Warranties. The Borrower hereby
represents and warrants to the Secured Party that:
(a) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action, corporate or otherwise, and do not
and will not (i) require any consent or approval of the stockholders of the
Borrower, if any; (ii) contravene the terms of the charter, by-laws or other
organizational papers of the Borrower; (iii) violate any applicable law, rule or
regulation of any governmental agency; (iv) contravene any provision of any
agreement, instrument, order or undertaking binding on the Borrower or by which
any of its properties are bound or affected; (v) other than as contemplated
hereby, result in or require the imposition of any Encumbrance on any of the
properties of the Borrower; or (vi) other than filings required by the Uniform
Commercial Code, require the approval or consent of, or filing or registration
with, any governmental or other agency or authority, or any other party.
(b) The Borrower is, and in the case of property acquired after the
date hereof, will be, the sole legal and equitable owner of the Collateral,
holding good and marketable title to the same free and clear of all Encumbrances
except for the security interests granted hereunder or permitted hereby, and has
good right and legal authority to assign, deliver, and create a security
interest in the Collateral in the manner herein contemplated. The Collateral is
genuine and is what it is purported to be. The Collateral is not subject to any
restriction that would prohibit or restrict the assignment, delivery or creation
of the security interests contemplated hereunder.
(c) Intentionally Blank
(d) Except as disclosed to the Secured Party in writing, the amount
represented by the Borrower to the Secured Party from time to time as owing by
each account debtor will at such time be the correct amount actually and
unconditionally owing by such account debtor(s) thereunder.
(e) The name of the Borrower set forth in the caption hereof is its
correct corporate name, and the Borrower is not now doing business and has not
during the last five (5) years done business under any other name.
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<PAGE> 5
(f) All of the Collateral is located at the locations as set forth
in the Credit Agreement Schedule 6.22.
(g) This Agreement, together with the filing of Uniform Commercial
Code financing statements in the appropriate offices for the locations of
Collateral listed in this Agreement, create a valid and continuing first lien
(except for Permitted Liens) on and perfected security interest in the
Collateral (except for property located in the United States in which a security
interest may not be perfected by filing under the Uniform Commercial Code) and
is enforceable as such against creditors of the Borrower, any owner of the real
property where any of the Collateral is located, any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property. Other than as disclosed in the Credit Agreement, no financing
statement under the Uniform Commercial Code of any state or other instrument
evidencing a lien that names the Borrower as debtor is on file in any
jurisdiction and the Borrower has not signed any currently effective financing
statement or any agreement authorizing the filing of any such financing
statement or instrument.
(h) The Borrower shall defend its title to and the Secured Party's
interest in the Collateral against all claims and take any action necessary to
remove any encumbrances other than those permitted under the Credit Agreement
and defend the right, title and interest of the Secured Party in and to any of
the Borrower's rights in the Collateral.
4. Covenants. The Borrower covenants and agrees that from and after the
date of this Security Agreement and until the Obligations are fully satisfied
and the Credit Agreement is terminated:
(a) Location of Collateral. The Collateral will be kept only at the
locations set forth in the Credit Agreement and the Borrower will not remove the
Collateral (other than sales in the ordinary course of business) from such
jurisdictions without the prior written consent of the Secured Party.
(b) Further Documentation; Pledge of Instruments. At any time and
from time to time, at its sole expense, the Borrower will, promptly upon request
by the Secured Party, duly execute and deliver any and all such further
instruments and documents and take such further action as Secured Party may
reasonably deem desirable in obtaining the full benefits of this Security
Agreement and of the rights and powers herein granted, including, without
limita- tion, the filing of any financing or continuation statements under the
UCC in effect in any jurisdiction with respect to the liens and security
interests granted hereby. The Borrower also hereby authorizes the Secured Party
to file any such financing or continuation statement without the signature of
the Borrower or to file a photocopy of this Agreement as a financing statement
to the extent permitted by applicable law. If any Collateral, or if any
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<PAGE> 6
amount payable under or in connection with any of the Collateral, shall be or
become evidenced by any negotiable document of title, or by any promissory note
or other instrument, such document, note or instrument shall be immediately
delivered to the Secured Party hereunder, duly endorsed in a manner satisfactory
to the Secured Party.
(c) Intentionally Deleted
(d) Limitations on Dispositions of Inventory and Equipment. The
Borrower will not sell, transfer, lease or otherwise dispose of any of its
interest in the Collateral or attempt, offer or contract to do so, except for
the disposition in the ordinary course of business of Inventory or Equipment or
other Collateral that has become worn out or obsolete or is immaterial and
unnecessary in Borrower's business operation and of Inventory. The Borrower will
not transfer any Inventory on consignment, or attempt, offer or contract to do
so.
(e) Notices Regarding Collateral. The Borrower will advise the
Secured Party promptly, in reasonable detail, (i) of any lien or claim made or
asserted against any of the Collateral (other than Permitted Liens), (ii) of all
material disputes with respect to the Collateral, and the basis therefor, and
(iii) of the occurrence of any other event that would have a material adverse
effect on the Collateral taken as a whole or on the security interests created
hereunder.
(f) Agreements Regarding Accounts.
1. The Borrower will at all reasonable times and upon reasonable notice
allow the Secured Party to examine, inspect or make extracts from or copies of
the Borrower's books and records, inspect the Collateral and arrange for
verification of Accounts constituting Collateral directly with the Borrower's
accountants, the account debtors or by other methods in the manner provided in
Section 7.9 of the Credit Agreement.
2. The Borrower will diligently collect all of its Accounts
constituting Collateral until the Secured Party exercises its rights to collect
the Accounts pursuant to this Agreement. The Borrower shall, at the request of
the Secured Party, after the occurrence of any Event of Default, notify account
debtors of the security interest of the Secured Party in any Account and that
payment thereof is to be made directly to the Secured Party. Upon request of the
Secured Party, after the occurrence of any Event of Default, any proceeds of
Accounts or Inventory constituting Collateral received by the Borrower, whether
in the form of cash, checks, notes or other instruments, shall be held in trust
for the Secured Party and the Borrower shall deliver said proceeds daily to the
Secured Party, without commingling, in the identical form received (properly
endorsed or assigned where required to enable the Secured Party to collect
same).
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<PAGE> 7
(g) Indemnification. In any suit, proceeding or action brought by
the Secured Party under any Accounts, Instruments and Documents, or any General
Intangibles for any sum owing thereunder or to enforce any provision thereof,
the Borrower will save, indemnify and keep the Secured Party harmless from and
against all reasonable expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability whatsoever
of the obligee thereunder arising out of a breach by the Borrower of any
agreement, indebtedness or liability at any time owing to or in favor of such
obligee or its successors from the Borrower, and all such obligations of the
Borrower shall be and remain enforceable against the Borrower and shall not be
enforceable against the Secured Party.
(h) Maintenance of Records. The Borrower will keep and maintain, at
Borrower's address as first written above or such other place as Borrower
notifies Secured Party at least 30 days in advance and at its own cost and
expense, satisfactory and complete records of the Collateral, including, without
limitation, a record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the Collateral. The
Borrower will mark its books and records pertaining to the Collateral to
evidence this Security Agreement and the security interests granted hereby. For
the Secured Party's further security, the Borrower agrees that the Secured Party
shall have a special property interest in all of its books and records
pertaining to the Collateral (including, without limitation, customer lists,
correspondence with present or future or prospective suppliers or customers,
advertising materials, credit files, computer tapes, programs, printouts, and
all other computer materials, records and electronic data processing software),
and after demand and after the occurrence of an Event of Default the Borrower
will deliver and turn over any such books and records to the Secured Party or to
its representatives at any reasonable time on demand of the Secured Party. The
Borrower may make copies of such books and records before its delivery to the
Secured Party, provided that such copying does not unreasonably delay such
delivery.
(i) Protect Rights of Secured Party. The Borrower will, upon the
Secured Party's written request, defend the right, title and interest of the
Secured Party in and to any of the Collateral against the claims and demands of
all Persons whomsoever.
(j) Maintenance of Insurance. The Borrower will maintain with
financially sound and reputable companies satisfactory to the Secured Party
insurance policies as set forth in the Credit Agreement. All such insurance
proceeds received by the Secured Party may be applied by the Secured Party in
its discretion to the satisfaction of the Obligations or to repair or replace
any Collateral which sustained the casualty, except as otherwise required by
applicable law; provided, however, that if such proceeds are less than
$100,000.00 for any claim and $300,000.00 in
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<PAGE> 8
the aggregate, so long as no Default has occurred and is continuing and no Event
of Default has occurred, the Bank shall allow the Borrower to use such proceeds
to repair, replace or rebuild such damaged property.
(k) Further Identification of Collateral. The Borrower will furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request, all in
reasonable detail.
(l) Maintenance of Equipment. Except as permitted by 4(d) hereof,
the Borrower will keep and maintain each item of Equipment in good operating
condition, ordinary wear and tear excepted, and the Borrower will provide all
maintenance and service and all repairs necessary for such purpose.
(m) Assignment of Claims. If any of the Accounts arise out of
contracts with the United States, or any state, or any department, agency or
instrumentality of either, Borrower shall immediately so notify Secured Party
and execute such instruments of assignment and take such other measures as may
be required to assign such Accounts to Secured Party and provide proper notice
thereof to the government under the Federal Assignment of Claims Act or any
applicable state assignment of claims act.
5. Secured Party's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and appoints the
Secured Party and each officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and in the name of
the Borrower or in its own name, from time to time, but only to be used after
demand for the purpose of carrying out the terms of this Security Agreement, to
take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby gives the Secured Party the power and right, on behalf of the Borrower,
without notice to or assent by the Borrower to do the following after the
occurrence of an Event of Default:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due to Borrower under any
Account, or otherwise, and, in the name of the Borrower or its own name or
otherwise, to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due to
Borrower and to file any claim or to take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the Secured Party for
the purposes of collecting any and all such moneys due whenever payable;
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<PAGE> 9
(ii) to pay or discharge taxes or liens levied or placed on
or threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any part of
the premiums therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment to
Borrower under any Account, or otherwise, to make payment of any and all moneys
due and to become due thereunder directly to the Secured Party or as the Secured
Party shall direct; (B) to receive payment of and receipt for any and all
moneys, claims and other amounts due and to become due at any time in respect of
or arising out of any Collateral; (C) to sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Borrower with respect to any Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Secured
Party may deem appropriate; (G) after demand, to notify the postal authorities
to change the address for delivery of any mail of the Borrower to an address
designated by the Secured Party, and to receive, open, and dispose of all mail
addressed to the Borrower; and (H) after demand, otherwise to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Secured Party were the absolute
owner thereof for all purposes, and to do, at the Secured Party's option and the
Borrower's expense, at any time or from time to time, all acts and things that
the Secured Party reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Secured Party's security interests therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof except for actions committed in bad faith or with
gross negligence or willful misconduct. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(b) The powers conferred on the Secured Party hereunder are solely
to protect the interests of the Secured Party in the Collateral and shall not
impose any duty or obligation upon the Secured Party to exercise any such
powers. The Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any of
its officers, directors, employees or agents shall be responsible
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<PAGE> 10
to the Borrower for any act or failure to act, except for its own willful
misconduct, gross negligence or bad faith.
6. Performance by Secured Party of the Borrower's Obligations. If the
Borrower fails to perform or comply with any of its agreements contained herein
and the Secured Party, as provided for by the terms of this Security Agreement,
shall itself perform or comply, or otherwise cause performance or compliance,
with such agreement, the reasonable costs and expenses of the Secured Party
incurred in connection with such performance or compliance shall be paid by the
Borrower on demand and until so paid shall be added to the principal amount of
the Loan and shall bear interest (calculated on the basis of a 360-day year for
the actual days elapsed) at the same rate as provided in the Loan Documents for
overdue amounts.
7. Events of Default. The occurrence of any Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.
8. Remedies, Rights Upon Default. If an Event of Default occurs:
(a) (i) All payments received by the Borrower under or in connection
with any of the Collateral shall be held by the Borrower in trust for the
Secured Party, shall be segregated from other funds of the Borrower and shall
forthwith upon receipt by the Borrower be turned over to the Secured Party, in
the same form as received by the Borrower (duly endorsed by the Borrower to the
Secured Party, if required).
(ii) Any and all such payments so received by the Secured Party
(whether from the Borrower or otherwise) shall be held by the Secured Party as
collateral security for, and then or at any time thereafter, may be applied in
whole or in part for the benefit of the Secured Party against, all or any part
of the Obligations in such order as the Secured Party, in its discretion, may
determine.
(iii) The Secured Party shall have the right to seize and take
possession of any Collateral (or any paper, documents, correspondence, computer
tapes, programs, printouts and all other computer materials, records and
electronic data processing software relating to the Collateral) and may enter
the premises where they, or any of them, are located and occupy all or any
portion of the Borrower's premises without charge therefor for the purposes of
effecting such seizure. The Secured Party shall not be liable to the Borrower
for any damage suffered by the Borrower by reason of such entry or seizure
unless it results from the Secured Party's willful misconduct, gross negligence
or bad faith.
(iv) The Secured Party may hire and maintain at the Borrower's
principal office premises a custodian or independent
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<PAGE> 11
contractor selected by the Secured Party who shall have full authority to do all
lawful acts necessary to protect the Secured Party's interests and to report to
the Secured Party thereon. The Borrower hereby agrees to cooperate with any such
Person and to do whatever the Secured Party may reasonably request to preserve
the Collateral.
(b) The Secured Party may exercise, after the occurrence of an Event
of Default, for the benefit of the Secured Party, in addition to all other
rights and remedies granted in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, the Borrower expressly agrees that in any such
event the Secured Party may, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or on the Borrower or any other Person,
all and each of which demands, advertisements and/or notices are (to the extent
permitted by applicable law) hereby expressly waived, forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
forthwith take possession and operate or use the Collateral or any part thereof
for the purpose of preserving it or its value, and/or forthwith sell, lease,
assign, give option or options to purchase, or sell or otherwise dispose of and
deliver the Collateral (or contract to do so), or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange or broker's
board or at any of the Secured Party's offices or elsewhere, at such prices as
it may deem appropriate, for cash or on credit or for future delivery without
assumption of any credit risk and to collect all Accounts, including, without
limitation, direct all Account Debtors to make payments of all of their Accounts
owing to the Borrower directly to the Bank and to exercise every right, option,
power or authority inuring to the Borrower under the Purchase Contract as fully
as the Borrower could itself, including, directing the counterparty thereto to
make all payments under the indemnification provisions of Section 10.3 thereof
directly to the Lender. Secured Party shall have the right on any such public
sale or sales and, to the extent permitted by law, on any such private sale or
sales to purchase the whole or any part of said Collateral so sold, free of any
right or equity of redemption in the Borrower, which right or equity is (to the
extent permitted by applicable law) hereby expressly waived or released. The
Borrower further agrees, at the Secured Party's request, to assemble the
Collateral and make it available to the Secured Party at places that the Secured
Party shall reasonably select, whether at the Borrower's premises or elsewhere.
To the extent permitted by applicable law, the Borrower waives all
claims, damages and demands against the Secured Party arising out of the
repossession, retention, sale, or other disposition of the Collateral unless
resulting from such Secured Party's willful misconduct, gross negligence or bad
faith. The Borrower agrees
- 11 -
<PAGE> 12
that the Secured Party need not give more than ten (10) days' notice (which
notification shall be deemed given when mailed) of the time and place of any
public sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. No notification need be
given to the Borrower if it has signed, after demand, a statement renouncing or
modifying any right to notification of sale or other intended disposition. The
Borrower shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which the
Secured Party is entitled, the Borrower also being liable for the reasonable
fees and expenses of any attorneys employed by Secured Party to collect such
deficiency. The Secured Party shall have the right, in its sole discretion, to
determine which rights, security, liens, guaranties or remedies the Secured
Party shall retain, pursue, release, subordinate, modify, or enforce, without in
any way modifying or affecting any of the other of them or any of its rights
hereunder.
(c) To the extent that it may lawfully do so, the Borrower agrees
that it will not at any time insist upon, plead or in any manner whatsoever
claim or take the benefit or advantage of any appraisement, valuation, stay,
extension or redemption laws, or any law permitting it to direct the order in
which the Collateral or any part thereof shall be sold, now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance
or enforcement of this Security Agreement or the Obligations and hereby
expressly waives all benefit or advantage of any such laws and covenants that it
will not hinder, delay or impede the execution of any power granted or delegated
to the Secured Party in this Security Agreement, but will suffer and permit the
execution of every such power as though no such laws were in force.
(d) To the extent not expressly provided for herein the Secured
Party shall also have all of its rights and remedies under the Credit Agreement.
(e) Borrower shall be responsible for any and all reasonable
expenses, including reasonable attorneys' fees and expenses, incurred or paid by
Secured Party in protecting or enforcing any rights of Secured Party hereunder,
including its right to take possession, store, operate, use and dispose of the
Collateral or to collect the Proceeds thereof. Secured Party shall also have the
right to pay all other sums deemed necessary or desirable by it for the
preservation and protection of the Collateral, or for the realization thereupon,
including taxes, insurance, salaries (directly related to the preservation or
use of the Collateral or continued operation of the Borrower's businesses to
that end), fees and costs. All such sums so paid by Secured Party shall be
"Obligations" within the meaning of this Security Agreement, due upon demand.
- 12 -
<PAGE> 13
9. Limitation on Secured Party's Duty in Respect to Collateral. Beyond
the safe custody thereof, the Secured Party shall have no duty as to any
Collateral in its possession or its nominee's or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. In any suit, proceeding or action brought by Secured Party under any
Accounts, Instruments and Documents, or any General Intangibles for any sum
owing thereunder or to enforce any provision thereof, Borrower will save,
indemnify and keep Secured Party harmless from and against all reasonable
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction or liability whatsoever of the obligee thereunder
arising out of a breach by Borrower of any agreement, indebtedness or liability
at any time owing to or in favor of such obligee or its successors from
Borrower, and all such obligations of Borrower shall be and remain enforceable
against Borrower.
10. Setoff. As security for the due payment and performance of all of
Borrower's Obligations to Secured Party now in existence or hereafter arising,
including, without limitation, Borrower's obligations hereunder, under the Note
and under the other Loan Documents, Borrower hereby grants to Secured Party a
lien on any and all deposits or other sums at any time credited by or due from
Secured Party and any affiliate of Secured Party to Borrower, whether in regular
or special depository accounts or otherwise, and any and all moneys, securities
and other property of Borrower, and the proceeds thereof, now or hereafter held
or received by or in transit to Secured Party from or for Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and any
such deposits, sums, moneys, securities and other property, may at any time,
after the occurrence of an Event of Default, be set off, appropriated and
applied by Secured Party against any of such Obligations, whether or not any of
the Obligations is then due or is secured by any other collateral, or, if it is
so secured, whether or not the other collateral held by Secured Party is
considered to be adequate.
11. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or on the Borrower or the Secured
Party shall be in writing and shall be given or made as provided in and subject
to the provisions of the Credit Agreement.
12. Severability. The provisions of this Agreement are severable, and
if any one clause or provision hereof 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 Agreement in any
jurisdiction.
- 13 -
<PAGE> 14
13. No Waiver; Cumulative Remedies. The Secured Party shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by the
Secured Party and then only to the extent therein set forth. A waiver of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Secured Party would otherwise have had on any
future occasion. No failure to exercise nor any delay in exercising, on the part
of any Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise or any other right, power or privilege. The rights and remedies
hereunder provided are cumulative, may be exercised singly or concurrently and
are not exclusive of any rights and remedies under the other Loan Documents or
available at law or in equity.
14. No Oral Modification; Successors; Governing Law. None of the terms
or provisions of this Security Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by the Secured Party
(and the Borrower, except in the case of a waiver). This Security Agreement and
all obligations of the Borrower hereunder shall be binding on the respective
successors and assigns of the Borrower and shall, together with the rights and
remedies of the Secured Party hereunder, inure to the benefit of the Secured
Party and its respective successors and assigns; provided, however, that the
foregoing shall not be deemed to modify the prohibitions on assignments or
transfers by Borrower contained herein or in the Credit Agreement and other Loan
Documents. This Security Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth of Massachusetts,
provided, however, that with respect to the perfection of the Secured Party's
lien in the Collateral and the effect or non-perfection thereof, this Security
Agreement shall be governed by, and construed in accordance with the laws of the
jurisdiction where such Collateral is located, as such laws are made applicable
by Section 9-103 of the Uniform Commercial Code as in effect in the Commonwealth
of Massachusetts. The Credit Agreement, the Note and other Loan Documents
(except as otherwise specifically provided therein) shall be governed by
Massachusetts state law as provided in the Credit Agreement.
15. Further Indemnification. The Borrower agrees to pay, and to save
the Secured Party harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, or failure of Borrower to pay, any wages or
salaries or any excise, sales, payroll, unemployment or other taxes that may be
payable or
- 14 -
<PAGE> 15
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Security Agreement. This
covenant shall survive the termination of this Security Agreement.
16. Counterparts. This Security Agreement may be executed in any number
of separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
17. Descriptive Headings. The captions in this Security Agreement are
for convenience of reference only and shall not define or limit the provisions
hereof.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as an instrument under seal as of the date first written above.
Witness: TRITON SYSTEMS, INC.
/s/ [illegible] By: /s/ Ernest L. Burdette
- -------------------------------- ------------------------------
Name: Ernest L. Burdette
Title: President
Witness: THE FIRST NATIONAL BANK OF BOSTON
/s/ [illegible] By: /s/ Gregory G. O'Brien
- -------------------------------- ------------------------------
Name: Gregory G. O'Brien
Title: Managing Director
-15-
<PAGE> 16
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss: Boston September __, 1996
Then personally appeared the above-named __________________,
____________________ of Triton Systems, Inc., as aforesaid and acknowledged the
foregoing instrument to be his free act and deed in said capacity and the free
act and deed of said corporation, before me.
________________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss: Boston October 11, 1996
Then personally appeared the above-named Gregory G. O'Brien, Managing
Director of The First National Bank of Boston as aforesaid and acknowledged the
foregoing instrument to be his free act and deed in said capacity and the free
act and deed of said The First National Bank of Boston, before me.
/s/ MaryEllen Hanscom
-------------------------------
Notary Public
My Commission Expires:
MARYELLEN HANSCOM, Notary Public
My Commission Expires May 13, 1999
- 16 -
<PAGE> 17
STATE OF MISSISSIPPI
Harrison County, ss. Sept. 25, 1996
Then personally appeared the above-named Ernest L. Burdette of Long
Beach, Mississippi and acknowledged the foregoing instrument to be their free
act and deed; before me.
/s/ [illegible]
------------------------------------
Notary Public
Print Name:
My commission expires: [illegible]
-4-
<PAGE> 1
Exhibit 10.8
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
IN RESPECT OF STOCK PURCHASE AND REDEMPTION AGREEMENT
(Triton Systems, Inc.)
1. PARTIES. TRITON SYSTEMS, INC., a Mississippi corporation (the
"Assignor") hereby grants to THE FIRST NATIONAL BANK OF BOSTON, a
banking institution organized under the laws of the United States of
America, having an office at One Hundred Federal Street, Boston,
Massachusetts 02110, its successors and assigns ("Lender"), a
continuing security interest in the "Assigned Contract" (as defined
herein) to secure the "Obligations" (as defined herein).
2. ASSIGNED CONTRACT. The term "Assigned Contract" shall mean all of the
contracts, undertakings and agreements and all of the Assignor's right,
title and interest therein, whether now owned or hereafter acquired,
and all proceeds thereof, in that certain agreement entitled Stock
Purchase and Redemption Agreement dated as of July 25, 1996, entered
into by and among the Assignor, Ernest L. Burdette, Robert E. Sandoz,
Frank J. Wilem, Jr., and Summit.
3. LOAN AGREEMENT; DEFINED TERMS. The term "Obligations" shall have the
same meaning as contained in that certain credit agreement dated as of
September 26, 1996, between Lender and Assignor. Such credit agreement,
as may be amended, supplemented, modified or recast from time to time,
referred to herein as the "Loan Agreement." Capitalized terms not
otherwise defined herein shall have the meanings given them in the Loan
Agreement. This Collateral Assignment and Security Agreement is given
pursuant to the terms of the Loan Agreement.
4. COVENANTS, WARRANTIES AND REPRESENTATIONS. Assignor covenants with, and
warrants and represents to, Lender that:
(a) Assignor is and shall be the owner of the Assigned Contract
free and clear of all pledges, liens, security interests and
other encumbrances of every nature whatsoever except in favor
of Lender;
(b) Assignor has the full right, power and authority to assign,
and to grant the security interest in, the Assigned Contract
as herein provided;
(c) The execution, delivery and performance of this Collateral
Assignment by Assignor will not result in the violation of any
mortgage, indenture, material contract,
-1-
<PAGE> 2
instrument, agreement, judgment, decree, order, statute, rule
or regulation to which the Assignor is subject or by which it
or any of its property is bound;
(d) Assignor shall not make any other assignment of, or permit any
lien or encumbrance to exist with respect to, the Assigned
Contract except in favor of Lender, and Assignor shall not
transfer, assign, sell or exchange its interest in the
Assigned Contract;
(e) A true and complete executed counterpart or certified copy of
the Assigned Contract has been delivered to Lender;
(f) The Assigned Contract in existence is in full force and
effect, is valid and enforceable in accordance with its terms,
has not been modified, and no default exists thereunder on the
part of any party thereto.
(g) The Assigned Contract shall not be amended, modified or
changed in any material respect, or cancelled or terminated,
without the Lender's prior written consent in each instance;
(h) Assignor shall pay and perform all of its obligations under or
with respect to the Assigned Contract and not permit any
default by it to exist with respect thereto. Assignor shall
exercise all efforts necessary to enforce or secure
performance by any other party to the Assigned Contract; and
(i) Assignor specifically acknowledges and agrees that Lender
neither assumes nor shall have any responsibility for the
payment of any sums due under the Assigned Contract or the
performance of any obligations to be performed under or with
respect to the Assigned Contract by Assignor.
5. INDEMNIFICATION. The Assignor hereby agrees to indemnify and hold the
Lender harmless against and from all liability, loss, damage and
expense, including reasonable attorney's fees, which Lender may or
shall incur by reason of this Agreement, or by reason of any
commercially reasonable action taken in good faith by the Lender
hereunder, and against and from any and all claims and demands
whatsoever which may be asserted against the Lender by reason of any
alleged obligation or undertaking on its part to perform or discharge
any of the terms, covenants and conditions contained in the Assigned
Contract. Should the Lender incur any such liability, loss, damage or
expense, the amount thereof shall be payable by the Assignor to the
Lender immediately upon demand, or at the option of the Lender, the
Lender may reimburse itself therefor out of any receipts, rents, income
or profits of the Property collected by the Lender before the
application of such receipts, rents, income or profits to any other
Obligations.
-2-
<PAGE> 3
6. LENDER NOT OBLIGATED. Nothing contained herein shall operate to
obligate or be construed to obligate, the Lender to perform any of the
terms, covenants or conditions contained in the Assigned Contract or
otherwise to impose any obligation upon the Lender with respect to the
Assigned Contract. This Agreement shall not operate to place upon the
Lender any responsibility for the payment, performance or observance of
any obligation, requirement or condition under the Assigned Contract or
under any agreement in respect to any such Assigned Contract, and the
execution of this Agreement by the Assignor shall constitute conclusive
evidence that all responsibility for the payment, performance or
observance of any obligation, requirement or condition under the
Assigned Contract is and shall be that of the Assignor.
7. FURTHER ASSURANCES; UCC FILINGS. The Assignor agrees to execute and
deliver to the Lender, at any time or times during which this Agreement
shall be in effect, such further instruments as the Lender may deem
necessary to make effective this Agreement, the security interest
created hereby and the covenants of the Assignor herein contained. To
evidence such security interest, at the request of the Lender, the
Assignor shall, in a form satisfactory to the Lender, join with the
Lender in executing one or more financing statements, and any
continuation thereof, pursuant to the provisions of the Uniform
Commercial Code as enacted in Massachusetts, and shall pay the cost for
filing thereof.
8. NO WAIVER; CUMULATIVE RIGHTS. Failure of the Lender to avail itself of
any of the terms, covenants, and conditions of this Agreement for any
period of time or at any time or times, shall not be construed or
deemed to be a waiver of any of its rights hereunder. The rights and
remedies of the Lender under this instrument are cumulative and are not
in lieu of but are in addition to any other rights and remedies which
the Lender shall have under or by virtue of the Obligations and the
Loan Documents. The rights and remedies of the Lender hereunder may be
exercised from time to time and as often as such exercise is deemed
expedient by the Lender.
9. LENDER; RIGHT TO ASSIGN. The Assignor agrees that upon any sale or
transfer by the Lender of the Loan Documents and the indebtedness
evidenced thereby, the Lender may deliver to the purchaser or
transferee the Assigned Contract and may assign to such purchaser or
transferee the rights of Lender hereunder, who shall thereupon become
vested with all powers and rights given to the Lender in respect
thereto (and subject to the Lender's obligations hereunder). In no
event shall the Lender be liable with respect to, or on account of, the
Assigned Contract, except for the safekeeping of any instruments
delivered to Lender pursuant hereto, and the Lender shall specifically
have no obligation to enforce any rights against the applicable
contractor.
-3-
<PAGE> 4
10. COPIES OF DEFAULT NOTICES. Assignor agrees to provide Lender with
copies of any and all notices received by Assignor which allege, either
directly or indirectly, that Assignor is in default of or deficient in
the performance of the terms of the obligation of Assignor under any
Assigned Contract.
11. INTENTIONALLY DELETED.
12. NOTICES. Any notices given pursuant to this Agreement shall be given in
the manner provided for in the Loan Agreement.
13. SUCCESSORS AND ASSIGNS. All of the agreements, obligations,
undertakings, representations and warranties herein made by the
Assignor shall inure to the benefit of the Lender and Lender's
successors and assigns and shall bind the Assignor and its successors
and assigns.
14. CAPTIONS AND HEADINGS. Captions and headings in this Agree- ment are
intended solely for the convenience of the parties and shall not be
considered in the determination of the meaning of any provision hereof.
[END OF PAGE 4]
-4-
<PAGE> 5
Executed as a sealed instrument as of the 26th day of September, 1996.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
--------------------------------------
Name: Ernest L. Burdette
Title: President
FIRST NATIONAL BANK OF BOSTON
By: /s/ Gregory G. O'Brien
--------------------------------------
Name: Gregory G. O'Brien
Title: Managing Director
THE FOREGOING TERMS AND
ASSIGNMENT ARE CONSENTED TO:
/s/ Ernest L. Burdette
- ----------------------------------
Ernest L. Burdette
/s/ Robert E. Sandoz
- -----------------------------------
Robert E. Sandoz
/s/ Frank J. Wilem, Jr.
- -----------------------------------
Frank J. Wilem, Jr.
-5-
<PAGE> 6
[NOTARY PAGE OF COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
IN RESPECT OF STOCK PURCHASE AND REDEMPTION AGREEMENT]
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. _____________, 1996
Then personally appeared the above-named _____________________ and
acknowledged the foregoing to be his free act and deed and the free act and deed
of Triton Systems, Inc., as aforesaid.
___________________________________
, Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. October 11, 1996
Then personally appeared before me the above named Gregory G. O'Brien
and acknowledged the foregoing to be his free act and deed and the free act and
deed of The First National Bank of Boston, as aforesaid.
/s/ MaryEllen Hanscom
___________________________________
, Notary Public
My Commission Expires:
MARYELLEN HANSCOM, Notary Public
My Commission Expires May 13, 1999
-6-
<PAGE> 7
STATE OF MISSISSIPPI
HARRISON COUNTY, ss. September 25, 1996
Then personally appeared the above-named Robert E. Sandoz, Frank J.
Wilem, and Ernest L. Burdette of Long Beach, Mississippi and acknowledged the
foregoing instrument to be their free act and deed; before me.
/s/ [signature illegible]
-----------------------------------
Notary Public
Print Name:
My commission expires: [illegible]
-------------
-4-
<PAGE> 1
EXHIBIT 10.9
TRITON SYSTEMS, INC.
1996 STOCK OPTION PLAN
(AS AMENDED 1/24/97)
1. Purpose of the Plan.
-------------------
This stock option plan (the "Plan") is intended to provide incentives: (a)
to the officers and other employees of Triton Systems, Inc. (the "Company") and
any present or future subsidiaries of the Company by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); and
(b) to officers, directors, employees and consultants of the Company and any
present or future subsidiaries by providing them with opportunities to purchase
stock in the Company pursuant to options granted hereunder which do not qualify
as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
2. Stock Subject to the Plan.
-------------------------
(a) The total number of shares of the authorized but unissued (i) shares
of the common stock, $.01 par value, of the Company ("Common Stock") and (ii)
shares of the non-voting common stock, $.01 par value, of the Company
("Non-Voting Common Stock") for which options may be granted under the Plan
shall not exceed 1,541,707 shares (after giving effect to the 1.65-for-1 stock
split effected on January 27, 1997), subject to adjustment as provided in
Section 11 hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan may
be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee (as defined in Section 3
below).
(d) Prior to the consummation by the Company of an initial public offering
of its securities pursuant to an effective registration statement filed with the
Securities and Exchange Commission ( the "IPO"), all stock issuable upon
exercise of an option granted under the Plan shall be shares of Non-Voting
Common Stock. Upon and after the IPO, all stock issuable upon exercise of an
option granted under the Plan shall be shares of Common Stock.
1
<PAGE> 2
3. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by a committee (the "Committee")
consisting of two or more members of the Company's Board of Directors, each of
whom is a "Non-Employee Director" as defined from time to time in the rules and
regulations promulgated under the Securities and Exchange Act of 1933. The Board
of Directors may from time to time appoint a member or members of the Committee
in substitution for or in addition to the member or members then in office and
may fill vacancies on the Committee however caused. The Committee shall choose
one of its members as Chairman and shall hold meetings at such times and places
as it shall deem advisable. A majority of the members of the Committee shall
constitute a quorum and any action may be taken by a majority of those present
and voting at any meeting. Any action may also be taken without the necessity of
a meeting by a written instrument signed by a majority of the Committee. The
decision of the Committee as to all questions of interpretation and application
of the Plan shall be final, binding and conclusive on all persons. The Committee
shall have the authority to adopt, amend and rescind such rules and regulations
as, in its opinion, may be advisable in the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement granted hereunder in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and shall be the sole and final judge of such expediency. No Committee member
shall be liable for any action or determination made in good faith.
(b) Subject to the terms of the Plan, the Committee shall have the
authority to (i) determine the employees of the Company and its subsidiaries
(from among the class of employees eligible under Section 4 to receive ISOs) to
whom ISOs may be granted, and to determine (from the class of individuals
eligible under Section 4 to receive Non-Qualified Options) to whom Non-Qualified
Options may be granted; (ii) determine the time or times at which options may be
granted; (iii) determine the option price of shares subject to each option which
price shall not be less than the minimum price specified in Section 6; (iv)
determine whether each option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to Section 9) the time or times when each option shall
become exercisable and the duration of the exercise period; and (vi) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to options and the nature of such restrictions.
4. Eligibility.
-----------
Options designated as ISOs may be granted only to officers and other
employees of the Company or any subsidiary. Non-Qualified Options may be granted
to any director, officer, employee, or consultant of the Company or of any of
its subsidiaries.
In determining the eligibility of an individual to be granted an option,
as well as in determining the number of shares to be optioned to any individual,
the Committee shall take into account the position and responsibilities of the
individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present
2
<PAGE> 3
and potential contribution to the success of the Company or its subsidiaries,
and such other factors as the Committee may deem relevant.
No option designated as an ISO shall be granted to any employee of the
Company or any subsidiary if such employee owns, immediately prior to the grant
of an option, stock representing more than 10% of the voting power or more than
10% of the value of all classes of stock of the Company or a parent or a
subsidiary, unless the purchase price for the stock under such option shall be
at least 110% of its fair market value at the time such option is granted and
the option, by its terms, shall not be exercisable more than five years from the
date it is granted. In determining the stock ownership under this paragraph, the
provisions of Section 424(d) of the Code shall be controlling. In determining
the fair market value under this paragraph, the provisions of Section 6 hereof
shall apply.
5. Option Agreement.
----------------
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee, provided that options designated as ISOs shall meet all of the
conditions for ISOs as defined in Section 422 of the Code. The date of grant of
an option shall be as determined by the Committee. More than one option may be
granted to an individual.
The maximum number of shares of Common Stock with respect to which an
option may be granted to any employee in any one taxable year of the Company
shall not exceed 250,000 shares (after giving effect to the 1.65-for-1 stock
split effected on January 27, 1997), taking into account shares subject to
options granted and terminated, or repriced, during such taxable year.
6. Option Price.
------------
The option price or prices of shares of the Company's Common Stock for
options designated as Non-Qualified Options shall be as determined by the
Committee, but in no event shall the option price be less than the minimum legal
consideration required therefor under the laws of the State of Mississippi or
the laws of any jurisdiction in which the Company or its successors in interest
may be organized. The option price or prices of shares of the Company's Common
Stock for ISOs shall be the fair market value of such Common Stock at the time
the option is granted as determined by the Committee in accordance with the
Regulations promulgated under Section 422 of the Code. If such shares are then
listed on any national securities exchange, the fair market value shall be the
mean between the high and low sales prices, if any, on such exchange on the
business day immediately preceding the date of the grant of the option or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section
25.2512-2. If the shares are not then
3
<PAGE> 4
listed on any such exchange, the fair market value of such shares shall be the
mean between the high and low sales prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System National Market
System ("NASDAQ/NMS") for the business day immediately preceding the date of the
grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in accordance with Treasury
Regulations Section 25.2512-2. If the shares are not then either listed on any
such exchange or quoted in NASDAQ/NMS, the fair market value shall be the mean
between the average of the "Bid" and the average of the "Ask" prices, if any, as
reported in the National Daily Quotation Service for the business day
immediately preceding the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Committee.
7. Manner of Payment; Manner of Exercise.
-------------------------------------
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, or (iii)
any combination of (i) and (ii), provided, however, that payment of the exercise
price by delivery of shares of Common Stock of the Company owned by such
optionee may be made only under such circumstances and on such terms as may from
time to time be established by the Committee. The fair market value of any
shares of the Company's Common Stock which may be delivered upon exercise of an
option shall be determined by the Committee in accordance with Section 6 hereof.
With the consent of the Committee, payment may also be made by delivery of a
properly executed exercise notice to the Company, together with a copy of
irrevocable instruments to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, after ten business days from the
date of receipt of the notice by the Company, as shall be designated in such
notice, or at such time, place and manner as may be agreed upon by the Company
and the person or persons exercising the option.
4
<PAGE> 5
8. Exercise of Options.
-------------------
Subject to the provisions of paragraphs 9 through 11, each option granted
under the Plan shall be exercisable as follows:
(a) VESTING. The option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable
it shall remain exercisable until expiration or termination of the option,
unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
(d) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date of exercise of any installment or any option; provided that
the Committee shall not, without the consent of an optionee, accelerate the
exercise date of any installment of any option granted to any employee as an ISO
if such acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code.
9. Term of Options; Exercisability.
-------------------------------
(a) Term.
----
(1) Each option shall expire not more than ten (10) years from the
date of the granting thereof, but shall be subject to earlier termination as
herein provided.
(2) Except as otherwise provided in this Section 9, an option
granted to any employee optionee who ceases to be an employee of the Company or
one of its subsidiaries shall terminate thirty days following the date such
optionee ceases to be an employee of the Company or one of its subsidiaries, or
on the date on which the option expires by its terms, whichever occurs first.
(3) If such termination of employment is because the optionee has
become permanently disabled (within the meaning of Section 22(e)(3) of the
Code), such option shall terminate on the last day of the sixth month from the
date such optionee ceases to be an employee, or on the date on which the option
expires by its terms, whichever occurs first.
(4) In the event of the death of any optionee, any option granted to
such optionee shall terminate on the last day of the twelfth month from the date
of death, or on the date on which the option expires by its terms, whichever
occurs first.
5
<PAGE> 6
(b) EXERCISABILITY. An option granted to an employee optionee who ceases to
be an employee of the Company or one of its subsidiaries shall be exercisable
only to the extent that the right to purchase shares under such option has
accrued and is in effect on the date such optionee ceases to be an employee of
the Company or one of its subsidiaries.
10. Options Not Transferable.
------------------------
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, or (solely with respect to
Non-Qualified Options) pursuant to a qualified domestic relations order, as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder, and any such option shall be exercisable during the
lifetime of such optionee only by him. Any option granted under the Plan shall
be null and void and without effect upon the bankruptcy of the optionee to whom
the option is granted, or upon any attempted assignment or transfer, except as
herein provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, except as provided above with respect to Non-Qualified
Options, trustee process or similar process, whether legal or equitable, upon
such option.
11. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
or acquired by another entity in a merger, sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the Committee or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding options, either (i) make
appropriate provision for the continuation of such options by substituting on an
equitable basis for the shares then subject to such options the consideration
payable with respect to the outstanding shares of Common Stock in connection
with the Acquisition; or (ii) upon written notice to the optionees, provide that
all options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the options shall terminate; or (iii) terminate all options in exchange for a
cash payment
6
<PAGE> 7
equal to the excess of the fair market value of the shares subject to such
options (to the extent then exercisable) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph (b) above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would have received
if he had exercised his option prior to such recapitalization or reorganization.
(d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs shall be
made only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
(e) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
(f) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(g) FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such fractional
shares.
(h) ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 2 hereof that are subject to options which previously have
been or subsequently may be granted under the Plan, and the maximum number of
shares that may be granted to optionees in any year under Section 5 hereof,
shall also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the specific
adjustments to be made under this paragraph 11 and, subject to Section 3, its
determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of an option made hereunder receives shares or securities or cash in connection
with a corporate
7
<PAGE> 8
transaction described in subparagraphs (a), (b) or (c) above as a result of
owning such restricted Common Stock, such shares or securities or cash shall be
subject to all of the conditions and restrictions applicable to the restricted
Common Stock with respect to which such shares or securities or cash were
issued, unless otherwise determined by the Committee or the Successor Board.
12. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
employment by the Company (or any subsidiary) or interfere in any way with the
right of the Company (or any subsidiary), subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the option holder from the rate
in existence at the time of the grant of an option. Whether an authorized leave
of absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Committee at the time.
13. Withholding.
-----------
The Company's obligation to deliver shares upon the exercise of any
Non-Qualified Option granted under the Plan shall be subject to the option
holder's satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements. The Company and employee may agree to
withhold shares of Common Stock purchased upon exercise of an option to satisfy
the above-mentioned withholding requirements. With the approval of the
Committee, which it shall have sole discretion to grant, and on such terms and
conditions as the Committee may impose, the option holder may satisfy the
foregoing condition by electing to have the Company withhold from delivery
shares having a value equal to the amount of tax to be withheld. The Committee
shall also have the right to require that shares be withheld from delivery to
satisfy such condition.
14. Restrictions on Issue of Shares.
-------------------------------
(a) Notwithstanding the provisions of Section 7, the Company may delay the
issuance of shares covered by the exercise of an option and the delivery of a
certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
8
<PAGE> 9
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective, and
the Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
15. Purchase for Investment; Rights of Holder on Subsequent Registration.
--------------------------------------------------------------------
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.
16. Loans.
-----
The Company may make loans to optionees to permit them to exercise options.
If loans are made, the requirements of all applicable Federal and state laws and
regulations regarding such loans must be met.
9
<PAGE> 10
17. Modification of Outstanding Options.
-----------------------------------
The Committee may authorize the amendment of any outstanding option with
the written consent of the optionee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.
18. Approval of Shareholders.
------------------------
The Plan shall be subject to approval by the vote of shareholders holding
at least a majority of the outstanding voting stock of the Company voting in
person or by proxy at a duly held shareholders' meeting, or by written consent
of shareholders holding at least a majority of the outstanding voting stock of
the Company, within twelve (12) months after the adoption of the Plan by the
Board of Directors and shall take effect as of the date of adoption by the Board
of Directors upon such approval. The Committee may grant options under the Plan
prior to such approval, but any such option shall become effective as of the
date of grant only upon such approval and, accordingly, no such option may be
exercisable prior to such approval.
19. Termination and Amendment.
-------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the Board of
Directors of the Company. The Board of Directors may at any time terminate the
Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 19, the Board of
Directors may not, without the approval of the shareholders of the Company
obtained in the manner stated in Section 18, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any other change
in the Plan which requires shareholder approval under applicable law or
regulations, including any approval requirement which is a prerequisite for
exemptive relief under Section 16 of the Securities Exchange Act of 1934. The
Committee may grant options to persons subject to Section 16(b) of the
Securities and Exchange Act of 1934 after an amendment to the Plan by the Board
of Directors requiring shareholder approval under Section 19, but any such
option shall become effective as of the date of grant only upon such approval
and, accordingly, no such option may be exercisable prior to such approval.
Except as provided in Section 11, without the written consent of the optionee,
the Committee shall not change the number of shares subject to an option, nor
the exercise price thereof, nor extend the term of such option.
20. Compliance with Rule 16b-3.
--------------------------
It is intended that the provisions of the Plan and any option granted
hereunder to a person subject to the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934 (the "Act") shall comply in all respects
with the terms and conditions of Rule 16b-3 under the
10
<PAGE> 11
Act, or any successor provisions. Any agreement granting options shall contain
such provisions as are necessary or appropriate to assure such compliance. To
the extent that any provision hereof is found not to be in compliance with such
Rule, such provision shall be deemed to be modified so as to be in compliance
with such Rule, or if such modification is not possible, shall be deemed to be
null and void, as it relates to a recipient subject to Section 16(a) of the Act.
21. Reservation of Stock.
--------------------
The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
22. Limitation of Rights in the Option Shares.
-----------------------------------------
An optionee shall not be deemed for any purpose to be a shareholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the optionee.
23. Notices.
-------
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
11
<PAGE> 12
TRITON SYSTEMS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
with
[Employee]
<PAGE> 13
TRITON SYSTEMS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION
AGREEMENT entered into this___ day of ________ , 199 , by and between
Triton Systems, Inc., a Mississippi corporation with a principal place of
business in Long Beach, Mississippi (the "Company"), and the undersigned
employee of the Company (the "Employee").
WHEREAS, the Company desires to grant to the Employee a non-qualified stock
option under the Company's 1996 Stock Option Plan (the "Plan") to purchase
shares of [Non-Voting] Common Stock, par value $1.00 per share, of the Company
(the "[Non-Voting] Common Stock");
WHEREAS, in consideration of entering into this Agreement, the Employee
agrees to execute the Company's form of Non-Competition and Non-Disclosure
Agreement; and
WHEREAS, Section 5 of the Plan provides that each option is to be evidenced
by an option agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual covenants
and agreements contained herein, the Company and the Employee hereby agree as
follows:
1. GRANT OF OPTION. The Company hereby grants to the Employee a
non-qualified stock option (the "Option") to purchase all or any part of an
aggregate of [__________ ] shares of [Non-Voting] Common Stock (the "Shares")
on the terms and conditions hereinafter set forth. This option shall not be
treated as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. PURCHASE PRICE. The purchase price ("Purchase Price") for the Shares
covered by the Option shall be [$___________ ] per Share.
3. RIGHTS TO EXERCISE. The Option may not be exercised before __________.
Thereafter, subject to the provisions of this Agreement, the Option shall be
exercisable only as follows:
Additional
Date of Vesting % Available Total % Available
- --------------- ----------- -----------------
On or after
------------------------,--------
but before 20% 20%
------------------------,--------
On or after
------------------------,--------
but before 20% 40%
------------------------,--------
On or after
------------------------,--------
but before 20% 60%
------------------------,--------
2
<PAGE> 14
Additional
Date of Vesting % Available Total % Available
- --------------- ----------- -----------------
On or after
------------------------,--------
but before 20% 80%
------------------------,--------
On or after
------------------------,-------- 20% 100%
4. Term of Options; Exercisability.
-------------------------------
(a) Term.
----
(1) The Option shall expire ten (10) years from the date of
this Agreement, but shall be subject to earlier termination as herein provided.
(2) Except as otherwise provided in this Section 4, the Option
shall terminate thirty days following the date the Employee ceases to be an
employee of the Company or one of its subsidiaries, or on the date on which the
Option expires by its terms, whichever occurs first.
(3) If such termination of employment is because the Employee
has become permanently disabled (within the meaning of Section 22(e)(3) of the
Code), the Option shall terminate on the last day of the sixth month from the
date the Employee ceases to be an employee, or on the date on which the Option
expires by its terms, whichever occurs first.
(4) In the event of the death of the Employee, the Option shall
terminate on the last day of the twelfth month from the date of death, or on the
date on which the Option expires by its terms, whichever occurs first.
(b) EXERCISABILITY. The Option shall be exercisable only to the
extent that the right to purchase shares under the Option has accrued and is in
effect on the date the Employee ceases to be an employee of the Company or one
of its subsidiaries.
5. Manner of Exercise of Option.
----------------------------
(a) To the extent that the right to exercise the Option has accrued
and is in effect, the Option may be exercised in full or in part by giving
written notice to the Company stating the number of Shares exercised and
accompanied by payment in full for such Shares. Payment may be either wholly in
cash or by check payable to the Company. Upon such exercise, delivery of a
certificate for paid-up, non-assessable Shares shall be made at the principal
office of the Company to the person exercising the Option, not more than thirty
(30) days from the date of receipt of the notice by the Company.
(b) The Company shall at all times during the term of the Option
reserve and
3
<PAGE> 15
keep available such number of Shares of its common stock as will be sufficient
to satisfy the requirements of the Option. The Employee shall not have any of
the rights of a stockholder of the Company in respect of the Shares until one or
more certificates for such Shares shall be delivered to him or her upon the due
exercise of the Option.
6. NON-TRANSFERABILITY. The right of the Employee to exercise the
Option shall not be assignable or transferable by the Employee otherwise than by
will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order, as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, and the Option shall be
exercisable during the lifetime of the Employee only by the Employee. The Option
shall be null and void and without effect upon the bankruptcy of the Employee or
upon any attempted assignment or transfer, including without limitation any
purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy of
execution, attachment, trustee process or similar process, whether legal or
equitable, upon the Option.
7. PERMITTED TRANSFERS; TAKE ALONG RIGHT. Subject to the provisions of
Sections 6, Shares issuable upon exercise of the Options may be transferred
pursuant to the specific terms and conditions set forth in either paragraph (a)
or (b) of this Section 7:
(a) Right of First Refusal. The Employee may sell Shares to a third
party in a bona fide transaction for fair value payable in cash or the
equivalent currently or in future installments, provided that the Employee
extends to the Company a right of first refusal with respect to such sale in
accordance with the following provisions. The Employee shall first give written
notice of such proposed sale to the Company, identifying the proposed purchaser,
the number of Shares to be sold, and the purchase price and terms of the
proposed sale. The Company shall have the right, exercisable by written notice
to the Employee within 30 days after receipt of the Employee's notice, to
purchase all, but not less than all, of the Shares referred to in the Employee's
notice, at the price and on the terms set forth in said notice. The Company
shall designate in such notice a date, time and place for the closing of the
repurchase (the "Closing"), which shall be not more than 60 days after the date
of the Company's notice, unless otherwise agreed by the parties. If the Company
is prohibited by Mississippi law from purchasing Shares, the Company may assign
its rights hereunder with respect to a particular transfer by written notice to
the Employee at or prior to the Closing. The Closing shall take place at the
offices of the Company or of its counsel, unless otherwise agreed by the
parties. At the Closing, the Company or its assignee (the "Purchaser") shall
purchase from the Employee the Shares referenced in the Employee's notice, at
the price and on the terms set forth therein, and the Employee shall sell such
Shares to the Purchaser by delivery of the certificate or certificates
representing such Shares, duly endorsed for transfer, free and clear of any
liens, pledges or encumbrances. If the Company does not exercise its purchase
right within 30 days after the Employee's notice to the Company, the Employee
may complete the sale of Shares to the proposed purchaser at the price and on
the terms specified in the Stockholder's notice to the Company at any time
within 60 days after the expiration of said 30-day period. No sale may be made
to a different purchaser, at a different price, on different
4
<PAGE> 16
terms or after the expiration of said 60-day period without renewed compliance
with this Section 7(a). Any Shares purchased in accordance with the provisions
of this Section 7(a) shall thereafter remain subject to the provisions of
Section 7(c), but shall no longer be subject to any of the other terms of this
Agreement. This Section 7 shall terminate on the closing of the Company's first
underwritten public offering of its securities. Notwithstanding the provisions
of this Section 7, in no event shall the Employee transfer Shares to any
individual, corporation, partnership, joint venture, trust or unincorporated
organization or a government or agency or political subdivision thereof who is
engaged in any business activity (i) which is directly or indirectly in
competition with the products or services being developed, manufactured or sold
by the Company or (ii) which is directly or indirectly detrimental to the
business of the Company.
(b) TRANSFER TO RELATED PERSON. The Employee may transfer Shares: (i)
to the Employee's spouse, parents, brothers, sisters, children, stepchildren or
grandchildren or any trust or individual retirement account for the exclusive
benefit of any of them or the Employee; or (ii) upon the Employee's death to the
Employee's estate, executors, administrators and personal representatives and
then to such Employee's heirs, legatees or distributees; provided that any
Shares transferred under this Section 7(b) shall remain subject to the
provisions of this Agreement. Any transferee of Shares under this Section 7(b)
shall become a party to this Agreement by executing a counterpart hereof, and
shall be bound by the provisions of this Agreement whether or not such
transferee does so.
(c) TAKE ALONG RIGHT. If, at any time the Company shall determine to
enter into a transaction which will result in a Change of Control (as defined
herein), then, upon written request of the Company (the "Sale Request"), the
Employee shall be obligated to, and shall (i) sell, transfer and deliver, or
cause to sold, transferred and delivered, that percentage of the Shares then
held by him that is equal to the percentage of the aggregate holding of all
shares sold by the other stockholders of the Company that is being sold or
exchanged in the transaction constituting the Change of Control at the same
price per share and on the same terms applicable to the other stockholders
selling Common Stock and, upon request, and (ii) if stockholder approval of the
transaction is required, vote his Shares in favor thereof. For purposes of this
Agreement, a "Change of Control" of the Company shall be deemed to have occurred
when there has occurred (i) a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act, as amended (the "Exchange
Act"), if the Company were subject to the Exchange Act, including in any event
the acquisition by any "person" (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) of beneficial ownership, directly or indirectly,
of securities of the Company representing 50.1% or more of the combined voting
power of the Company's then outstanding securities or (ii) the sale of all or
substantially all of the assets of the Company.
8. Representation Letter and Investment Legend.
-------------------------------------------
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the Securities
Act of 1933, as amended (the
5
<PAGE> 17
"1933 Act"), upon any date on which the Option is exercised in whole or in part,
the person exercising the Option shall give a written representation to the
Company in the form attached hereto as EXHIBIT 1 and the Company shall place an
"investment legend", so-called, as described in EXHIBIT 1, upon any certificate
for the Shares issued by reason of such exercise.
(b) The Company shall be under no obligation to qualify Shares or to
cause a registration statement or a post-effective amendment to any registration
statement to be prepared for the purposes of covering the issue of Shares.
9. RECAPITALIZATIONS, REORGANIZATIONS, CHANGES IN CONTROL AND THE LIKE.
Adjustments and other matters relating to recapitalizations, reorganizations,
sale of the assets of the Company, changes in control and the like shall be made
and determined in accordance with Section 11 of the Plan, as in effect on the
date of this Agreement.
10. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in this Agreement
shall be construed or deemed by any person under any circumstances to bind the
Company to continue the employment of the Employee for the period within which
this Option may be exercised. However, during the period of the Employee's
employment, the Employee shall render diligently and faithfully the services
which are assigned to the Employee from time to time by the Board of Directors
or by the executive officers of the Company, provided that such services are
consistent with the services usually required to be performed by the Employee.
The Employee shall at no time take any action which directly or indirectly would
be inconsistent with the best interests of the Company.
11. WITHHOLDING TAXES. Whenever Shares are to be issued upon exercise of
this Option, the Company shall have the right to require the Employee to remit
to the Company an amount sufficient to satisfy all Federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares.
12. AMENDMENT AND WAIVER. This Agreement may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by the parties.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Mississippi without regard to
principles of conflicts of laws.
14. NOTICES. Any notices or other communications required to be given
hereunder shall be given by hand delivery or by first class mail with all fees
prepaid and addressed, if to the Company, to it at 522 East Railroad Street,
Long Beach, Mississippi 39560, Attn: ____________________________________,and
if to Employee, to him at the address set forth in the signature page hereto.
* * * * * *
6
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its corporate seal to be hereto affixed by its officer thereunto duly
authorized, and the Employee has hereunto set his or her hand and seal, all as
of the day and year first above written.
TRITON SYSTEMS, INC.
By:
--------------------------------
Name:
Title:
EMPLOYEE:
-----------------------------------
Name:
Employee's Home Address:
-----------------------------------
-----------------------------------
-----------------------------------
Social Security No.:
-----------------------------------
S-1
<PAGE> 19
EXHIBIT 1
TO STOCK OPTION AGREEMENT
-------------------------
Gentlemen:
In connection with the exercise by me as to________ shares of [non-voting]
common stock, par value $1.00 per share, of Triton Systems, Inc. (the "Company")
under the non-qualified stock option dated _________, 199__, I hereby
acknowledge that I have been informed as follows:
1. The shares of [non-voting] common stock of the Company to be issued to
me pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the Act, or an
exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the Act
can be made only after the holding period and in limited amounts in accordance
with the terms and conditions provided by that Rule, and in any sale to which
that Rule is not applicable, registration or compliance with some other
exemption under the Act will be required.
3. The Company is under no obligation to me to register the shares or to
comply with any such exemptions under the Act.
4. The availability of Rule 144 is dependent upon adequate current public
information with respect to the Company being available and, at the time that I
may desire to make a sale pursuant to the Rule, the Company may neither wish nor
be able to comply with such requirement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own account
for investment, and that I will not sell, pledge or transfer such shares in the
absence of an effective registration statement covering the same, except as
permitted by the provisions of Rule 144, if applicable, or some other applicable
exemption under the Act. In view of this representation and warranty, I agree
that there may be affixed to the certificates for the shares to be issued to me,
and to all certificates issued hereafter representing such shares (until in the
opinion of counsel, which opinion must be reasonably satisfactory in form and
substance to counsel for the Company, it is no longer necessary or required) a
legend as follows:
"The shares of [non-voting] common stock represented by this
certificate have not been registered under the Securities Act of
1933, as amended, and were acquired by the registered holder,
pursuant to a representation and warranty that such holder was
acquiring such shares for his own account and for investment, with no
intention to transfer or dispose of the same, in
E-1
<PAGE> 20
violation of the registration requirements of that Act. These shares
may not be sold, pledged, or transferred in the absence of an
effective registration statement under the Securities Act of 1933, as
amended, or an opinion of counsel, which opinion is reasonably
satisfactory to counsel to the Company, to the effect that
registration is not required under said Act."
I further agree that the Company may place a stop order with its Transfer
Agent, prohibiting the transfer of such shares, so long as the legend remains on
the certificates representing the shares.
Very truly yours,
E-2
<PAGE> 1
Exhibit 10.10
TRITON SYSTEMS, INC.
1997 Employee Stock Purchase Plan
---------------------------------
1. Purpose.
-------
It is the purpose of this Employee Stock Purchase Plan to provide a means
whereby eligible employees may purchase Common Stock of Triton Systems, Inc.
(the "Company") through payroll deductions. It is intended to provide a further
incentive for employees to promote the best interests of the Company and to
encourage stock ownership by employees in order that they may participate in the
Company's economic growth.
It is the intention of the Company that the Plan qualify as an "employee
stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code and the provisions of this Plan shall be construed in a manner consistent
with the Code and the Treasury Regulations promulgated thereunder.
2. Definitions.
-----------
The following words or terms, when used herein, shall have the following
respective meanings:
(a) "Plan" shall mean the 1997 Triton Systems, Inc. Employee Stock
Purchase Plan.
(b) "Company" shall mean Triton Systems, Inc., a Delaware corporation.
(c) "Account" means the Employee Stock Purchase Account established for a
Participant under Section 7 hereof.
- 1 -
<PAGE> 2
(d) "Basic Compensation" shall mean the regular rate of salary or wages in
effect immediately prior to a Purchase Period, before any deductions
or withholdings, but shall exclude overtime, bonuses, shift
differential and amounts paid in reimbursement for expenses.
(e) "Board of Directors" shall mean the Board of Directors of Triton
Systems, Inc..
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Stock Purchase Plan Committee appointed and
acting in accordance with the terms of the Plan.
(h) "Common Stock" shall mean shares of the Company's common stock with a
par value of $.01 per share.
(i) "Effective Date" shall mean the date of the closing of the Company's
first public offering of Common Stock made pursuant to an effective
Registration Statement filed with the Securities and Exchange
Commission.
(j) "Eligible Employees" shall mean all persons employed by the Company or
its participating subsidiaries (as defined in Section 22), but
excluding:
(1) Persons who have been employed by the Company or its
participating subsidiaries for less than six months on the first
day of the Purchase Period; and
(2) Persons whose customary employment is not more than twenty hours
per week or not more than five months in any calendar year.
- 2 -
<PAGE> 3
For purposes of this Plan, employment will be treated as continuing intact
while a Participant is on military leave, sick leave, or other bona fide
leave of absence, for up to 90 days or so long as the Participant's right
to re-employment is guaranteed either by statute or by contract, if longer
than 90 days.
(k) "Exercise Date" shall mean the last day of a Purchase Period;
provided, however, that if such date is not a business day, "Exercise
Date" shall mean the immediately preceding business day.
(l) "Participant" shall mean an Eligible Employee who elects to
participate in the Plan under Section 6 hereof.
(m) The first "Purchase Period" shall begin July 1, 1997 and continue
through December 31, 1997. Thereafter, there shall be two Purchase
Periods within each of the Company's fiscal years, one commencing on
the first day of the Company's fiscal year and continuing through the
last day of the first fiscal half-year, and the second commencing the
first day of the Company's second fiscal half-year and continuing
through the end of the Company's fiscal year.
(n) "Purchase Price" shall mean the lower of (i) 85% of the average fair
market value of a share of Common Stock for the first day of the
relevant Purchase Period, or 85% of such value on the relevant
Exercise Date. Fair market value on any day shall be the mean between
the closing bid and asked price of a share of Common Stock on the
over-the-counter market.
- 3 -
<PAGE> 4
3. Grant of Option to Purchase Shares; Restrictions on Grant.
---------------------------------------------------------
Each Eligible Employee shall be granted an option effective on the first
day of each Purchase Period to purchase shares of Common Stock. The term of the
option shall be the length of the Purchase Period. The number of shares subject
to each option, up to a maximum of 500 shares per Purchase Period, shall be the
quotient of the aggregate payroll deductions in the Purchase Period authorized
by each Participant in accordance with Section 6 divided by the Purchase Price.
No employee shall be granted an option which permits the employee's right to
purchase Common Stock under this Plan, and under all other Section-423(b)
employee stock purchase plans of the Company or any parent or subsidiary
corporations, to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined on the date or dates that options on such stock were
granted) for each calendar year in which such option is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code. In addition, in no event may an employee be
granted an option if such employee, immediately after the option was granted,
would own stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any parent
corporation or subsidiary corporation, as the terms "parent corporation" and
"subsidiary corporation" are defined in Sections 424(e) and (f) of the Code, all
within the meaning of Section 423(b)(3) of the Code. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the Code
shall apply, and stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee.
- 4 -
<PAGE> 5
4. Shares.
------
There shall be 250,000 shares of Common Stock reserved for issuance to and
purchase by Participants under the Plan, subject to adjustment as herein
provided. The shares of Common Stock subject to the Plan shall be either shares
of authorized but unissued Common Stock or shares of Common Stock reacquired by
the Company. Shares of Common Stock not purchased under an option terminated
pursuant to the provisions of the Plan may again be subject to options granted
under the Plan.
The aggregate number of shares of Common Stock which may be purchased
pursuant to options granted hereunder, the number of shares of Common Stock
covered by each outstanding option, the maximum number of shares that may be
granted in any Purchase Period, and the purchase price for each such option
shall be appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split or other
subdivision or consolidation of shares of Common Stock or for other capital
adjustments or payments of stock dividends or distributions or other increases
for decreases in the outstanding shares of Common Stock affected without receipt
of consideration by the Company, in each case, occurring after January 31, 1997.
5. Administration.
--------------
The Plan shall be administered by a Compensation Committee appointed from
time to time by the Board of Directors, consisting of not less than two members.
Committee members shall be ineligible to participate under the Plan. All members
of the Committee shall serve at the discretion of the Board. The Committee is
vested with full authority to make, administer and interpret such equitable
rules and regulations regarding the Plan as it may deem advisable.
- 5 -
<PAGE> 6
The Committee's determinations as to the interpretation and operation of-the
Plan shall be final and conclusive. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under the Plan.
6. Election to Participate.
-----------------------
An Eligible Employee may elect to become a Participant in the Plan for a
Purchase Period by completing a "Stock Purchase Agreement" form prior to the
first day of the Purchase Period for which the election is made. The election to
participate shall be effective for the Purchase Period for which it is made.
There is no limit on the number of Purchase Periods for which an Eligible
Employee may elect to become a Participant in the Plan. In the Stock Purchase
Agreement, the Eligible Employee shall authorize regular payroll deductions of
any full percentage of his Basic Compensation, but in no event less than one
percent nor more than ten percent of his Basic Compensation, not to exceed
$25,000 per year. An Eligible Employee may not change his authorization except
as otherwise provided in Section 9. Options granted to Eligible Employees who
have failed to execute a Stock Purchase Agreement within the time periods
prescribed by the Plan will automatically lapse.
7. Employee
--------
An Employee Stock Purchase Account will be established for each Participant
in the Plan for bookkeeping purposes, and payroll deductions made under Section
6 will be credited to such Accounts. However, prior to the purchase of shares in
accordance with Section 8 or withdrawal from or termination of the Plan in
accordance with the provisions hereof, the
- 6 -
<PAGE> 7
Company may use for any valid corporate purpose all amounts deducted from a
Participant's wages under the Plan and credited for bookkeeping purposes to his
Account. The Company shall be under no obligation to pay interest on funds
credited to a Participant's account, whether upon purchase of shares in
accordance with Section 8 or upon distribution in the event of withdrawal from
or termination of the Plan as herein provided.
8. Purchase of Shares.
------------------
Each Eligible Employee who is a Participant in the Plan automatically and
without any act on his part will be deemed to have exercised his option on each
Exercise Date to the extent that the balance then in his Account under the Plan
is sufficient to purchase at the Purchase Price whole shares of the Company's
stock subject to his option, subject to the 500-share limit of the option and
the Section 423(b)(8) limitation described in Section 3. If the Participant's
accumulated payroll deductions on the last business day of the Purchase Period
would enable the Participant to purchase more than 500 shares except for the
500-share limitation, the excess of the amount of the accumulated payroll
deductions over the aggregate purchase price of the 500 shares shall be promptly
refunded to the Participant by the Company, without interest. If the
Participant's accumulated payroll deductions on the last day of the Purchase
Period would otherwise enable the Participant to purchase Common Stock in excess
of the Section 423 (b) (8) limitation described in Section 3 hereof, the excess
of the amount of the accumulated payroll deductions over the aggregate purchase
price of the shares actually purchased shall be promptly refunded to the
Participant by the Company, without interest. Any balance remaining in the
Participant's Account by reason of the inability to purchase a fractional share
shall be carried forward and credited for use in the next Purchase Period. No
- 7 -
<PAGE> 8
other unused amounts may be carried forward. If the Employee chooses not to
participate in the next Purchase Period, any balance will be refunded to him in
cash.
9. Withdrawal.
----------
A Participant who has elected to authorize payroll deductions for the
purchase of shares of Common Stock may cancel his election by written notice of
cancellation delivered to the office or person designated to receive Stock
Purchase Agreements ("Cancellation"), but any such notice of Cancellation must
be so delivered not later than ten days before the relevant Exercise Date.
An employee will receive in cash, as soon as practicable after delivery of
the notice of Cancellation, the amount credited to his Account. Any Participant
who so withdraws from the Plan may again become a Participant at the start of
the next Purchase Period in accordance with Section 6.
Upon dissolution or liquidation of the Company or a merger or consolidation
in which the Company is not the surviving entity, every option outstanding
hereunder shall terminate, in which event each Participant shall be refunded the
amount of cash then in his Account.
10. Issuance of Stock Certificates.
------------------------------
The shares of Common Stock purchased by a Participant shall, for all
purposes, be deemed to have been issued and sold at the close of business on the
Exercise Date. Prior to that date none of the rights or privileges of a
stockholder of the Company, including the right to vote or receive dividends,
shall exist with respect to such shares.
Within a reasonable time after the Exercise Date, the Company shall issue
and deliver a certificate for the number of shares of Common Stock purchased by
a Participant for the
- 8 -
<PAGE> 9
Purchase Period, which certificate shall be registered either in the
Participant's name or jointly with the right of survivorship in the names of the
Participant and his spouse, as the Participant shall designate in his Stock
Purchase Agreement. Such designation may be changed at any time by filing notice
thereof.
11. Termination of Employment.
-------------------------
(a) Upon a Participant's termination of employment for any reason, other
than death, no payroll deduction may be made from any compensation due
him, the entire balance credited to his Account shall be automatically
refunded, and his rights under the Plan shall terminate.
(b) Upon the death of a Participant, no payroll deduction shall be made
from any compensation due him at the time of his death, his rights
under the Plan shall terminate, and the entire balance in the deceased
Participant's Account shall be paid in cash to the Participant's
designated beneficiary, if any, under a group insurance plan of the
Company covering such employee, or otherwise to his estate.
12. Rights Not Transferable.
-----------------------
The right to purchase shares of Common Stock under this Plan is exercisable
only by the Participant during his lifetime and is not transferable by him. If a
Participant attempts to transfer his right to purchase shares under the Plan, he
shall be deemed to have requested withdrawal from the Plan and the provisions of
Section 9 hereof shall apply with respect to such Participant.
- 9 -
<PAGE> 10
13. No Guarantee of Continued Employment.
------------------------------------
Granting of an option under this Plan shall imply no right of continued
employment with the Company for any Eligible Employee.
14. Notice.
------
Any notice which an Eligible Employee or Participant files pursuant to this
Plan shall be in writing and shall be delivered personally or by mail addressed
to the Stock Purchase Plan Committee, c/o Triton Systems, Inc., 522 East
Railroad Street, Long Beach, MS 39560. Any notice to a Participant or an
Eligible Employee shall be conspicuously posted in the Company's principal
office or shall be mailed addressed to the Participant or Eligible Employee at
the address designated in the Stock Purchase Agreement or in a subsequent
writing.
15. Application of Funds.
--------------------
All funds deducted from a Participant's wages in payment for shares
purchased or to be purchased under this Plan may be used for any valid corporate
purpose provided that the Participant's Account shall be credited with the
amount of all payroll deductions as provided in Section 7.
16. Governmental Approvals or Consents.
----------------------------------
This Plan and any offering and sales to Eligible Employees under it are
subject to any governmental approvals or consents that may be or become
applicable in connection therewith. Subject to the provisions of Section 17, the
Board of Directors of the Company may make such changes in the Plan and include
such terms in any offering under this Plan as may be necessary or desirable, in
the opinion of counsel, to comply with the rules or regulations of
- 10 -
<PAGE> 11
any governmental authority, or to be eligible for tax benefits under the Code or
the laws of any state.
17. Amendment of the Plan.
---------------------
The Board may, without the consent of the participants, amend the Plan at
any time, provided that no such action shall adversely affect options
theretofore granted hereunder, and provided that no such action by the Board
without approval of the Company's stockholders may (a) increase the total number
of shares of Common Stock which may be purchased by all Participants; (b) change
the class of employees eligible to receive options under the Plan; (c) decrease
the Purchase Price; (d) extend a Purchase Period hereunder; or (e) extend the
term of the Plan.
18. Term of the Plan.
----------------
The Plan shall become effective on the Effective Date, provided that it is
approved within twelve months after adoption by the Board of Directors by the
affirmative vote of the holders of a majority of the stock of the Company
present or represented and entitled to vote at a duly held stockholders'
meeting. The Plan shall continue in effect through December 31, 2007. The Plan
may be terminated at any time by the Company's Board of Directors but such
termination shall not affect options then outstanding under the Plan. It will
terminate in any case when all or substantially all of the unissued shares of
stock reserved for the purposes of the Plan have been purchased. If at any time
shares of stock reserved for the purposes of the Plan remain available for
purchase but not in sufficient number to satisfy all then unfilled purchase
requirements, the available shares shall be apportioned among Participants in
proportion to the amount of payroll deductions accumulated on behalf of each
Participant that
- 11 -
<PAGE> 12
would otherwise be used to purchase stock and the Plan shall terminate. Upon
such termination or any other termination of the Plan, all payroll deductions
not used to purchase stock will be refunded, without interest.
19. Notice to Company of Disqualifying Disposition; Legend.
------------------------------------------------------
By electing to participate in the Plan, each Participant agrees to notify
the Company in writing immediately after the Participant transfers Common Stock
acquired under the Plan, if such transfer occurs within two years after the
first business day of the Purchase Period in which such Common Stock was
acquired. Each Participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to Participants and to the Company and
its participating subsidiaries. The Participant further agrees that all stock
certificates for Common Stock purchased under the Plan by the Participant shall
be held in his name or jointly with his spouse, as the case may be, and not in
the name of a broker, nominee or other person or entity for such two-year
period, and agrees that such stock certificates shall bear a legend reflecting
that such Common Stock was obtained upon the purchase of Common Stock
underwriters der the Plan. The Participant acknowledges that the Company may
send a Form W-2, or substitute therefor, as appropriate, to the Participant with
respect to any income recognized by the Participant upon a disqualifying
disposition of Common Stock.
- 12 -
<PAGE> 13
20. Withholding of Additional Income Taxes.
--------------------------------------
By electing to participate in the Plan, each Participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the Participant's compensation and
accumulated for the benefit of the Participant under the Plan and each
Participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the Participant's compensation, when amounts are
added to the Participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each Participant further
acknowledges that when Common Stock is purchased under the Plan, the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each Participant agrees that such
taxes may be withheld from compensation otherwise payable to such Participant.
It is intended that tax withholding will be accomplished in such a manner that
the full amount of payroll deductions elected by the Participant under Section 6
will be used to purchase Common Stock. However, if amounts sufficient to satisfy
applicable tax withholding obligations have not been withheld from compensation
otherwise payable to any Participant, then, notwithstanding any other provision
of the Plan, the Company may withhold such taxes from the Participant's
accumulated payroll deductions and apply the net amount to the purchase of
Common Stock, unless the Participant pays to the Company, prior to the exercise
date, an amount sufficient to satisfy such withholding obligations. Each
Participant further acknowledges that the Company and its participating
subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees
- 13 -
<PAGE> 14
that the Company or any participating subsidiary may take whatever action it
considers appropriate to satisfy such withholding requirements, including
deducting from compensation otherwise payable to such Participant an amount
sufficient to satisfy such withholding requirements or conditioning any
disposition of Common Stock by the Participant upon the payment to the Company
or such subsidiary of an amount sufficient to satisfy such withholding
requirements.
21. Participating Subsidiaries.
--------------------------
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan or designated in this Section 21 to participate in the
Plan. The Board of Directors shall have the power to make such designation
before or after the Plan is approved by the stockholders.
22. General.
-------
Whenever the context of this Plan permits, the masculine gender shall
include the feminine and neuter genders.
23. Compliance with Rule 16b-3.
--------------------------
It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act
of 1934 (the "Act") and that transactions in the Plan be exempt from Section
16(b) of the Act. Therefore, if any Plan provision is found not to be in
compliance with Rule 16b-3 or if any Plan provision would prevent transactions
in the Plan from being exempt from Section 16(b) of the Act, that
- 14 -
<PAGE> 15
provision shall be deemed null and void and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Adopted by the Board of Directors January 23, 1997.
Approved by the Stockholders January 23, 1997.
- 15 -
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Agreement is made as of the 25 day of July, 1996 between Triton
Systems, Inc., a Mississippi corporation (the "Company"), and Ernest L.
Burdette, an individual residing at 1201 East Second Street, Pass Christian,
Mississippi 39591 (the "Employee").
RECITALS
WHEREAS, pursuant to a Stock Purchase and Redemption Agreement dated as
of the date hereof (the "Purchase Agreement"), Summit Ventures IV, L.P., Summit
Investors III, L.P. and Summit Subordinated Debt Fund, L.P. (collectively, the
"Investors") have agreed to purchase an aggregate of 114,000 shares of Series A
Preferred Stock, par value $.01 per share, of the Company and 4,160,000 shares
of Common Stock, par value $1.00 per share, of the Company (collectively, the
"Shares");
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company
will apply the proceeds received upon the sale of the Shares to redeem a
portion of the shares of Common Stock held by the Employee; and
WHEREAS, the Investors would be unwilling to purchase the Shares and
the Company would be unwilling to redeem the shares of Common Stock held by the
Employee without the execution of this Agreement by the Employee containing
certain covenants on the part of the Employee, including, without limitation,
the covenants contained in Section 6 and 7 hereof.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. Employment. The Company hereby employs the Employee as President
and Chief Executive Officer of the Company, and the Employee accepts such
employment for the term of employment specified in Section 3 below (the
"Employment Term"). During the Employment Term, the Employee shall, subject to
the direction of the Board of Directors of the Company, oversee and direct the
operations of the Company and perform such other duties as may from time to
time be assigned to him by the Board of Directors.
2. Performance. The Employee agrees to devote his best efforts and
substantially all of his business time to the performance of his duties
hereunder during the Employment Term.
<PAGE> 2
3. Employment Term. The Employment Term shall begin on the date of this
Agreement and continue until July 31, 1999 (the "Employment Term"), unless
earlier terminated in accordance with the terms of this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Seventy-Five Thousand Dollars ($175,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the term of
this Agreement.
(b) Bonus. The Employee shall be eligible to participate in a bonus
plan of the Company pursuant to which he may be entitled to receive an annual
bonus equal to a specified percentage of the annual base salary then in effect,
subject to achieving specified financial targets. The actual amount of such
bonus and the financial targets for the payment thereof shall be as determined
by the Compensation Committee of the Board of Directors of the Company.
(c) Insurance; Other Benefits. The Employee shall be entitled to
participate in all employee benefit plans now existing or hereinafter
established by the Company, including, but not limited to, medical plans, group
life and disability insurance plans, pension, profit sharing or bonus plans, and
any other employee benefit plan or arrangement made available to executive
officers of the Company.
(d) Vacation. The Employee shall be entitled to take four weeks of
paid vacation during each year of the Employment Term, consistent with the
Company's past employment practices with regard to the Employee, to be taken at
such time or times as shall be mutually convenient and consistent with his
duties and obligations to the Company.
(e) Automobile. The Employee shall be entitled to an automobile
allowance of $500 per month which shall cover, without limitation, all
maintenance, insurance and other costs respecting such automobile.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board of
Directors from time to time and upon receipt of appropriate documentation.
-2-
<PAGE> 3
6. Agreement Not to Compete. The Employee acknowledges and agrees that
the covenants contained in Sections 6 and 7 hereof are provided in connection
with the transactions contemplated by the Purchase Agreement. The Employee
agrees that during the Non-Competition Period (defined below) he will not in any
capacity, either separately, jointly, or in association with others, directly or
indirectly, as an officer, director, consultant, agent, employee, owner,
partner, stockholder or otherwise, engage or have a financial interest in any
business which competes with the Company in the United States (excepting only
the ownership of not more than 5% of the outstanding securities of any class
of an issuer listed on an exchange or regularly traded in the over-the-counter
market). The "Non-Competition Period" shall mean the period ending two years
after the termination of the Employee's employment with the Company for any
reason. The Employee further agrees that during the Non-Competition Period,
except in connection with the performance of services hereunder, he will not in
any capacity, either separately, jointly or in association with others, directly
or indirectly, solicit or contact with regard to a business competitor of the
Company any of the Company's employees, consultants, agents or suppliers,
customers, distributors or prospects, as shown by the Company's records, that
were employees, consultants, agents, suppliers, customers or prospects of the
Company at any time during the two years immediately preceding termination of
employment hereunder.
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
revise the foregoing restrictions to include the maximum restrictions allowed
under the applicable law. The Employee expressly agrees that breach of the
foregoing would result in irreparable injuries to the Company, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
7. Secret Processes and Confidential Information. For the Employment Term
and thereafter, (a) the Employee will not divulge (except as legally compelled
by court order, and then only to the extent required, after prompt notice to the
Company of any such order), directly or indirectly, other than in the regular
and proper course of business of the Company, any Confidential Information (as
defined below) and (b) the Employee will not use, directly or indirectly, any
Confidential Information for the benefit of anyone other than the Company. For
purposes of this Agreement, "Confidential Information" means any information
which is proprietary or unique to the Company, including information with
respect to the operations or finances of the Company or with respect to
confidential or secret processes, techniques, machinery, customers, plans or
products manufactured or sold by the Company. Notwithstanding the foregoing,
Confidential Information shall not include information (i) that is of public
knowledge at the time of disclosure to Employee, (ii) that becomes generally
available to the public other than as a result of disclosure by Employee, (iii)
that is rightfully received by the Employee from a third party on a
nonconfidential basis, or (iv) that is unrelated to the
-3-
<PAGE> 4
products then being developed, manufactured or sold by the Company and is
developed by Employee independently and is not derived from Confidential
Information. All new processes, techniques, know-how, inventions, plans,
products, patents and devices (collectively, "Developments") developed, made or
invented by the Employee, alone or with others, while an employee of the
Company, shall be and become the sole property of the Company, unless released
in writing by the Company or unless such Developments do not result from tasks
assigned to the Employee by the Company and do not relate to the business of
the Company or any of its products or services, and the Employee hereby assigns
any and all rights therein or thereto to the Company.
8. Termination.
(a) Termination at End of Term. The employment of the Employee
hereunder shall automatically terminate at the end of the Employment Term,
unless the parties hereto mutually agree otherwise in writing at least 60 days
prior to expiration of the Employment Term, or earlier terminated by the
Company or the Employee pursuant to this Section 8.
(b) Termination by the Company With Cause. The Company shall have the
right at any time to terminate the Employee's employment hereunder upon the
occurrence of any of the following (any such termination being referred to as a
termination for "Cause"):
(i) the commission by the Employee of any embezzlement or other
deliberate and premeditated act of dishonesty against the financial or business
interests of the Company;
(ii) the habitual drug addiction or intoxication of the Employee;
(iii) the conviction by the Employee of, or the pleading by the
Employee of nolo contendere to, a felony;
(iv) the willful failure or refusal of the Employee to perform
the duties specified in and pursuant to Section 1 hereof, which failure or
refusal is not cured within 15 days subsequent to notice from the Company to
the Employee specifying the nature of such failure or refusal; or
(v) the breach by the Employee of any material terms of this
Agreement, which breach is not cured within 30 days subsequent to notice from
the Company to the Employee specifying such breach.
(c) Termination Upon Death or Disability. The Employee's employment
hereunder shall automatically terminate upon the Employee's death or upon his
inability to perform his duties hereunder by reason of any mental, physical or
other disability for a period of at least six consecutive months, as determined
by a qualified physician.
-4-
<PAGE> 5
(d) Termination by the Company Without Cause. The Company
shall have the right to terminate the Employee's employment at any time after
the first anniversary of the date hereof for any reason without Cause.
(e) Voluntary Termination by Employee. The Employee may
terminate his employment hereunder at any time for any reason.
9. Effect of Termination of Employment.
(a) With Cause; Resignation; Death or Disability. If the
Employee's employment is terminated with Cause pursuant to Section 8(b), if the
Employee's employment is terminated by the death or disability of the Employee
pursuant to Section 8(c) or if the Employee elects to terminate his employment
under Section 8(e), the Employee's salary and other benefits specified in
Section 4 shall cease at the time of such termination; provided, however, that
the Employee shall be entitled to continue to participate in the Company's
medical benefit plans to the extent required by law and shall be entitled to
the reimbursement for expenses incurred by him through the date of termination
pursuant to Section 5.
(b) Without Cause by the Company. If the Employee's
employment is terminated by the Company without Cause pursuant to Section 8(d),
the Employee's salary and other benefits specified in Section 4 shall cease at
the time of such termination, and the Employee shall only be entitled to
receive his then current annual base salary payable under Section 4(a) for a
period equal to the lesser of (i) twelve months from the date of termination,
and (ii) the remaining period of the Employment Term. In addition, the Employee
shall also be entitled to receive any bonus accrued or earned by the Employee
through the date of termination pursuant to Section 4(b) and the amount of any
expenses incurred by the Employee through the date of termination pursuant to
Section 5.
10. Insurance. The Company may purchase insurance on the life of the
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
11. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or
when mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Ernest L. Burdette
1201 East Second Street
Pass Christian, MS 39591
-5-
<PAGE> 6
With a copy to:
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Attn: Dan Bushee, Esq.
If to the Company:
Triton Systems, Inc.
522 East Railroad Street
Long Beach, MS 39560
With copies to:
Summit Partners IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey; and
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: Michael J. Riccio, Jr.
12. General.
(a) Governing Law. The terms of this Agreement shall be
governed by and construed under the laws of the State of Mississippi without
regard to its principles of conflicts of laws.
(b) Assignability. The Employee may not assign his interest
in or delegate his duties under this Agreement. The Company may not assign the
Agreement or the rights and obligations hereunder without written consent of
Employee.
(c) Enforcement Costs. In the event that either the Company
or Employee initiates an action or claim to enforce any provision or term of
this Agreement, the costs and expenses (including reasonable attorneys' fees
and expenses) of the prevailing party shall be paid by the other party, such
party to be deemed to have prevailed if such action or claim is concluded
pursuant to a court order or final judgment which is not subject to appeal,
a settlement agreement or dismissal of the principle claims.
-6-
<PAGE> 7
(d) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, its permitted successors and assigns,
and the Employee, his representatives and heirs.
(e) Entire Agreement; Modification. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by the
parties hereto and shall require the consent of the Investors as provided in
Section 5.8 of the Purchase Agreement.
(f) Duration. Notwithstanding the term of employment hereunder,
this Agreement shall continue for so long as any obligations remain under
this Agreement.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
-----------------------------
Name: Ernest L. Burdette
Title: President
EMPLOYEE
/s/ Ernest L. Burdette
---------------------------------
Ernest L. Burdette
S-1
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Agreement is made as of the 25 day of July, 1996 between Triton Systems,
Inc., a Mississippi corporation (the "Company"), and Frank J. Wilem, Jr., an
individual residing at 124 Yucca Drive, Long Beach, Mississippi 39560 (the
"Employee")
RECITALS
WHEREAS, pursuant to a Stock Purchase and Redemption Agreement dated as of
the date hereof (the "Purchase Agreement"), Summit Ventures IV, L.P., Summit
Investors III, L.P. and Summit Subordinated Debt Fund, L.P. (collectively, the
"Investors") have agreed to purchase an aggregate of 114,000 shares of Series A
Preferred Stock, par value $.01 per share, of the Company and 4,160,000 shares
of Common Stock, par value $1.00 per share, of the Company (collectively, the
"Shares");
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company will
apply the proceeds received upon the sale of the Shares to redeem a portion of
the shares of Common Stock held by the Employee; and
WHEREAS, the Investors would be unwilling to purchase the Shares and the
Company would be unwilling to redeem the shares of Common Stock held by the
Employee without the execution of this Agreement by the Employee containing
certain covenants on the part of the Employee, including, without limitation,
the covenants contained in Section 6 and 7 hereof.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Vice President -
Sales of the Company, and the Employee accepts such employment for the term of
employment specified in Section 3 below (the "Employment Term"). During the
Employment Term, the Employee shall, subject to the direction of the Board of
Directors of the Company, oversee and direct the operations of the Company and
perform such other duties as may from time to time be assigned to him by the
Board of Directors.
2. Performance. The Employee agrees to devote his best efforts and
substantially all of his business time to the performance of his duties
hereunder during the Employment Term.
<PAGE> 2
3. Employment Term. The Employment Term shall begin on the date of this
Agreement and continue until July 31, 1999 (the "Employment Term"), unless
earlier terminated in accordance with the terms of this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Seventy-Five Thousand Dollars ($175,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the term of
this Agreement.
(b) Bonus. The Employee shall be eligible to participate in a bonus
plan of the Company pursuant to which he may be entitled to receive an annual
bonus equal to a specified percentage of the annual base salary then in effect,
subject to achieving specified financial targets. The actual amount of such
bonus and the financial targets for the payment thereof shall be as determined
by the Compensation Committee of the Board of Directors of the Company.
(c) Insurance; Other Benefits. The Employee shall be entitled to
participate in all employee benefit plans now existing or hereinafter
established by the Company, including, but not limited to, medical plans, group
life and disability insurance plans, pension, profit sharing or bonus plans, and
any other employee benefit plan or arrangement made available to executive
officers of the Company.
(d) Vacation. The Employee shall be entitled to take four weeks of
paid vacation during each year of the Employment Term, consistent with the
Company's past employment practices with regard to the Employee, to be taken at
such time or times as shall be mutually convenient and consistent with his
duties and obligations to the Company.
(e) Automobile. The Employee shall be entitled to an automobile
allowance of $500 per month which shall cover, without limitation, all
maintenance, insurance and other costs respecting such automobile.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board of
Directors from time to time and upon receipt of appropriate documentation.
- 2 -
<PAGE> 3
6. Agreement Not to Compete. The Employee acknowledges and agrees that the
covenants contained in Sections 6 and 7 hereof are provided in connection with
the transactions contemplated by the Purchase Agreement. The Employee agrees
that during the Non-Competition Period (defined below) he will not in any
capacity, either separately, jointly, or in association with others, directly or
indirectly, as an officer, director, consultant, agent, employee, owner,
partner, stockholder or otherwise, engage or have a financial interest in any
business which competes with the Company in the United States (excepting only
the ownership of not more than 5% of the outstanding securities of any class of
an issuer listed on an exchange or regularly traded in the over-the-counter
market). The "Non-Competition Period" shall mean the period ending two years
after the termination of the Employee's employment with the Company for any
reason. The Employee further agrees that during the Non-Competition Period,
except in connection with the performance of services hereunder, he will not in
any capacity, either separately, jointly or in association with others, directly
or indirectly, solicit or contact with regard to a business competitor of the
Company any of the Company's employees, consultants, agents or suppliers,
customers, distributors or prospects, as shown by the Company's records, that
were employees, consultants, agents, suppliers, customers or prospects of the
Company at any time during the two years immediately preceding termination of
employment hereunder.
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
revise the foregoing restrictions to include the maximum restrictions allowed
under the applicable law. The Employee expressly agrees that breach of the
foregoing would result in irreparable injuries to the Company, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
7. Secret Processes and Confidential Information. For the Employment Term
and thereafter, (a) the Employee will not divulge (except as legally compelled
by court order, and then only to the extent required, after prompt notice to the
Company of any such order), directly or indirectly, other than in the regular
and proper course of business of the Company, any Confidential Information (as
defined below) and (b) the Employee will not use, directly or indirectly, any
Confidential Information for the benefit of anyone other than the Company. For
purposes of this Agreement, "Confidential Information" means any information
which is proprietary or unique to the Company, including information with
respect to the operations or finances of the Company or with respect to
confidential or secret processes, techniques, machinery, customers, plans or
products manufactured or sold by the Company. Notwithstanding the foregoing,
Confidential Information shall not include information (i) that is of public
knowledge at the time of disclosure to Employee, (ii) that becomes generally
available to the public other than as a result of disclosure by Employee, (iii)
that is rightfully received by the Employee from a third party on a
nonconfidential basis, or (iv) that is unrelated to the
- 3 -
<PAGE> 4
products then being developed, manufactured or sold by the Company and is
developed by Employee independently and is not derived from Confidential
Information. All new processes, techniques, know-how, inventions, plans,
products, patents and devices (collectively, "Developments") developed, made or
invented by the Employee, alone or with others, while an employee of the
Company, shall be and become the sole property of the Company, unless released
in writing by the Company or unless such Developments do not result from tasks
assigned to the Employee by the Company and do not relate to the business of the
Company or any of its products or services, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
8. Termination.
(a) Termination at End of Term. The employment of the Employee
hereunder shall automatically terminate at the end of the Employment Term,
unless the parties hereto mutually agree otherwise in writing at least 60 days
prior to expiration of the Employment Term, or earlier terminated by the Company
or the Employee pursuant to this Section 8.
(b) Termination by the Company With Cause. The Company shall have
the right at any time to terminate the Employee's employment hereunder upon the
occurrence of any of the following (any such termination being referred to as a
termination for "Cause"):
(i) the commission by the Employee of any embezzlement or
other deliberate and premeditated act of dishonesty against the
financial or business interests of the Company;
(ii) the habitual drug addiction or intoxication of the
Employee;
(iii) the conviction by the Employee of, or the pleading by
the Employee of nolo contendere to, a felony;
(iv) the willful failure or refusal of the Employee to perform
the duties specified in and pursuant to Section 1 hereof, which
failure or refusal is not cured within 15 days subsequent to notice
from the Company to the Employee specifying the nature of such
failure or refusal; or
(v) the breach by the Employee of any material terms of this
Agreement, which breach is not cured within 30 days subsequent to
notice from the Company to the Employee specifying such breach.
(c) Termination Upon Death or Disability. The Employee's employment
hereunder shall automatically terminate upon the Employee's death or upon his
inability to perform his duties hereunder by reason of any mental, physical or
other disability for a period of at least six consecutive months, as determined
by a qualified physician.
- 4 -
<PAGE> 5
(d) Termination by the Company Without Cause. The Company shall have
the right to terminate the Employee's employment at any time after the first
anniversary of the date hereof for any reason without Cause.
(e) Voluntary Termination by Employee. The Employee may terminate
his employment hereunder at any time for any reason.
9. Effect of Termination of Employment.
(a) With Cause; Resignation; Death or Disability. If the Employee's
employment is terminated with Cause pursuant to Section 8(b), if the Employee's
employment is terminated by the death or disability of the Employee pursuant to
Section 8(c) or if the Employee elects to terminate his employment under Section
8(e), the Employee's salary and other benefits specified in Section 4 shall
cease at the time of such termination; provided, however, that the Employee
shall be entitled to continue to participate in the Company's medical benefit
plans to the extent required by law and shall be entitled to the reimbursement
for expenses incurred by him through the date of termination pursuant to Section
5.
(b) Without Cause by the Company. If the Employee's employment is
terminated by the Company without Cause pursuant to Section 8(d), the Employee's
salary and other benefits specified in Sections 4 shall cease at the time of
such termination, and the Employee shall only be entitled to receive his then
current annual base salary payable under Section 4(a) for a period equal to the
lesser of (i) twelve months from the date of termination, and (ii) the remaining
period of the Employment Term. In addition, the Employee shall also be entitled
to receive any bonus accrued or earned by the Employee through the date of
termination pursuant to Section 4(b) and the amount of any expenses incurred by
the Employee through the date of termination pursuant to Section 5.
10. Insurance. The Company may purchase insurance on the life of the
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
11. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Frank J. Wilem, Jr.
124 Yucca Drive
Long Beach, MS 39560
- 5 -
<PAGE> 6
With a copy to:
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Attn: Dan Bushee, Esq.
If to the Company:
Triton Systems, Inc.
522 East Railroad Street
Long Beach, MS 39560
With copies to:
Summit Partners IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey; and
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: Michael J. Riccio, Jr.
12. General.
(a) Governing Law. The terms of this Agreement shall be governed by
and construed under the laws of the State of Mississippi without regard to its
principles of conflicts of laws.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. The Company may not assign the
Agreement or the rights and obligations hereunder without written consent of
Employee.
(c) Enforcement Costs. In the event that either the Company or
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including reasonable attorneys' fees and
expenses) of the prevailing party shall be paid by the other party, such party
to be deemed to have prevailed if such action or claim is concluded pursuant to
a court order or final judgment which is not subject to appeal, a settlement
agreement or dismissal of the principle claims.
- 6 -
<PAGE> 7
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company, its permitted successors and assigns, and the
Employee, his representatives and heirs.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto and shall require the consent of the Investors as provided in Section 5.8
of the Purchase Agreement.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L.Burdette
----------------------------------
Name: Ernest L. Burdette
Title: President
EMPLOYEE
/s/ Frank J. Wilem, Jr.
--------------------------------------
Frank J. Wilem, Jr.
S-1
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Agreement is made as of the 25 day of July, 1996 between Triton
Systems, Inc., a Mississippi corporation (the "Company"), and Robert E. Sandoz,
an individual residing at 205 Ash Lane, Gulfport, Mississippi 39507 (the
"Employee").
RECITALS
WHEREAS, pursuant to a Stock Purchase and Redemption Agreement dated as of
the date hereof (the "Purchase Agreement"), Summit Ventures IV, L.P., Summit
Investors III, L.P. and Summit Subordinated Debt Fund, L.P. (collectively, the
"Investors") have agreed to purchase an aggregate of 114,000 shares of Series A
Preferred Stock, par value $.01 per share, of the Company and 4,160,000 shares
of Common Stock, par value $1.00 per share, of the Company (collectively, the
"Shares");
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company will
apply the proceeds received upon the sale of the Shares to redeem a portion of
the shares of Common Stock held by the Employee; and
WHEREAS, the Investors would be unwilling to purchase the Shares and the
Company would be unwilling to redeem the shares of Common Stock held by the
Employee without the execution of this Agreement by the Employee containing
certain covenants on the part of the Employee, including, without limitation,
the covenants contained in Section 6 and 7 hereof.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Vice President -
Operations of the Company, and the Employee accepts such employment for the term
of employment specified in Section 3 below (the "Employment Term"). During the
Employment Term, the Employee shall, subject to the direction of the Board of
Directors of the Company, oversee and direct the operations of the Company and
perform such other duties as may from time to time be assigned to him by the
Board of Directors.
2. Performance. The Employee agrees to devote his best efforts and
substantially all of his business time to the performance of his duties
hereunder during the Employment Term.
<PAGE> 2
3. Employment Term. The Employment Term shall begin on the date of this
Agreement and continue until July 31, 1999 (the "Employment Term"), unless
earlier terminated in accordance with the terms of this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Seventy-Five Thousand Dollars ($175,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the term of
this Agreement.
(b) Bonus. The Employee shall be eligible to participate in a bonus
plan of the Company pursuant to which he may be entitled to receive an annual
bonus equal to a specified percentage of the annual base salary then in effect,
subject to achieving specified financial targets. The actual amount of such
bonus and the financial targets for the payment thereof shall be as determined
by the Compensation Committee of the Board of Directors of the Company.
(c) Insurance; Other Benefits. The Employee shall be entitled to
participate in all employee benefit plans now existing or hereinafter
established by the Company, including, but not limited to, medical plans, group
life and disability insurance plans, pension, profit sharing or bonus plans, and
any other employee benefit plan or arrangement made available to executive
officers of the Company.
(d) Vacation. The Employee shall be entitled to take four weeks of
paid vacation during each year of the Employment Term, consistent with the
Company's past employment practices with regard to the Employee, to be taken at
such time or times as shall be mutually convenient and consistent with his
duties and obligations to the Company.
(e) Automobile. The Employee shall be entitled to an automobile
allowance of $500 per month which shall cover, without limitation, all
maintenance, insurance and other costs respecting such automobile.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board of
Directors from time to time and upon receipt of appropriate documentation.
- 2 -
<PAGE> 3
6. Agreement Not to Compete. The Employee acknowledges and agrees that the
covenants contained in Sections 6 and 7 hereof are provided in connection with
the transactions contemplated by the Purchase Agreement. The Employee agrees
that during the Non-Competition Period (defined below) he will not in any
capacity, either separately, jointly, or in association with others, directly or
indirectly, as an officer, director, consultant, agent, employee, owner,
partner, stockholder or otherwise, engage or have a financial interest in any
business which competes with the Company in the United States (excepting only
the ownership of not more than 5% of the outstanding securities of any class of
an issuer listed on an exchange or regularly traded in the over-the-counter
market). The "Non-Competition Period" shall mean the period ending two years
after the termination of the Employee's employment with the Company for any
reason. The Employee further agrees that during the Non-Competition Period,
except in connection with the performance of services hereunder, he will not in
any capacity, either separately, jointly or in association with others, directly
or indirectly, solicit or contact with regard to a business competitor of the
Company any of the Company's employees, consultants, agents or suppliers,
customers, distributors or prospects, as shown by the Company's records, that
were employees, consultants, agents, suppliers, customers or prospects of the
Company at any time during the two years immediately preceding termination of
employment hereunder.
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
revise the foregoing restrictions to include the maximum restrictions allowed
under the applicable law. The Employee expressly agrees that breach of the
foregoing would result in irreparable injuries to the Company, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
7. Secret Processes and Confidential Information. For the Employment Term
and thereafter, (a) the Employee will not divulge (except as legally compelled
by court order, and then only to the extent required, after prompt notice to the
Company of any such order), directly or indirectly, other than in the regular
and proper course of business of the Company, any Confidential Information (as
defined below) and (b) the Employee will not use, directly or indirectly, any
Confidential Information for the benefit of anyone other than the Company. For
purposes of this Agreement, "Confidential Information" means any information
which is proprietary or unique to the Company, including information with
respect to the operations or finances of the Company or with respect to
confidential or secret processes, techniques, machinery, customers, plans or
products manufactured or sold by the Company. Notwithstanding the foregoing,
Confidential Information shall not include information (i) that is of public
knowledge at the time of disclosure to Employee, (ii) that becomes generally
available to the public other than as a result of disclosure by Employee, (iii)
that is rightfully received by the Employee from a third party on a
nonconfidential basis, or (iv) that is unrelated to the
- 3 -
<PAGE> 4
products then being developed, manufactured or sold by the Company and is
developed by Employee independently and is not derived from Confidential
Information. All new processes, techniques, know-how, inventions, plans,
products, patents and devices (collectively, "Developments") developed, made or
invented by the Employee, alone or with others, while an employee of the
Company, shall be and become the sole property of the Company, unless released
in writing by the Company or unless such Developments do not result from tasks
assigned to the Employee by the Company and do not relate to the business of the
Company or any of its products or services, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
8. Termination.
(a) Termination at End of Term. The employment of the Employee
hereunder shall automatically terminate at the end of the Employment Term,
unless the parties hereto mutually agree otherwise in writing at least 60 days
prior to expiration of the Employment Term, or earlier terminated by the Company
or the Employee pursuant to this Section 8.
(b) Termination by the Company With Cause. The Company shall have
the right at any time to terminate the Employee's employment hereunder upon the
occurrence of any of the following (any such termination being referred to as a
termination for "Cause"):
(i) the commission by the Employee of any embezzlement or
other deliberate and premeditated act of dishonesty against the
financial or business interests of the Company;
(ii) the habitual drug addiction or intoxication of the
Employee;
(iii) the conviction by the Employee of, or the pleading by
the Employee of nolo contendere to, a felony;
(iv) the willful failure or refusal of the Employee to perform
the duties specified in and pursuant to Section 1 hereof, which
failure or refusal is not cured within 15 days subsequent to notice
from the Company to the Employee specifying the nature of such
failure or refusal; or
(v) the breach by the Employee of any material terms of this
Agreement, which breach is not cured within 30 days subsequent to
notice from the Company to the Employee specifying such breach.
(c) Termination Upon Death or Disability. The Employee's employment
hereunder shall automatically terminate upon the Employee's death or upon his
inability to perform his duties hereunder by reason of any mental, physical or
other disability for a period of at least six consecutive months, as determined
by a qualified physician.
- 4 -
<PAGE> 5
(d) Termination by the Company Without Cause. The Company shall have
the right to terminate the Employee's employment at any time after the first
anniversary of the date hereof for any reason without Cause.
(e) Voluntary Termination by Employee. The Employee may terminate
his employment hereunder at any time for any reason.
9. Effect of Termination of Employment.
(a) With Cause; Resignation; Death or Disability. If the Employee's
employment is terminated with Cause pursuant to Section 8(b), if the Employee's
employment is terminated by the death or disability of the Employee pursuant to
Section 8(c) or if the Employee elects to terminate his employment under Section
8(e), the Employee's salary and other benefits specified in Section 4 shall
cease at the time of such termination; provided, however, that the Employee
shall be entitled to continue to participate in the Company's medical benefit
plans to the extent required by law and shall be entitled to the reimbursement
for expenses incurred by him through the date of termination pursuant to Section
5.
(b) Without Cause by the Company. If the Employee's employment is
terminated by the Company without Cause pursuant to Section 8(d), the Employee's
salary and other benefits specified in Sections 4 shall cease at the time of
such termination, and the Employee shall only be entitled to receive his then
current annual base salary payable under Section 4(a) for a period equal to the
lesser of (i) twelve months from the date of termination, and (ii) the remaining
period of the Employment Term. In addition, the Employee shall also be entitled
to receive any bonus accrued or earned by the Employee through the date of
termination pursuant to Section 4(b) and the amount of any expenses incurred by
the Employee through the date of termination pursuant to Section 5.
10. Insurance. The Company may purchase insurance on the life of the
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
11. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Robert E. Sandoz
205 Ash Lane
Gulfport, MS 39507
- 5 -
<PAGE> 6
With a copy to:
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Attn: Dan Bushee, Esq.
If to the Company:
Triton Systems, Inc.
522 East Railroad Street
Long Beach, MS 39560
With copies to:
Summit Partners IV, L.P.
600 Atlantic Avenue, Suite 2800
Boston, MA 02210-2227
Attn: Joseph F. Trustey; and
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: Michael J. Riccio, Jr.
12. General.
(a) Governing Law. The terms of this Agreement shall be governed by
and construed under the laws of the State of Mississippi without regard to its
principles of conflicts of laws.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. The Company may not assign the
Agreement or the rights and obligations hereunder without written consent of
Employee.
(c) Enforcement Costs. In the event that either the Company or
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including reasonable attorneys' fees and
expenses) of the prevailing party shall be paid by the other party, such party
to be deemed to have prevailed if such action or claim is concluded pursuant to
a court order or final judgment which is not subject to appeal, a settlement
agreement or dismissal of the principle claims.
- 6 -
<PAGE> 7
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company, its permitted successors and assigns, and the
Employee, his representatives and heirs.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto and shall require the consent of the Investors as provided in Section 5.8
of the Purchase Agreement.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L.Burdette
----------------------------------
Name: Ernest L. Burdette
Title:President
EMPLOYEE
/s/ Robert E. Sandoz
--------------------------------------
Robert E. Sandoz
S-1
<PAGE> 1
EXHIBIT 10.14
STATE OF MISSISSIPPI
COUNTY OF HARRISON
PURCHASE AND SALES AGREEMENT
This Purchase and Sales Agreement entered into this the 27th day of
December, 1996, by and between ERNEST L. BURDETTE, III, FRANK J. WILEM, JR. and
ROBERT E. SANDOZ, all of Harrison County, Mississippi, hereinafter referred to
as "Sellers" and TRITON SYSTEMS, INC. a Mississippi corporation, hereinafter
referred to as "Purchaser/Buyer".
WITNESSETH:
The Sellers agree to sell and the Purchaser agrees to buy Real Property,
as more fully described on the attached Exhibit "A", and Personal Property, as
more fully described on the attached Exhibit "B", (collectively, "Property"),
located in Long Beach, Harrison County, Mississippi.
1. PURCHASE PRICE: The Purchase Price of the Real Property shall be
$587,000.00, and the Purchase Price for the Personal Property shall be
$44,257.00, both payable at closing by certified or bank cashiers check or wire
transfer of immediately available funds.
2. PRORATION AND ADJUSTMENTS: All Personal Property and Real Property
taxes relating to the Property shall be prorated as of the closing date. All
such taxes attributable to the period prior to the closing date that remain
unpaid as of the closing date shall
1
<PAGE> 2
be deducted from the purchase price and shall be paid by the Buyer on Sellers
behalf to all applicable taxing authority. All such taxes attributable to the
period after the closing date that have been paid by the Seller shall be added
to the purchase price. All adjustments of the purchase price will be allocated
to the closing payment and will be calculated as of 12:01 A.M. on the date the
deed is recorded with the appropriate registry of deeds.
3. INSURANCE: Fire, windstorm, liability, flood and extended coverage
insurance is to be obtained by the Purchaser, at closing; however, if the
Purchaser desires to assume the existing policies of the Seller, the assumption
is acceptable to the Seller. Seller shall maintain its current insurance
policies through the delivery of the deed.
4. TITLE: The Purchaser shall be allowed reasonable time for examination
of title. Should such examination of title reveal defects which can be cured,
the Sellers hereby obligate themselves to cure same as expeditiously as
possible, and to execute and tender a warranty deed to Purchaser in accordance
with the terms hereof. In addition, the Sellers warrant title to the Personal
Property which is a part of this agreement and will tender the necessary bill of
sale in accordance with the terms hereof.
5. POSSESSION: Possession of the Property to be sold hereunder shall be
given at the time of closing.
6. REPRESENTATIONS AND WARRANTIES OF SELLERS: Sellers warrant and
represent to the Purchaser as follows, and acknowledge and confirm that
Purchaser is relying upon such warranties and
2
<PAGE> 3
representations in connection with the purchase of the Property:
(a) ORGANIZATION, POWER OF AUTHORITY OF SELLERS AND THE PROPERTY.
Sellers have the power and authority to own, operate, and lease this
Property and to carry on this Business, as defined below, as it is
presently being conducted.
(b) VALIDITY OF AGREEMENT. This Agreement constitutes the legal, valid
and binding obligation of Sellers, enforceable in accordance with its
terms. Sellers have the authority to enter into this agreement and to
undertake and perform fully the transactions contemplated hereby.
(c) ZONING. The zoning of the Real Property permits the presently
existing improvements, continuation of the business presently being
conducted on the Real Property ("Business"), and the near future
expansion plans of the Business, as a conforming use, no permits or
variances required. The existing use of each tract of Real Property is
not depended upon the use or availability of any other tract, and no
restrictions exist in the right to remodel, rebuild, or replace any
improvements located on the Real Property, or to continue the operation
of the Business. Sellers are not aware of or have reasonable grounds
to believe that there is any pending change in laws (including zoning)
that will render any part of the Business as presently conducted
illegal or uneconomical. Sellers are not aware of or have reasonable
grounds to believe that there is any plan, study or effect by
3
<PAGE> 4
any governmental authority or of any non-governmental person, that in
any way would materially and adverse defect any or all the portion of
the Real Property.
(d) ENVIRONMENTAL ISSUES. Except for the extent set forth in writing in
the Phase I Environmental Report, dated July, 1996, and prepared by
Vanasse Hangen and Brustlin, Inc., to the best knowledge of Sellers,
no other person has engaged in or permitted any operations or
activities upon, or any use or occupancy of, the Real Property or any
portion thereof, resulting in the storage, omission, release,
discharge, dumping or disposal of any hazardous materials on, under,
in or about the Real Property, nor have any hazardous materials
migrated from the real property to, upon, about, beneath other
properties, nor has any hazardous materials migrated or threatened to
migrate from any other properties, to, upon, or about or beneath the
Real Propery.
(e) LICENSES AND PERMITS. All licenses and permits in the name of the
Seller or the Business including, but not limited to, construction
permits, are in full force and effect, are assignable without the
consent of any party, and will allow for the current operation of the
Business and the operation of the Business following the near future
expansion plans for the same.
(f) COMPLIANCE WITH THE LAWS. Sellers have been conducting the Business
in compliance with all applicable laws and Sellers have not recieved
any notice of any alleged non-
4
<PAGE> 5
compliance relating to the Business of the Real Property.
(g) OSHA AND ADA. Sellers are in compliance with all requirements of the
Occupational Safety and Health Act ("OSHA") and the Americans with
Disability Act ("ADA") pertaining to the facilities and operations of
the Real Property.
(h) BROKERS. Neither Sellers nor anyone acting on Sellers behalf, has
taken any action that would directly or indirectly obligate Buyer or any
affiliate of Buyer to anyone acting as a Broker, finder, financial
advisor, or any other similar capacity in connection with this agreement
or the transactions contemplated by this agreement.
7. REPRESENTATIONS AND WARRANTIES OF BUYER: Buyer hereby warrants and
represents to the Sellers as follows:
(a) BROKERS. Neither Buyer nor anyone acting on its behalf has taken any
action that would directly or indirectly obligate Sellers to anyone
acting as a Broker, finder, financial advisor or in any similar capacity
in connection with this agreement or the transactions contemplated by
this agreement.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Buyer contained in this section
will be true and correct after closing as if made anew at the time of
closing.
8. SURVIVAL OF REPRESENTATIONS. Notwithstanding any investigations or
inquiries made by Buyer or the waiver of any
5
<PAGE> 6
conditions by Buyer, the representations, warranties, covenants and agreements
of Sellers contained herein will survive the delivery the deed, and
notwithstanding the closing of the Purchase and Sale as provided for in this
agreement, will continue in full force and effect after the closing.
9. See Rider attached hereto and incorporated herein.
WITNESS OUR SIGNATURES this the 27 day of December, 1996.
SELLERS:
/s/ Ernest L. Burdette, III
---------------------------
Ernest L. Burdette, III
/s/ Frank J. Wilem, Jr.
---------------------------
Frank J. Wilem, Jr.
/s/ Robert E. Sandoz
---------------------------
Robert E. Sandoz
PURCHASER/BUYER:
TRITON SYSTEMS, INC.
BY: /s/ Ernest L. Burdette
-----------------------
Ernest L. Burdette
6
<PAGE> 7
RIDER
TO PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
ERNEST L. BURDETTE, III, FRANK J. WILEM, JR.
AND ROBERT E. SANDOZ, AS SELLER
AND
TRITON SYSTEMS, INC, AS BUYER
DATED DECEMBER 27, 1996
10. SELLER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Buyer as follows, the provisions of this paragraph to survive the
delivery of the deed:
1. The Real Property is equipped with all necessary utilities,
including without limitation, electricity, private or municipal
water, public sewer or private septic system, gas, above ground oil
storage tank, and all the foregoing utilities and systems are in
good working order and properly connected.
2. That there is not presently nor during the period of Seller's
ownership has there been, nor to the best of Seller's knowledge has
there been during any prior ownership, any underground storage tank
for the storage of fuel, oil, petroleum products or hazardous
materials in the Real Property.
3. That no hazardous material or waste has been improperly disposed of
at the Real Property during the period of Seller's ownership or to
the best of Seller's knowledge during any prior ownership.
4. That there are no complaints or actions relating to or affecting
the Real Property which have been filed with or are pending before
any federal, state or municipal, administrative or judicial
department, board or court, and that Seller is not aware that any
person or entity is now preparing or contemplating such a
complaint or action.
5. That the Personal Property is (a) in good working condition, (b)
meets the current operation requirements of the Business and will
meet the requirements of the near future expansion plans of the
Business, and (c) is owned by Seller, free and clear of any lien,
mortgage, security interest or encumbrance of any kind.
<PAGE> 1
EXHIBIT 10.15
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated as of December 31, 1996, to that certain Employment
Agreement (the "Employment Agreement") dated July 25, 1996, by and between
Triton Systems, Inc., a Mississippi corporation (the "Company") and Ernest L.
Burdette, an individual residing at 1201 East Second Street, Pass Christian,
Mississippi 39591 (the "Employee").
RECITALS
WHEREAS, the Company and the Employee have entered into the Employment
Agreement referenced above, which sets forth the terms and conditions under
which the Company employs the Employee as its President and Chief Executive
Officer;
WHEREAS, the Company and the Employee have agreed to decrease the
Employee's base salary;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties, each intending to be legally bound hereby, agree
as follows:
1. Section 4(a) of the Employment Agreement shall be deleted in its
entirety and replaced with a new section 4(a) to read as follows:
"Salary. During the Employment term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Twenty-Five Thousand Dollars ($125,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the Term of
this Agreement."
2. Unless superseded by the terms of this Amendment to Employment
Agreement, the Employment Agreement shall remain in effect under its original
terms.
* * * * * *
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement as of the day and year first written above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
---------------------------------------
Name: Ernest L. Burdette
Title: President
EMPLOYEE:
/s/ Ernest L. Burdette
-----------------------------------------
Ernest L. Burdette
<PAGE> 1
EXHIBIT 10.16
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated as of December 31, 1996, to that certain Employment
Agreement (the "Employment Agreement") dated July 25, 1996, by and between
Triton Systems, Inc., a Mississippi corporation (the "Company") and Frank J.
Wilem, Jr., an individual residing at 124 Yucca Drive, Long Beach Mississippi
39560 (the "Employee").
RECITALS
WHEREAS, the Company and the Employee have entered into the Employment
Agreement referenced above, which sets forth the terms and conditions under
which the Company employs the Employee as its Vice President - Sales of the
Company;
WHEREAS, the Company and the Employee have agreed to decrease the
Employee's base salary;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties, each intending to be legally bound hereby, agree
as follows:
1. Section 4(a) of the Employment Agreement shall be deleted in its
entirety and replaced with a new section 4(a) to read as follows:
"Salary. During the Employment term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Twenty-Five Thousand Dollars ($125,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the Term of
this Agreement."
2. Unless superseded by the terms of this Amendment to Employment
Agreement, the Employment Agreement shall remain in effect under its original
terms.
* * * * * *
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement as of the day and year first written above.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
---------------------------------------
Name: Ernest L. Burdette
Title: President
EMPLOYEE:
/s/ Frank J. Wilem, Jr.
----------------------------------------
Frank J. Wilem, Jr.
<PAGE> 1
EXHIBIT 10.17
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated as of December 31, 1996, to that certain Employment
Agreement (the "Employment Agreement") dated July 25, 1996, by and between
Triton Systems, Inc., a Mississippi corporation (the "Company") and Robert A.
Sandoz, an individual residing at 205 Ash Lane, Gulfport, Mississippi 39507 (the
"Employee").
RECITALS
WHEREAS, the Company and the Employee have entered into the Employment
Agreement referenced above, which sets forth the terms and conditions under
which the Company employs the Employee as its Vice President - Operations of the
Company;
WHEREAS, the Company and the Employee have agreed to decrease the
Employee's base salary;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties, each intending to be legally bound hereby, agree
as follows:
1. Section 4(a) of the Employment Agreement shall be deleted in its
entirety and replaced with a new section 4(a) to read as follows:
"Salary. During the Employment term, the Company shall pay the
Employee a base salary, payable in equal installments in accordance with the
Company's then current compensation practices for all of its employees, subject
to withholding and other applicable taxes, at an annual rate of One Hundred
Twenty-Five Thousand Dollars ($125,000.00). The annual base salary will be
subject to review annually and will be revised based on the recommendation of
the Compensation Committee of the Board of Directors of the Company; provided,
however, that such annual base salary shall not be decreased during the Term of
this Agreement."
2. Unless superseded by the terms of this Amendment to Employment
Agreement, the Employment Agreement shall remain in effect under its original
terms.
* * * * * *
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement as of the day and year first written above.
TRITON SYSTEMS, INC.
By:/s/ Ernest L. Burdette
-------------------------------------
Name: Ernest L. Burdette
Title: President
EMPLOYEE:
/s/ Robert A. Sandoz
---------------------------------------
Robert A. Sandoz
<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
(Triton Systems, Inc.)
This First Amendment to Credit Agreement (the or this "First Amendment") is
dated as of January 24, 1997 by and between TRITON SYSTEMS, INC. (the
"Borrower") a Mississippi corporation and THE FIRST NATIONAL BANK OF BOSTON (the
"Bank")a national banking association.
NOW, THEREFORE, for the Loan Increase (defined below) for the premises
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
I. BACKGROUND.
----------
As of September 26, 1996 the Borrower and the Bank entered into a revolving
reducing loan arrangement of up to Fifteen Million Dollars ($15,000,000.00) (the
"Original Loan"). The Original loan was evidenced by a revolving credit note
(the "Original Note") dated September 26, 1996 in the original principal amount
of Fifteen Million Dollars ($15,000,000.00) made by the Borrower to the order of
the Bank. The Borrower and the Bank entered into a Credit Agreement (the
"Original Credit Agreement") dated as of September 26, 1996.
The Borrower and the Bank have agreed, subject to the terms, covenants and
conditions herein, to a Fifteen Million Dollar ($15,000,000.00) increase (the
"Loan Increase") of the Original Loan so that the amount of the Commitment shall
be up to Thirty Million Dollars ($30,000,000.00).
The Borrower intends to use a portion of the Original Loan and the Loan
Increase to redeem all of the issued and outstanding Series A Preferred Stock
and Series B Preferred Stock of the Borrower from the holders of such shares and
for working capital purposes.
The Original Loan, as increased by the Loan Increase, as may be further
modified, amended, supplemented or recast, from time to time, is referred to
herein as the "Loan".
To evidence the Loan Increase the Borrower is providing to the Bank a first
amendment to promissory note (the "Note Amendment") dated the date hereof. The
Original Note, as amended by the Note Amendment, as may be further amended,
modified, supplemented or recast, from time to time, is referred to herein as
the "Note".
In connection with the Note Amendment, the Borrower, INTER, ALIA, (i) is
amending and confirming the Loan Documents executed in connection with the
Original Credit Agreement and (ii) is providing to F.S.C. Corp., an affiliate of
the Bank, a warrant (the "Warrant") to purchase shares of common stock of the
<PAGE> 2
Borrower on such terms and conditions as more particularly described in the
Warrant.
Capitalized terms used in this First Amendment and not defined herein shall
have the meanings given such term in the Original Loan Agreement. This First
Amendment, together with the Original Loan Agreement and such other amendments,
modifications, supplements or restatements, as may be made from time to time is
referred to herein as the "Loan Agreement".
II. AMENDMENTS TO ARTICLE I, DEFINITIONS AND RULES OF INTERPRETATIONS.
-----------------------------------------------------------------
A. The term "Commitment" is hereby amended to delete the amount
"$15,000,000.00" therein contained and to insert the amount
"$30,000,000.00" in lieu thereof.
B. The term "Cash Flow Commitment Reduction" is hereby amended to delete
the amount "$1,000,000.00" in subsection (a)(ii)(x) and to insert the
amount "$2,000,000.00" in lieu thereof.
C. The term "Loan Documents" is hereby amended to delete the phrases
therein contained and to insert the following in lieu thereof:
The Loan Agreement, the Note, the Security Agreement, as amended
by the Security Documents Amendment, the Contract Assignment as
amended by the Security Documents Amendment, the Warrant, and
each of the other documents, agreements and certificates as each
may be amended, supplemented, modified or recast from time to
time, executed by the Borrower or any Subsidiary or Affiliate
thereof and delivered to the Bank in connection with or with
regard to the Loan and any Revolving Credit Loans thereunder.
D. The term "Obligations" shall be deemed to include the Loan Increase
and all of the obligations, covenants and agreements contained in the
Warrant.
E. The term "Security Agreement" shall be deemed to include the original
security agreement as amended by the Security Documents Amendment.
F. The term "Security Documents" shall be deemed to include the Security
Documents Amendment.
G. The term "Security Documents Amendment" shall mean that certain first
amendment to security documents dated
2
<PAGE> 3
January 24, 1997 made by the Borrower and the Bank which amends the
Security Documents.
H. The term "Warrant" is hereby added which term shall have the following
definition:
That certain warrant to purchase common stock of the Borrower
issued to F.S.C. Corp. an affiliate of the Bank dated January 24,
1997.
I. The term "Borrower's IPO" is hereby added which term shall have the
following definition:
As defined in Section 2.5(b).
III. AMENDMENT TO ARTICLE 2. THE REVOLVING CREDIT FACILITY.
-----------------------------------------------------
A. Section 2.1(b) is hereby amended by deleting the table set forth therein
and inserting the following table in lieu thereof:
Period Base Amount
------ -----------
January 24, 1997 - $30,000,000.00
September 25, 1997 ("Base Amount 1")
("Period One")
September 26, 1997 - $28,000,000.00
September 25, 1998 ("Base Amount 2")
("Period Two")
September 26, 1998 - $26,000,000.00
September 25, 1999 ("Base Amount 3")
("Period Three")
September 26, 1999 - $24,000,000.00
September 25, 2000 ("Base Amount 4")
("Period Four")
September 26, 2000 - $22,000,000.00
September 25, 2001 ("Base Amount 5")
("Period Five")
B. Section 2.5 entitled "INTEREST ON REVOLVING CREDIT LOANS" is hereby
amended by deleting the sentence therein contained and inserting the following
in lieu thereof:
(a) Unless (i) an Event of Default shall have occurred and the Default
Rate applies as provided in Section 4.7; or (ii) on or before October
31, 1997, the Borrower's IPO has not occurred and the LIBOR Rate is
unavailable and the Increasing Base Rate applies and subject to the
limitation as to the number of different maturities of LIBOR Rate
Loans
3
<PAGE> 4
outstanding at any one time set forth in Section 2.6, all Revolving
Credit Loans shall bear interest per annum at the election of the
Borrower, of either
(x) the Base Rate plus the Base Rate Applicable Margin, or
(y) Reserve Adjusted LIBOR plus the LIBOR Rate Applicable Margin.
(b) The term "Borrower's IPO" shall mean the following:
The Borrower has completed an initial public offering of its
common stock by registering shares of common stock with the
Securities and Exchange Commission and raised, by selling a
sufficient number of shares so registered, a minimum amount of
Thirty Million Dollars ($30,000,000.00) and the Borrower has
received, in good funds, such Thirty Million Dollars
($30,000,000.00) of proceeds.
(c) In the event that the Borrower's IPO has not been completed on or
before October 31, 1997 then,
(i) commencing on October 31, 1997, and terminating on the date of
the Borrower's IPO the Borrower shall not be permitted, nor have
available the option to select Reserve Adjusted LIBOR plus the
LIBOR Rate Applicable Margin; and
(ii) all Revolving Credit Loans then bearing interest at Reserve
Adjusted LIBOR plus the LIBOR Rate Applicable Margin shall be, on
October 31, 1997, converted to an interest rate of the Base Rate
plus the Base Rate Applicable Margin (unless the Default Rate
shall otherwise be applicable) and all payments required to be
made under Article 4 of this Credit Agreement for terminating any
LIBOR Rate Loan prior to the expiration of the applicable
Interest Period shall be paid as provided in, and in accordance
with, Article 4.
(d) In the event that the Borrower's IPO has not been completed by April
30, 1998 then the interest rate charged on the Revolving Credit Loans
shall be increased to three quarters of one percent (0.75%) plus the
Base Rate plus the Base Rate Applicable Margin (unless the Default
Rate shall otherwise apply) and shall be increased by three quarters
of
4
<PAGE> 5
one percent (0.75%)on each October 31 and April 30 thereafter up to a
maximum amount of three percent (3%) plus the Base Rate plus the Base
Rate Applicable Margin until the earlier of the Maturity Date or the
Borrower's IPO is completed.
(e) Upon the completion of the Borrower's IPO and, so long as no Event of
Default exists, the Credit Agreement, including, without limitation,
the Commitment shall remain in full force and effect, and the Borrower
shall have the election to chose the interest rate of either (x) or
(y) set forth in subsection 2.5(a) above subject to the conditions set
forth therein.
III. AMENDMENT FEE.
-------------
The Borrower shall pay, upon the execution of this First Amendment by the
Borrower and the Bank an amendment facility fee in the amount of Seventy-five
Thousand Dollars ($75,000.00). Such amount shall be deemed fully earned upon the
execution of this First Amendment by the Borrower and the Bank and shall not be
subject to rebate or return, in whole or in part.
IV. RATIFICATION AND CONSENTS.
-------------------------
1. The Loan Documents shall otherwise remain unaltered, ratified,
confirmed and in full force and effect. The Borrower also hereby
ratifies and confirms the Note.
2. The Borrower represents and warrants as follows: There are no
defenses, affects or counterclaims against the obligations to the Bank
evidenced by the Note, or the other Loan Documents and to the extent
there are any defense, offsets or counterclaims the same are hereby
waived. All of the representations and warranties contained in the
Loan Agreement are true, accurate and complete in all material
respects as of the date hereof except for such representations and
warranties which addressed a specific date certain which
representations and warranties were true as of that date..
3. The Bank hereby consents to the redemption of the Series A Preferred
Stock for the aggregate sum of $11,979,500.00 and of the Series B
Preferred Stock for the aggregate sum of $10,508,333.00 provided that
each such redemption occurs on or prior to January 27, 1997.
4. The Bank hereby waives Section 2.1 and 2.2 of the Paydown Restriction
Agreement for purposes of the Borrower redeeming its Series A
Preferred Stock and its Series B Preferred Stock on or prior to
January 27, 1997.
5
<PAGE> 6
5. Upon (i) repayment in full of the Loan, and (ii) repayment in full of
all of the other Obligations contained in the Loan Documents excluding
those contained in the Warrant, and (iii) the irrevocable termination
of the Commitment, the Bank shall provide the Borrower a discharge of
the Security Documents.
[END OF PAGE]
6
<PAGE> 7
[SIGNATURE PAGE OF FIRST AMENDMENT TO CREDIT AGREEMENT - TRITON]
IN WITNESS WHEREOF the parties hereto have set their hand and seal as of
the date first above written.
WITNESS: TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
- --------------------- ------------------------------
Name: ERNEST L. BURDETTE
Title: PRESIDENT
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ RANDALL WEHLING
------------------------------
Name: Randall Wehling
Title: Vice President
6
<PAGE> 1
EXHIBIT 10.19
FIRST AMENDMENT TO PROMISSORY NOTE
----------------------------------
This First Amendment To Promissory Note (this "Amendment") is made as of
January 24, 1997 by and between TRITON SYSTEMS, INC., a Mississippi corporation
(the "Borrower") and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association (the "Bank").
This Amendment amends that certain revolving credit note (the "Original
Note") dated September 26, 1996 in the original principal amount of
$15,000,000.00. The Original Note, as amended by this Amendment, as may be
further amended, modified, supplemented or recast, from time to time, is
referred to herein as the "Note".
On the date hereof, the Borrower and the Bank have agreed, INTER, ALIA, to
increase the amount evidenced by the Note and increase the loan evidenced
thereby by Fifteen Million Dollars ($15,000,000.00).
Reference is made to a credit agreement (the "Original Loan Agreement")
entered into between the Borrower and the Bank dated as of September 26, 1996.
The Bank and the Borrower are, as of the date hereof, entering into a First
Amendment To Credit Agreement (the "Loan Agreement First Amendment"). The
Original Loan Agreement, as amended by the Loan Agreement First Amendment, as
may be further amended, modified, supplemented or recast, from time to time, is
referred to herein as the "Loan Agreement". Capitalized terms not otherwise
defined in this Amendment shall have the meaning given such term in the Original
Note.
In consideration of the mutual premises herein contained, the parties
hereto agree as follows:
1. On the top of page 1 the figure "$15,000,000.00" is hereby deleted and
the figure "$30,000,000.00" is hereby inserted in lieu thereof.
2. All references to the term "Loan Agreement" shall be deemed to include
the Loan Agreement First Amendment and all references to the "Loan Documents"
shall be deemed to include all amendments thereto.
3. Borrower represents and warrants that there are no defenses, offsets or
counterclaims against the obligations to the Bank evidenced by the Note, or
other Loan Documents and to the extent there are any defenses, offsets or
counterclaims, the same are hereby waived. All the representations and
warranties contained in the Loan Agreement, as amended, are true, accurate and
complete in all material respects as of the date hereof.
In all other respects, the Note remains unaltered, unmodified and in full
force and effect.
<PAGE> 2
[SIGNATURE PAGE TO FIRST AMENDMENT TO PROMISSORY NOTE]
IN WITNESS WHEREOF, the parties hereto have set their hand and seal as of
the date first above written.
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ RANDALL WEHLING
---------------------------
Name: Randall Wehling
Title: Vice President
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
---------------------------
Name: Ernest L. Burdette
Title: President
<PAGE> 1
EXHIBIT 10.20
FIRST AMENDMENT TO SECURITY DOCUMENTS
This First Amendment to Security Documents (the "First Amendment" or
this "First Amendment") dated as of January 24, 1997, is made by and between
TRITON SYSTEMS, INC. (the "Borrower"), a Mississippi corporation and THE FIRST
NATIONAL BANK OF BOSTON (the "Lender"), a national banking association.
1. BACKGROUND
----------
As of September 26, 1996, the Borrower and the Lender entered into a
revolving reducing loan arrangement of up to Fifteen Million Dollars
($15,000,000.00) (the "Original Loan"). The Original Loan was evidenced by a
revolving credit note (the "Original Note") dated September 26, 1996 in the
original principal amount of $15,000,000.00 made by the Borrower to the order of
the Lender. The Borrower and the Secured Party entered into a Credit Agreement
(the "Original Credit Agreement") dated as of September 26, 1996 and Advances
would be made subject to and in accordance with the Original Credit Agreement.
On or about the date hereof the Lender and the Borrower have agreed to
enter into an increase ("Loan Increase") of the Original Loan of up to Fifteen
Million Dollars ($15,000,000.00). In connection with the Loan Increase, the
Lender and the Borrower are entering into a first amendment to credit agreement
(the "First Amendment to Credit Agreement") to amend the Original Credit
Agreement, INTER ALIA, to account for the Loan Increase. The Borrower intends to
use a portion of the proceeds of the Original Loan and the Loan Increase to
redeem all of the issued and outstanding Series A Preferred Stock and all of the
issued and outstanding Series B Preferred Stock. The Original Credit Agreement
as amended by the First Amendment to Credit Agreement as may be further amended,
supplemented, modified or recast, from time to time, referred to herein as the
"Credit Agreement."
The Original Note was secured by, INTER ALIA, the "Pledge and Security
Agreement," and the "Collateral Assignment", each as defined in Section 2 below.
On the date hereof, the Borrower has executed and delivered to the Lender a
first amendment to promissory note ("Note Amendment") evidencing the Loan
Increase.
The purpose of this Amendment is to describe the amendment of certain
documents, to take into account the Loan Increase, the corresponding Note
Amendment, and the corresponding First Amendment to Credit Agreement.
Capitalized terms not otherwise defined herein shall have the meaning given
such term in the Credit Agreement.
<PAGE> 2
2. DOCUMENTS AMENDED
-----------------
This Amendment affects the following documents:
a. Pledge and Security Agreement - All Assets dated as of July 3,
1995 by and between the Borrower and the Lender ("Pledge and
Security Agreement");
b. Collateral Assignment and Security Agreement in Respect of Stock
Purchase and Redemption Agreement by and among the Borrower and
the Lender ("Collateral Assignment").
3. AMENDMENT TO LOAN DOCUMENTS
---------------------------
NOW, THEREFORE, in consideration of the Loan Increase and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Borrower and the Lender hereby amend the Pledge and Security Agreement, the
Patent and Trademark Security Agreement and the Collateral Assignment as
follows:
a. all references to "Obligations" or "obligations of the Borrower
to the Lender" shall be deemed to include, without limitation,
the Note Amendment, the Credit Agreement (as amended by the First
Amendment to Credit Agreement) and all of the other Loan
Documents, as amended.
b. All references to the "Loan Documents" shall be deemed to include
the Original Credit Agreement and all of the Loan Documents
referred to therein, the First Amendment to Credit Agreement and
all of the Loan Documents referred to therein, including, without
limitation, the Note Amendment, and all of the amendments,
supplements, modifications or restatements of any of the
foregoing.
4. RATIFICATION
------------
In all other respects, the Pledge and Security Agreement and the
Collateral Assignment shall remain unaltered, ratified, confirmed and in full
force and effect.
-2-
<PAGE> 3
[SIGNATURE PAGE OF FIRST AMENDMENT TO SECURITY DOCUMENTS]
EXECUTED as a sealed instrument as of this 24 day of January, 1997.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
--------------------------------
Name: Ernest L. Burdette
Title: President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Randall Wehling
---------------------------------
Name: Randall Wehling
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 10.21
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED FROM TIME TO TIME, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT.
WARRANT
TO PURCHASE COMMON STOCK OF
TRITON SYSTEMS, INC.
January 24, 1997
THIS CERTIFIES THAT, for value received, F.S.C. CORP. or its registered
assigns (hereinafter called the "Holder") is entitled to purchase at any time
and from time to time after January 24, 1997 until the Warrant Expiration Date
(defined below) from TRITON SYSTEMS, INC. (the "Company"), a Mississippi
corporation, 32,109 fully paid and non-assessable shares (the "Original Number
of Warrant Shares") of Common Stock (defined below) plus the Additional Number
of Warrant Shares (defined below) at the Purchase Price (defined below). The
exercise of this Warrant shall be subject to the provisions, limitations and
restrictions herein contained. The Original Number of Warrant Shares and the
Additional Number of Warrant Shares purchasable hereunder and the Purchase Price
are subject to adjustment as hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
Section 1. (a) DEFINITIONS. The following words and terms as used in this
Warrant shall have the following meanings:
"Additional Number of Warrant Shares" means all of the additional shares of
the Common Stock purchased or purchasable by the Warrantholder upon the exercise
of this Warrant, based upon the calculation of the number of such additional
shares set forth in Section 11.(c) hereof.
"Additional Shares of Common Stock" means Common Stock of the Company,
including treasury shares, issued on or after the Business Day prior to January
24, 1997, except for: (i) shares in the aggregate not exceeding, upon issuance
thereof, up to ten percent (10%) of the Outstanding Shares, which shares are
issued to employees of the Company or are issued upon exercise of options
granted to such employees, in each case as approved from time to time by the
Company's Board of Directors, (ii) Common Stock issued upon the exercise of this
Warrant, and (iii) Common Stock issued to any Person in consideration of the
acquisition of stock or assets for such Person.
"Affiliate," with respect to any specified Person controlling, controlled
by, or under common control with such specified Person. For the purposes of this
definition the term "control" when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the meaning of the term "control" or otherwise can directly or
indirectly vote more than 10% of the securities having ordinary voting power for
the selection of directors of such Person.
<PAGE> 2
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in Boston, Massachusetts are authorized or obligated
by law or required by executive order to be closed.
"Change in Control" means the acquisition, other than pursuant to a merger
or consolidation, by any "person" or "group" (as such terms are used in Sections
13(d)(3) and (14)(d)(2) of the Exchange Act), other than any holder of shares of
the Common Stock of the Company on the date hereof, of the beneficial ownership,
directly or indirectly, of securities representing more than 50% of the combined
voting power of the outstanding securities of the Company that are entitled to
vote generally in the election of directors of the Company.
"Common Stock" when used with reference to the stock of the Company means
and includes the Company's authorized Common Stock as constituted on the
Business Day prior to January 24, 1997 and the Company's common stock thereafter
authorized and shall not be limited to a fixed sum or a percentage of par value
in respect of the rights of the holders thereof to receive dividends and to
participate in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding-up of the Company.
"Commission" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government of the United States of
America administering the Securities Act or the Exchange Act.
"Company's IPO" means that the Company has completed an initial Public
Offering of its Common Stock by registering shares of Common Stock with the
Securities and Exchange Commission and raised, by selling a sufficient number of
shares so registered, a minimum amount of Thirty Million Dollars
($30,000,000.00) and the Company has received, in good funds, such Thirty
Million Dollars ($30,000,000.00) of proceeds.
"Convertible Securities" means any securities issued by the Company which
are convertible into, or exchangeable or exercisable for, directly or
indirectly, shares of Common Stock.
"Corporate Office" means the Company's office at 522 East Railroad Street,
Long Beach, Mississippi 39560 (or such other office as the Company may designate
from time to time by written notice to the Warrantholder).
"Credit Agreement" - that certain Credit Agreement dated as of September
26, 1996, as amended as of January 24, 1997 between The First National Bank of
Boston, and the Company.
"Exchange Act" means the Securities Exchange Act of 1934, and any similar
or successor federal statute, and the rules and regulations of the Commission
thereunder.
"Market Price" of a share of Common Stock of the Company shall be:
(i) if the Common Stock is listed on a national securities
exchange, the average closing price of such Common Stock on the principal
national securities exchange on which such Common Stock is traded for the
ten trading days immediately preceding on the date for which any
determination of Market Value is made for any purpose hereunder (a
"Determination Date"), or, if there shall have been no sales on any such
exchange during the ten trading days immediately preceding the
Determination Date, the average of the highest bid and lowest asked prices
on such principal exchange during such ten trading days; or
-2-
<PAGE> 3
(ii) if the Common Stock is not listed on a national
securities exchange, the closing price of such Common Stock on the largest
principal securities exchange on which such Common Stock is traded on the
Determination Date, or, if the Common Stock is not listed on a securities
exchange, such closing price on the NASDAQ National Market System, or, if
there shall have been no sales on the Determination Date on such exchange
or the NASDAQ National Market System, as the case may be, the average of
highest bid and lowest asked prices during the ten trading days
immediately preceding the Determination Date on such exchange or the
NASDAQ National Market System, as applicable; or
(iii) if the Common Stock is not listed on a securities
exchange or the NASDAQ National Market System, the average of the
representative bid and asked prices of the Common Stock as of the close of
trading during the ten trading days immediately preceding the
Determination Date as quoted in the NASDAQ System; or
(iv) if the Common Stock is not quoted in the NASDAQ System,
the average of the high and low bid and asked prices during the ten
trading days immediately preceding the Determination Date in the
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization; or
(v) if the Common Stock is not listed on or traded
in any recognized securities market, such value as the Company
and the Holder may agree upon; or
(vi) if the Company and the Holder cannot agree on a value for
the Common Stock within thirty (30) days after the Company or the Holder
has made a written proposal with respect to such value to the other party,
the value of the Company as determined by an independent appraisal,
conducted by an independent financial expert selected by the Company which
expert must be reasonably satisfactory to the Holder, divided by the
number of Outstanding Shares as of such date. In making the independent
appraisal, the independent financial expert shall not consider items such
as discounts for minority interests, lack of marketability of the Common
Stock or blockage. The fees and expenses incurred by the independent
financial expert in rendering its independent appraisal shall be paid one
half by the Warrantholder and one half by the Company. Such independent
financial expert shall complete and deliver its independent appraisal with
sixty (60) days after the date of such written proposal. If such
independent appraisal is not so timely delivered the Warrantholder, acting
in good faith, shall set such value.
"NASDAQ System" means the inter-dealer quotation system operated by the
National Association of Securities Dealers, Inc.
"Number of Warrant Shares" - at any time means: (a) if no adjustments have
theretofor been made pursuant to the provisions hereof, the Original Number of
Warrant Shares and the Additional Number of Warrant Shares purchasable under
this Warrant, and (b) if any one or more of such adjustments have been so made,
the amount to which the Original Number of Warrant Shares and the Additional
Number of Warrant Shares shall have been so adjusted of Common Stock purchasable
under this Warrant.
-3-
<PAGE> 4
"Outstanding Shares" shall mean all of the shares of Common Stock
exercisable or outstanding on the applicable date as if all options and rights
to convert or exchange Convertible Securities outstanding on such date had been
exercised, whether or not exercisable on such date.
"Person" means in individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Public Offering" shall mean the filing by the Company of a registration
statement under the Securities Act on any form with the exception of Form S-8 or
its then equivalent.
"Purchase Price" means, as of any date: (a) if no adjustments have
theretofor been made pursuant to the provisions of Section 11(a) hereof, Eleven
Dollars ($11.00) per Warrant Share (the "Original Purchase Price"); (b) if any
one or more such adjustments have been so made, the amount to which the Original
Purchase Price shall have been so adjusted pursuant to the provisions hereof;
and (c) if an Additional Number of Warrant Shares have been issued with a
purchase price of $0.01 then an amount equal to the following formula:
OWS + CAWS
----------
PPOWS
where: OWS = Original Number of Warrant Shares multiplied by
the Original Purchase Price therefor, as
adjusted;
CAWS = Additional Number of Warrant shares with a
purchase price of the Original Purchase Price,
as adjusted;
PPOWS = Original Number of Warrant Shares plus all of
the Additional Number of Warrant Shares which have
been issued for either the Original Purchase
Price, as adjusted or for a nominal amount.
"Redemption Event" means the occurrence of the repayment in full of the
Reducing Revolver and the termination of the commitments thereunder, other than
following acceleration of the Reducing Revolver by the "Lender" under the Credit
Agreement.
"Redemption Price" means Forty-five Thousand Dollars ($45,000.00).
"Reducing Revolver" means the reducing revolving line of credit pursuant
to the Credit Agreement.
"Securities Act" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules and regulations of the Commission
thereunder.
"Significant Shareholder Transaction" means a Transfer by the Significant
Holders to Persons who are not Affiliates of such Significant Shareholder of any
of the shares of Common Stock held by them on the date hereof (treating for such
purpose any outstanding Convertible Securities as being the number of shares of
Common Stock issuable upon their conversion).
"Significant Shareholders" means any of Summit Investors III, L.P.,
Summit Ventures IV, L.P. and Summit Subordinated Debt Fund, L.P.
-4-
<PAGE> 5
"Transfer" means, with respect to this Warrant, the Warrant Shares, or any
interest therein, the Common Stock or any Convertible Securities, or any
interest therein, any disposition thereof, whether by sale, assignment, gift,
exchange, pledge, hypothecation or otherwise.
"Warrant Expiration Date" means January 24, 2007.
"Warrant Redemption Notice" means a notice delivered pursuant to Section
19 concerning redemption of Warrants.
"Warrantholder" means, as of any day, the then registered holder of the
Warrants and the then registered holder of the Warrant Shares.
"Warrants" means this Warrant and the additional Warrants which may be
issued hereunder.
"Warrant Shares" means all the shares of the Common Stock purchased or
purchasable by the Warrantholder upon the exercise of this Warrant.
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references herein (A)
to any Person other than the Company, shall be deemed to include such Person
other than the Company, shall be deemed to include such Person's successors and
assigns; (B) to the Company, shall be deemed to include the Company's
successors, and (C) to any applicable law defined or referred to herein, shall
be deemed references to such applicable law as the same may have been or may be
amended or supplemented from time to time.
(ii) When used in this Agreement the words "herein," "hereof" and
"hereunder," and words of similar import, shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Section" and
"Exhibit" shall refer to Sections of, and Exhibits to, this Agreement unless
otherwise specified.
(iii) Whenever the context so requires, the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and covenants with the Holder of this Warrant or any part thereof
as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Mississippi. The Company has
all necessary corporate power and authority, and has taken all necessary
corporate action to execute and deliver and to perform its obligations under
this Warrant, to authorize and reserve for issuance, and to issue and deliver
the Warrant Shares. Upon such issuance, such Common Shares will be validly
issued, fully paid and nonassessable, with no personal liability attaching to
the ownership thereof. The issuance of such Common Shares is not subject to any
preemptive or other similar rights.
(b) This Warrant has been duly authorized, executed and delivered by
the Company and constitutes its legal, valid and binding obligation, enforceable
against the Company in accordance with its terms, except as rights to indemnity
and contribution hereunder may be limited by applicable law, and except as may
be limited by bankruptcy, insolvency,
-5-
<PAGE> 6
reorganizations, moratorium or similar laws affecting the enforceability of
creditors' rights generally and subject to general principles of equity.
(c) The execution, delivery, performance and issuance by the Company
of this Warrant and the issuance of Warrant Shares do not and will not, with or
without the giving of notice of the lapse of time, or both:
(i) violate any terms or provisions of the Company's Articles of
Incorporation or Bylaws;
(ii) result in a breach of, constitute a default under, result in
the termination or modification of, or result in the
creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties of the
Company pursuant to any material indenture, mortgage, deed
of trust, contract, commitment or other material agreement
or instrument to which the Company is a party or by which
any of the Company's properties or assets are bound or
affected; or
(iii) violate any applicable law, rule, regulation, judgment,
order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or
assets.
(d) No consent, approval, authorization, order, registration,
license or permit of any court, government or governmental agency,
instrumentality or other regulatory body or official is required for the valid
authorization, execution, issuance, sale, delivery, and performance by the
Company of this Warrant or the Warrant Shares.
(e) That all Common Stock which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof; and
(f) That during the period from which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue and delivery upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
Section 3. Reserved.
--------
Section 4. OWNERSHIP OF WARRANTS. The Company may deem and treat the
Person in whose name the Warrants are registered as the holder and owner thereof
for all purposes, notwithstanding any notations of or writing thereon made by
anyone other than the Company, and shall not be affected by any notice to the
contrary, until presentation of such Warrants for Transfer or replacement as
provided in Section 5. The Company shall maintain at the Corporate Office a
register for the Warrants in which the Company shall record the name and address
of the Person in whose name each Warrant has been issued or to whom the Warrants
have been transferred.
Section 5. TRANSFER AND REPLACEMENT. Subject to compliance with the
applicable legend in Section 9.c below, the Warrants and all rights thereunder
may be Transferred upon presentation of the Warrants, with the Assignment Form
attached thereto duly completed, by the Warrantholder (in person or by duly
authorized attorney) to the Company at the Corporate Office, and thereupon new
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<PAGE> 7
Warrants, of the same tenor as the Warrants presented for Transfer, shall be
delivered by the Company in accordance with such Assignment Form and the
transferee's ownership of such Warrants shall be registered in accordance with
Section 4. Following any Transfer of the Warrants or the Warrant Shares, or any
portions thereof, the transferee of such Warrants or Warrant Shares shall
succeed to all rights and obligations of the transferor under the Agreement and
the Warrant(s) and shall be deemed to be a "Warrantholder." Upon receipt by the
Company at the Corporate Office of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of a Warrant, the Company will make and
deliver a new Warrant of like tenor in replacement of such Warrant. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall
at any time be enforceable by any Person. The Warrants shall be promptly
canceled by the Company upon the surrender thereof in connection with any
Transfer or replacement. The Company shall pay all taxes and all other expenses
and charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section 5. Notwithstanding the foregoing, the
Holder may not transfer the Warrant or the Warrant Shares to a direct competitor
of the Company.
Section 6. WARRANTHOLDER NOT DEEMED A SHAREHOLDER. No Warrant shall
entitle a Warrantholder to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in the
Warrants be construed to confer upon any Warrantholder any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action, receive notice of meetings, or receive dividends or
subscription rights, prior to any due exercise of this Warrant, in whole or in
part, by the Warrantholder.
Section 7. NO LIMITATION ON CORPORATE ACTION. Except as otherwise
expressly provided in this Section 7, no provisions of the Warrants and no right
or option granted or conferred thereunder shall in any way limit, affect, or
abridge the exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its Articles of Incorporation or By-Laws, reorganize,
consolidate or merge with or into another Person, or transfer all or any part of
its property or assets or the exercise of any other of its corporate rights and
powers. Notwithstanding the foregoing, without the prior written consent of the
Warrantholder the Company shall not hereafter amend any of the terms of its
Articles of Organization or By-laws in any manner that would adversely affect
the rights of the Warrantholder unless such amendment has a like effect on all
holders of Common Stock.
Section 8. REPRESENTATION OF WARRANTHOLDERS. The Warrantholder represents
that it is acquiring the Warrants for its own account for investment and not
with a view to, or sale in connection with, any distribution thereof or of any
of the Warrant Shares issuable upon the exercise thereof, nor with the present
intention of distributing any of such securities.
Section 9. Exercise of Warrants; Conversion of Warrants.
--------------------------------------------
(a) PROCEDURE FOR EXERCISE. Subject to the terms and conditions hereof,
the Warrantholder may exercise this Warrant, in whole or in part, at any time
during normal business hours on any Business Day during the period beginning on
January 24, 1997 and ending on the Warrant Expiration Date. The rights
represented by the Warrants may be exercised by the Warrantholder by:
(i) delivery to the Company at the Corporate Office this Warrant, with
the Subscription Form attached thereto in the form attached as
EXHIBIT B hereto duly completed and
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<PAGE> 8
executed, and
(ii) payment to the Company (IN CASH OR BY CERTIFIED OR BANK CHECK) of
the Purchase Price (which may be done simultaneously with the sale
of the Warrant Shares in connection with any public offering).
In the event of exercise of the Warrants, certificates for the
Warrant Shares so purchased, registered in the name of, or as directed by, the
Warrants shall be delivered by the Company to the Warrantholder or its designee
or nominee within a reasonable time, not exceeding 5 Business Days, after such
Warrants shall have been exercised.
Upon receipt of (i) and (ii) immediately preceding, the
Warrantholder 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 may then be closed or that certificates representing such Common
Stock may not then be actually delivered to the Warrantholder. The stock
certificate so delivered shall be in such denomination as may be requested by
the Warrantholder and shall be registered in the name of the Warrantholder or
such other name as shall be designated by the Warrantholder. If this Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of said stock certificate or certificates, deliver to the Warrantholder
a new Warrant evidencing the right of the Warrantholder to purchase the
remaining shares of Common Stock then covered by this Warrant. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of stock certificates pursuant to this
Section, regardless of the name or names in which such stock certificates shall
be registered.
(b) PROCEDURE FOR CONVERSION. The Warrantholder may convert this Warrant,
in whole or in part, at any time during normal business hours on any Business
Day during the period beginning January 24, 1997 and ending on the Warrant
Expiration Date into the number of shares of Common Stock of the Company
calculated pursuant to the following formula by surrendering the Warrant with
the Subscription Form attached hereto as EXHIBIT B (duly completed and executed)
at the Principal Office of the Company specifying the number of shares of Common
Stock of the Company, and the rights to purchase which the Warrantholder desires
to convert:
X = Y x (A-B)
-------------
A
where: X = the number of shares of Common Stock to be
issued to the Warrantholder;
Y = the number of shares of Common Stock subject to this
Warrant for which the conversion right is being
exercised as such number may be affected by the
provisions contained in Section 11 hereof;
A = the Market Price of one share of Common Stock;
B = the Purchase Price.
(c) LEGENDS. Unless at the time of exercise or conversion the Warrant
Shares are registered under the Securities Act, each certificate representing
Warrant Shares initially issued upon exercise or conversion of the Warrants
shall bear the following legend (and any additional legend required by any
applicable state securities laws):
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<PAGE> 9
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption therefrom
under said Act and are subject to the terms a Warrant dated January 24,
1997."
Any certificate issued any time upon Transfer or replacement of any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration under the Securities Act)
shall also bear such legend, unless, in the opinion of counsel for the
Warrantholder the securities represented thereby are not, at such time, required
by law to bear such legend.
Section 10. Covenants as to Warrant Shares.
------------------------------
(a) The Company covenants and agrees that all Warrant Shares which may be
issued upon any exercise or conversion of the Warrants will, upon issuance, be
validly issued, fully paid and nonassessable. The Company further covenants and
agrees that, during the period within which the Warrants may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
Warrant Shares to provide for the exercise or conversion of such Warrants in
whole.
(b) If any Warrant Shares reserved or to be reserved to provide for the
exercise of the Warrants require registration with or approval of any
governmental authority under any federal or state law before such shares may be
validly issued, then the Company covenants that it will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
Section 11. Adjustment of Warrants; Purchase Price.
--------------------------------------
(a) STOCK SPLITS, DIVIDENDS, DISTRIBUTIONS AND COMBINATIONS. In case
after January 29, 1997, the Company shall:
(1) take a record of the holders of any class of its Common Stock for
the purpose of entitling them to receive a dividend payable in,
or other distribution of, such Common Stock, or
(2) subdivide the outstanding shares of any class of its Common Stock
into a larger number of shares; or
(3) combine the outstanding shares of any class of its Common Stock
into a smaller number of shares,
then the Number of Warrant Shares shall be adjusted to that Number of Warrant
Shares determined by the following formula:
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<PAGE> 10
A = WSB x TA
------------
TB
where: A = the adjusted Number of Warrant Shares;
WSB = the Number of Warrant Shares in effect immediately
prior to such event;
TA = the total number of Outstanding Shares of Common Stock
immediately following such event;
TB = the total number of Outstanding Shares of Common Stock
immediately prior to such event.
(b) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value), or as a result 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 another
corporation in which the Company is a continuing corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant, or in case of any sale of all or substantially all of
the assets of the Company, the Company, or any successor or purchasing
corporation, as the case may be, shall execute a new Warrant providing that the
Warrantholder shall have the right to exercise such new Warrant and procure upon
such exercise, in lieu of each share of Common Stock theretofor issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation or merger by a holder of one share of Common Stock, PROVIDED,
HOWEVER, that in connection with any consolidation or merger or other sale of
the Company which involves either (i) the sale of all or substantially all of
the assets of the Company or (ii) a Change of Control of the Company, then the
Company may redeem or purchase pro-rata with the redemption or sale of shares of
Common Stock of each of the Significant Shareholders, such Number of Warrant
Shares under this Warrant. The Company shall make such redemption or purchase by
simultaneously (i) paying the Warrantholder, in the same consideration which is
being paid to the Significant Shareholders good funds, an amount equal to the
Number of Warrant Shares being redeemed or purchased, multiplied times the
consideration per share being paid in connection with such merger or
consolidation or sale to the Significant Shareholders, or in the case of
cancellation of the Warrant with respect to Warrant Shares not yet issued, such
consideration per share being paid to the Significant Shareholders, less the
Purchase Price and (ii) issuing a new Warrant, if so requested by the
Warrantholder, for the Number of Warrant Shares remaining and the Warrantholder
shall exchange this Warrant if so requested by the Company. The third party
purchaser of the Company may, on behalf of the Company, make the payments to the
Warrantholder, required pursuant to the foregoing proviso. Any new Warrant
issued shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 11(b). If the
Warrantholder still has Warrant Shares purchasable thereafter, then no
consolidation or merger of the Company with or into another corporation referred
to in the first sentence of this paragraph (b) shall be consummated unless the
successor or purchasing corporation referred to above shall have agreed to issue
a new Warrant as provided in this Section 11(b). The provisions of this
subsection (b) shall similarly apply to successive reclassification, changes,
consolidations, mergers and transfers.
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<PAGE> 11
(c) Additional Warrant Shares Calculation.
-------------------------------------
1. In the event that (i) the Company's IPO has not been
completed on or before April 30, 1997 and (ii) the Reducing Revolver
has not been repaid in full, all of the obligations due and payable
under the Credit Agreement repaid and the Commitment (as therein
defined) irrevocably terminated, the number of additional shares
that the holder shall be entitled to purchase as an "Additional
Number of Warrant Shares" in addition to the Original Number of
Warrant Shares and in addition to any adjustments thereof, as herein
provided, shall be equal to one quarter of one percent (0.25%) of
the then issued and outstanding non-assessable shares of Common
Stock on a fully diluted basis, including, any Convertible
Securities issued, which may be purchased at the Purchase Price, as
adjusted.
2. In the event that (i) the Company's IPO has not been completed on
or before October 31, 1997 and (ii) the Reducing Revolver has not
been repaid in full, all of the obligations due and payable under
the Credit Agreement repaid and the Commitment (as therein defined)
irrevocably terminated, then the number of additional shares that
the holder shall be entitled as an "Additional Number of Warrant
Shares" in addition to the Original Number of Warrant Shares, any
Additional Number of Warrant Shares otherwise provided for in this
subsection (c) and in addition to any adjustments thereof, as herein
provided, shall be equal to one quarter of one percent (0.25%) of
the then issued and outstanding non-assessable shares of Common
Stock on a fully diluted basis, including any Convertible Securities
issued, which shall be deemed issued for $0.01 per share and
thereafter until the earlier to occur of (x) the completion of the
Borrower's IPO; (y) the Maturity Date (as defined in the Credit
Agreement) and (z) the repayment in full of the Reducing Revolver
and all obligations due and payable under the Credit Agreement with
the simultaneous irrevocable termination of the Commitment (as such
term is defined in the Credit Agreement), on April 30 and October 31
of each year the holder shall be entitled to purchase as an
Additional Number of Warrant Shares a number equal to one quarter of
one percent (0.25%) of the then issued and outstanding
non-assessable shares of Common Stock and Convertible Shares issued,
which shall be deemed issued for $0.01 per share.
(d) Intentionally Deleted.
---------------------
(e) Intentionally Deleted.
---------------------
(f) Intentionally Deleted.
---------------------
(g) ADJUSTMENT TO PURCHASE PRICE. Upon each adjustment in the Number of
Warrant Shares under the terms of Section 11(a) hereof, the Purchase Price shall
be adjusted to an amount equal to the QUOTIENT of (i) the Number of Warrant
Shares entitled to be purchased upon exercise of this Warrant immediately prior
to the adjustment, MULTIPLIED BY the Purchase Price in effect immediately prior
to such adjustment, DIVIDED BY (ii) the adjusted Number of Warrant Shares
immediately after such adjustment.
(h) STOCK DIVIDENDS. In the event at any time after January 29, 1997 that
the Company shall at any time declare any dividend or distribution upon its
Common Stock payable in stock, the Number of Warrant Shares shall increase by
the number (and the kind) of shares which would have
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<PAGE> 12
been issued to the Warrantholder if the Warrant were exercised immediately prior
to such dividend. Such increase shall become effective immediately after the
opening of business on the day following the record date for such dividend or
distribution.
(i) Intentionally Deleted.
---------------------
(j) Computation of Adjustments.
--------------------------
(i) Upon each computation of an adjustment in the number of
Warrant Shares which may be purchased upon exercise of the
Warrants, the number of Warrant Shares which may be purchased
upon exercise of such Warrants shall be calculated to the
nearest whole share (e.g., fractions of one-half of a share,
or greater, shall be treated as being a whole share).
(ii) The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the
account of the Company.
Section 12. Covenants as to Issuances and Sale of Stock.
-------------------------------------------
(a) PREEMPTIVE RIGHTS. If at any time after the date hereof but prior to
the first registration by the Company of any Common Stock under the Securities
Act the Company proposes to issue, any Additional Shares of Common Stock or
Convertible Security convertible to Additional Shares of Common Stock, the
Company shall first offer in writing to sell to the Warrantholder a portion
thereof which bears the same proportion to the total as the proportion the
Warrant Shares then owned by each such Warrantholder bears to the total
Outstanding Shares. Such offer shall describe such securities and specify the
quantity, the price and the payment terms. If within 10 days after the making of
such offer any Warrantholder accepts the same in writing as to the portion
referred to above or any lesser amount, then the Company shall sell such portion
of such securities, or such lesser amount as such Warrantholder may specify, to
such Warrantholder upon the terms specified. If Additional Shares of Common
Stock are being sold as a unit with other securities, the Warrantholder must
purchase a prorata share of each such security upon exercise of their rights
under this Section.
(b) "TAG ALONG" RIGHTS. Simultaneously with the issuance by the Company of
this Warrant, the Warrantholder and the Significant Shareholders are entering
into a Co-sale Agreement in the form of EXHIBIT C hereto providing for the
participation of the Warrantholder in certain transactions by the Significant
Shareholders.
Section 13. MERGER AND CONSOLIDATION. In case of any consolidation or
merger of the Company with or into any other Person (other than a consolidation
or merger in which the Company is the continuing corporation and which does not
result in the Common Stock being changed into or exchanged for stock or other
securities or property of any other Person), PROVIDED, HOWEVER, that in
connection with any consolidation or merger or other sale of the Company which
involves either (i) the sale of all or substantially all of the assets of the
Company or (ii) a Change of Control of the Company, then the Warrant Shares
shall be subject to repurchase or redemption or the Warrant subject to
cancellation all in the same manner and under the same terms and conditions as
set forth or provided in Section 11(b) hereof. Any new Warrant shall entitle the
Warrantholder to purchase the kind and number of shares of stock or other
securities or property (a) of the Person resulting from such consolidation or
surviving such merger or (b) into or for which the Common Stock has been changed
or is exchangeable, as the case may be, to which the Warrantholder would have
been entitled if it had held the Warrant Shares issuable upon the exercise of
its Warrants
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<PAGE> 13
immediately prior to such consolidation or merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the Warrantholder to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the number of shares purchasable upon
the exercise of the Warrants) shall thereafter be applicable, as nearly as may
be practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of the rights represented by the
Warrants.
Section 14. NOTICE OF ADJUSTMENT OF WARRANT SHARES. Upon any adjustment of
the number of Warrant Shares purchasable pursuant to the Warrants, the Company
shall give notice thereof to Warrantholder, which notice shall state the number
of Warrant Shares purchasable pursuant to the Warrant after such adjustment,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
Section 15. Intentionally Deleted.
---------------------
Section 16. NOTICE OF CERTAIN EVENTS. Prior to the time that:
(a) The Company shall pay any dividend upon, or make any
distribution in respect of, its Common Stock or Convertible Securities; or
(b) there shall be any capital reorganization, or reclassification
of the Common Stock or Convertible Securities, of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of its assets
to, another person; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) the Company receives notice, or otherwise becomes aware of,
a Change in Control; or
(e) the Company shall determine to register under the Securities Act
(including pursuant to a demand of any stockholder of the Company exercising
registration rights) any Common Stock or Convertible Securities; or
(f) the Company receives notice, or otherwise becomes aware of,
a prospective, pending or completed Significant Shareholder Transaction;
then, in any one or more of such cases, the Company shall give written notice to
the Warrantholder of the date on which (i) the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (ii) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, Change in Control, Public
Offering, or Significant Shareholder Transaction shall occur, as the case may
be. Such notice shall be given not less than 20 days prior to the record date or
the date on which the transfer books of the Company are to be closed in respect
thereto in the case of any action specified in clause (i) and, to the extent
known by the Company, 20 days prior to the effective date of the action in
question in the case of an action specified in clause(ii).
Section 17. NO NEW WARRANT ON ADJUSTMENT. Irrespective of any adjustment
in the number of Warrant Shares issuable upon exercise of the Warrant, such
Warrants, whether theretofore or thereafter issued or reissued, may continue to
express the same Purchase Price and Number of Warrant
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<PAGE> 14
Shares as are stated therein and the Purchase Price and the Number of Warrant
Shares specified therein shall be deemed to have been so adjusted.
Section 18. TRANSFERS. Subject to the restrictions contained in the last
sentence of Section 5 hereof, the Warrant and all rights thereunder and the
Warrant Shares purchased upon exercise thereof may be Transferred in whole or
part.
Section 19. Redemption.
----------
(a) REDEMPTION AT OPTION OF A WARRANTHOLDER. At any time prior to the
completion of the Company's IPO, upon the occurrence of a Redemption Event, the
Warrantholder shall have the right, but not the obligation, in the sole
discretion of the Warrantholder, to cause the Company to redeem all, but not
less than all, of its Warrants and/or Warrant Shares, by delivery to the Company
of a duly completed and signed Redemption Notice in the form of Exhibit D
attached hereto, at any time.
Upon a redemption of the Warrant, the Warrantholder shall be
entitled, upon tender of the Warrant, as provided in this Section 19, to receive
from and the Company shall pay to the Warrantholder upon such tender a
redemption price ("Redemption Price") of Forty-five Thousand Dollars
($45,000.00) in payment for all Warrants evidenced hereby and/or all Warrant
Shares issuable upon the exercise hereof, which amount shall not be subject to
offset, counterclaim, deduction or abatement.
(b) TENDER AND PAYMENT. The Warrantholder shall deliver to the Company at
the Corporate Office the Warrant or the Warrant Shares, as the case may be, to
be redeemed. Against receipt of the Warrant or the Warrant Shares, as the case
may be, from the Warrantholder the Company shall pay the Redemption Price to the
Warrantholder by certified or bank check or by wire transfer as so directed by
the Warrantholder.
Section 20. Registration Rights.
-------------------
(a) "PIGGY BACK" REGISTRATION. If at any time the Company shall
determine to register under the Securities Act (including pursuant to a demand
of any stockholder of the Company exercising registration rights) any of its
Common Stock of the type which has been or may be issued upon the exercise of
the Warrant, other than on Form S-8 or its then equivalent, it shall send to the
Warrantholder, written notice of such determination and, if within twenty (20)
days after receipt of such notice, such Warrantholder shall so request in
writing, the Company shall include in such registration statement all or any
part of the Warrant Shares the Warrantholder requests to be registered. In the
event that the underwriter managing such a distribution determines, in its best
judgment, a limitation or exclusion is necessary to effect an orderly public
distribution, including all shares to which the Warrantholder has requested
registration, and such limitation or exclusion is imposed among all of the
holders of such Common Stock having an incidental ("piggy back") right to
include such Common Stock in the registration statement according to the amount
of such Common Stock which the Warrantholder had requested to be included
pursuant to such right, then the Company shall be obligated to include in such
registration statement only such limited portion of the Warrant Shares with
respect to which the Warrantholder has requested inclusion hereunder (or in the
event of an exclusion of piggy back shares, none of such Warrant Shares). In the
event of such a pro rata limitation, no shares of Common Stock held by Persons
not having such an incidental ("piggy back") right may be included in the
registration statement.
(b) EFFECTIVENESS. The Company will use its best efforts to maintain
the
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<PAGE> 15
effectiveness of any registration statement pursuant to which any of the Warrant
Shares are being offered for at least the longest period of time for which the
registration statement remains effective for the benefit of any other
participant in such registration, and from time to time will amend or supplement
such registration statement and the prospectus contained therein as to the
extent necessary to comply with the Securities Act and any applicable state
securities statute or regulation. The Company will also provide the holder of
Warrant Shares with as many copies of the prospectus contained in any such
registration statement as it may reasonably request. As a condition to inclusion
of Warrant Shares in any registration of shares of the Company, the
Warrantholder shall enter into such Underwriting Agreement having usual and
customary terms, including customary representations, warranties, indemnities
and other agreements, PROVIDED, HOWEVER, that no such agreement shall require
the Warrantholder to make any representation or warranty or indemnification
based thereon concerning the Company unless the same is based upon the actual
knowledge of the Warrantholder. Representations as to the Warrantholder's title
to shares, authorization and accuracy of written information provided by such
Warrantholder shall be given without qualification as to knowledge. In no event
shall the Warrantholder be obligated to indemnify in any amount in excess of the
proceeds received by the Warrantholder.
(c) INDEMNIFICATION OF WARRANTHOLDER. In the event that the Company
registers the Warrant Shares under the Securities Act, the Company will
indemnify and hold harmless the Warrantholder and each underwriter of the
Warrant Shares so registered (including any broker or dealer through whom such
shares may be sold) and each Person, if any, who controls such Warrantholder or
any such underwriter within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several, to which they or any of them become subject under the Securities Act
or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Warrantholder, each such underwriter
and each such controlling Person, if any, for any legal or other expenses
reasonably incurred by then or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the final prospectus (in each case as from time to
time amended or supplemented by the Company) or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or any violation by the Company of any rule or regulation promulgated
under the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with such registration, unless
such untrue statement or omission was made in such registration statement,
preliminary or amended, preliminary prospectus or prospectus in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by any such Warrantholder, any such underwriter or any such
controlling person expressly for use therein. Promptly after receipt by the
Warrantholder, any underwriter or any controlling person, of notice of the
commencement of any action in respect of which indemnity may be sought against
the Company, such Warrantholder, or such underwriter or such controlling person,
as the case may be, will notify the Company in writing of the commencement
thereof, and, subject to the provisions hereinafter stated, the Company shall
assume the defense of such action (including the employment of counsel, who
shall be counsel satisfactory to such Warrantholder, such underwriter or such
controlling person, as the case may be), and the payment of expenses insofar as
such action shall relate to any alleged liability in respect of which indemnity
may be sought against the Company. Such Warrantholder, any such underwriter or
any such controlling person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees and
expenses of such counsel shall not be at the expense of the Company unless the
employment of such counsel has been specifically authorized by
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<PAGE> 16
the Company. The Company shall not be liable to indemnify any person for any
settlement of any such action effected without the Company's consent. The
Company shall not, except with the approval of each party being indemnified
under this Section 20(c), consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the parties being so indemnified of a release from
all liability in respect to such claim or litigation.
(d) EXCHANGE ACT REGISTRATION. If the Company at any time shall list
any of its Common Stock of the type which may be issued upon the exercise of the
Warrant on any national securities exchange and shall register such Common Stock
under the Exchange Act, the Company will, at its expense, simultaneously list on
such exchange and maintain such listing of, all of the Common Stock from time to
time issuable upon exercise of the Warrants. If the Company becomes subject to
the reporting requirements of either Section 13 or Section 15(d) of the Exchange
Act, the Company will use its best efforts to timely file with the Securities
and Exchange Commission such information as the Securities and Exchange
Commission may require under either of said Sections; and in such event, the
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to such Common
Stock. The Company shall furnish to the Warrantholder forthwith upon request (i)
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144, (ii) a copy of the most recent annual or quarterly
report of the Company as filed with the Securities and Exchange Commission, and
(iii) such other reports and documents as the Warrantholder may reasonably
request in availing itself of any rule or regulation of the Securities and
Exchange Commission allowing a holder to sell any such Warrant Shares without
registration.
(e) DAMAGES. The Company recognizes and agrees that the
Warrantholder will not have an adequate remedy if the Company fails to comply
with this Section 20 and that damages will not be readily ascertainable, and the
Company expressly agrees that, in the event of such failure, it shall not oppose
an application by the Warrantholder of any other person entitled to the benefits
of this Section 20 requiring specific performance of any and all provisions
hereof or enjoining the Company from continuing to commit any such breach of
this Section 20.
(f) FURTHER OBLIGATIONS OF THE COMPANY. Whenever under this Section
20, the Company is required hereunder to register the Warrant Shares, it agrees
that it shall also do the following:
(i) Furnish to the Warrantholder such copies of each preliminary and final
prospectus and such other documents as said Warrantholder may reasonably request
to facilitate the public offering of its Warrant Shares;
(ii) Use its best efforts to register or qualify the Warrant Shares
covered by said registration statement under the applicable securities or "blue
sky" laws of such jurisdictions as the Warrantholder may reasonably request;
provided that the Company shall not be required to register or qualify Warrant
Shares in any jurisdiction in which the Company must consent to a general
consent or service of process, or in which the Company must qualify to do
business by virtue of such registration and the Company is not then otherwise
qualified to do business therein;
(iii) Furnish to the Warrantholder a signed counterpart or a copy
thereof, of:
(1) an opinion of counsel for the Company, dated the effective date
of the registration statement, and
-16-
<PAGE> 17
(2) "comfort" letters signed by the Company's independent public
accountants who have examined and reported on the Company's
financial statements included in the registration statement, to the
extent permitted by the standards of the American Institute of
Certified Public Accountants, covering substantially the same
matters with respect to the registration statement (and the
prospectus included therein) and (in the case of the accountants'
"comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' "comfort" letters delivered to
the underwriters in underwritten public offerings of securities, to
the extent that the Company is required to deliver or cause the
delivery of such Opinion or "comfort" letters to the underwriters in
an underwritten public offering of securities;
(iv) Permit the Warrantholder or its counsel or other representatives to
inspect and copy such corporate documents and records as may reasonably be
requested by them;
(v) Furnish to the selling Warrantholder a copy of all documents filed and
all correspondence from or to the Securities and Exchange Commission in
connection with any such offering; and
(vi) Use its best efforts to ensure the obtaining of all necessary
approvals from the National Association of Securities Dealers, Inc.
(g) EXPENSES; TAXES. In the case of a registration hereunder, the Company
shall bear all costs and expenses of each such registration, including, but not
limited to, printing, legal and accounting expenses, Securities and Exchange
Commission filing fees and "blue sky" fees and expenses, PROVIDED, HOWEVER, that
the Company shall have no obligation to pay or otherwise bear: (i) any portion
of the fees or disbursements for the Warrantholder in connection with the
registration of the Warrant Shares, or (ii) any portion of the underwriters
commissions or discounts attributable to the Warrant Shares being offered and
sold by the Warrantholder. The Company covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificate thereof
issuable upon the exercise of this Warrant.
Section 21. NOTICE. All notices and other communications under this
Agreement shall (a) be in writing (which shall include communications by telex
and telecopy), (b) be (i) sent by registered or certified mail, return receipt
requested and postage prepaid, or (ii) delivered by hand, and (c) be given at
the following respective addresses and telex and telecopier numbers and to the
attention of the following Persons:
(i) If to the Company, to it at:
Triton Systems, Inc.
522 East Railroad Street
Long Beach, MS 39560
Telecopier: (601) 868-0850
Telephone: (601) 868-1317
Attention: Ernest L. Burdette
-17-
<PAGE> 18
with a copy to:
Michael Riccio, Esq.
Hutchins, Wheeler & Dittmar, P.C.
101 Federal Street
Boston, Massachusetts 02110
(ii) If to the Warrantholder, to it at its address as it appears on
the Warrant register maintained by the Company pursuant to
Section 4; for this purpose the address and telex, telecopier
and telephone numbers of the initial Warrantholder and the
Person to whom notices to such Warrantholder shall be sent are
as follows:
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Attention: Gregory G. O'Brien, Managing Director
Telecopier No.: 617-434-8102
Telephone No.: 617-434-8206
with a copy to:
James R. Kane, Esq.
Kirkpatrick & Lockhart LLP
One International Place
Boston, Massachusetts 02110-2637
The Company and the Warrantholder may change its address or telex or
telecopier number for purposes of receiving notices hereunder or the person to
whom notices to such party shall be sent by sending a notice thereof
(specifically captioned "Notice of Change of Address") to the other parties to
this Warrant. Notices and other communications hereunder shall be effective or
deemed delivered or furnished (a) if given by mail, on the fifth Business Day
after such communication is deposited in the mail, as provided in this Section
20, (b) if given by telex or telecopier, when such communication is transmitted
to the number as provided in this Section 20 and the appropriate answer back is
received or receipt is otherwise acknowledged, and (c) if given by hand
delivery, when left at the address of the addressee addressed as provided in
this Section 20, except that notices of a change of address, telex or telecopier
number shall not be deemed furnished until received.
Section 22. GOVERNING LAW. This Warrant shall be governed and construed in
accordance with the laws of the State of Mississippi, without regard to the
conflict of laws provisions thereof.
Section 23. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
Section 24. CONFLICT WITH CREDIT AGREEMENT AND SECURITY DOCUMENTS.
Notwithstanding anything herein to the contrary, this Warrant and the rights and
responsibilities of the parties hereto shall be subject to, and void to the
extent of any inconsistency with, the rights and responsibilities
-18-
<PAGE> 19
of such parties as set forth in the Credit Agreement and in the "Security
Documents" (as defined in the Credit Agreement).
Section 25. COVENANTS IN CREDIT AGREEMENT FOR THE BENEFIT OF THE
WARRANTHOLDER. For so long as any of the Warrants or Warrant Shares are
outstanding, the Company shall comply with its covenants in Sections 7.3, 7.4(a)
(provided that no statement of accountants shall be provided), 7.9, 7.10 and 8.6
of the Credit Agreement for the benefit of the Warrantholder, notwithstanding
that the Credit Agreement may have terminated by reason of the termination of
the lending commitments thereunder or for any other reason. Solely for the
purpose of permitting the Warrantholder to enforce such covenants, the defined
term "Lender," as such defined term is incorporated in such Sections, shall be
deemed to include the Warrantholder. The foregoing sections of the Credit
Agreement are incorporated herein by reference and shall survive the earlier
termination of the Credit Agreement. Upon completion of the Company's IPO, the
Company may satisfy all of its obligations under this Section 25 by delivering
to the Warrantholder all reports and other documents provided by the Company to
its Stockholders.
[END OF PAGE]
-19-
<PAGE> 20
[SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK OF TRITON SYSTEMS, INC.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued by
its duly authorized officers and its corporate seal to be hereunto affixed as of
the date first hereinbefore written.
WITNESS: TRITON SYSTEMS, INC.
/s/ Jeffrey C. Bandrowski By: /s/ Ernest L. Burdette
- --------------------------- ------------------------------
Name: ERNEST L. BURDETTE
Title: PRESIDENT
-20-
<PAGE> 21
EXHIBIT A
ASSIGNMENT FORM
(To be executed upon assignment of Warrant)
For value received, ________________________ hereby sells, assigns and
transfers unto _________________ (print name and address) the attached Warrant,
together with all its right, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ as its attorney to
transfer said Warrant on the books TRITON SYSTEMS, INC., a Mississippi
corporation, with full power of substitution in the premises.
Name:
-----------------------------------
-----------------------------------
-----------------------------------
(print name and address)
-----------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the attached Warrant.
Signature:
-----------------------------------
Date:
Signature Guaranteed:
-----------------------------------
<PAGE> 22
EXHIBIT B
SUBSCRIPTION FORM
(To be executed upon exercise or of Warrant)
The undersigned hereby irrevocably elects to exercise the right
represented by this Warrant to receive _____ shares of Common Stock and herewith
[check one] [_] tenders payment for such shares in the form of cash or a
certified or ban check in the amount of $_________, or [_] elects to convert the
Warrant directly to Common Stock pursuant to Section 9(b) of the Warrant.
The undersigned requests that a certificate for such shares be registered
in the name of __________________________, whose address is
___________________________ and that such shares be delivered to
________________________ whose address is __________________.
Name:
--------------------------------
--------------------------------
--------------------------------
(Please print name and address)
Signature:
-------------------------------
Date:
Signature Guaranteed:
-------------------------------
<PAGE> 1
Exhibit 10.22
CO-SALE AGREEMENT
Agreement made and entered into as of January 24, 1997, by and among Summit
Ventures IV, L.P., Summit Investors III, L.P. and Summit Subordinated Debt Fund,
L.P. (each of whom is sometimes referred to as a "Significant Shareholder" and
all of whom are referred to herein collectively as the "Significant
Shareholders") Triton Systems, Inc., a Mississippi corporation (the "Company")
and F.S.C. Corp. (together with its successors and assigns, the "Warrantholder;"
as initial Warrantholder, "F.S.C.".
The Company has issued a Warrant of even date herewith (the "Warrant") in
favor F.S.C. permitting F.S.C. to purchase the Company's Common Stock.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Warrant.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the Significant Shareholders, the Company and the Warrantholder, the parties do
hereby agree as follows:
1. Each of the Significant Shareholders agrees that it will not sell or
otherwise transfer or dispose ("Transfer") for value any shares of Common Stock
or Convertible Securities of the Company to any third party other than to an
Affiliate without first giving written notice in reasonable detail to the
Warrantholder at least twenty (20) days prior to such sale or agreement to sell
and affording the Warrantholder the opportunity to participate pro-rata in such
sale or agreement to sell, as hereinafter provided. In the event that the
Significant Shareholders have agreed to sell their shares of Common Stock and/or
Convertible Securities (i) in a transaction in which all of the outstanding
capital stock of the Company is being sold, or (ii) in a Group Sale Transaction
(as hereinafter defined) the Warrantholder shall be entitled to and, if so
requested by the Significant Shareholders shall, participate in such transaction
on an equivalent basis to the Significant Shareholders. In such event the
Warrantholder shall sell the same proportion of their Warrant Shares owned or
issuable as that proportion of shares which are being sold or conveyed by the
Significant Shareholders bears to the total number of shares of Common Stock
owned by the Significant Shareholders. The Warrantholders shall be entitled to
receive payment at the same time as the Significant Shareholders receive their
payment.
As used herein, the defined term "Group Sale Transaction" shall refer to a
transfer (whether by sale, merger or otherwise) of in excess of 75% of the
outstanding shares of Common Stock (assuming the full conversion of all
Convertible Securities. In the event that less than all of the Company is sold
in connection with a sale by the Significant Shareholders of their Shares of
Common Stock in a transaction which is not a Group Sale Transaction, the
Warrantholder shall receive proceeds from such sale on a pro-rata basis with the
Significant Shareholders, plus cash in the amount of their pro-rata share of the
fair market value of all non-cash consideration received by the Significant
Shareholders. The pro-rata participation in such sale or agreement to sell which
each Warrantholder shall be entitled, shall be in the proportion that the
aggregate number of Warrant Shares held by such Warrantholder assuming the full
conversion of all
<PAGE> 2
Warrants bears to the aggregate number of shares of Common Stock into which any
Convertible Securities held by the Significant Shareholders and the holders of
all other equity holders participating in the sale transaction could then be
converted, assuming the full conversion of all Convertible Securities.
2. All notices and other communications under this Agreement (A) shall be
in writing which shall include communications by telex and telecopy, (B) be (i)
sent by registered or certified mail, return receipt and postage prepaid, or
(ii) delivered by hand, and (C) be given at the following respective addresses
and telex and telecopier numbers and to the attention of the following persons:
(i) if to the Warrantholder or to the Bank, at the address, telex and
telecopier numbers and to the attention of the person listed in the
Warrant; and
(ii) if to the Significant Shareholders at the addresses set forth in
Schedule 1 annexed hereto.
3. This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to conflict of laws,
provisions thereof.
TRITON SYSTEMS, INC.
By: /s/ Ernest L. Burdette
------------------------------
Name: ERNEST L. BURDETTE
Title: PRESIDENT
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 3
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
SUMMIT VENTURES IV, L.P.
By: Summit Partners III, L.P.,
General Partner
By: Stamps, Woodsum & Co. III,
General Partner
By: /s/ Joseph F. Trustey
----------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Joseph F. Trustey
----------------------------------
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.
Its General Partner
By: /s/ Joseph F. Trustey
----------------------------------
General Partner
F.S.C. CORP.
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 11.1
<TABLE>
TRITON SYSTEMS, INC.
Statement Regarding Computation of Primary and Fully Diluted
Net Income Per Common Share
<CAPTION>
Year Ended December 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net Income Applicable to Common Stockholders $ 233,306 $ 4,713,689
----------- -----------
Pro Forma Net Income Applicable to Common Stockholders $ 8,216,992
-----------
Actual weighted average shares outstanding 12,408,288 12,408,288 12,408,288
Additional shares considered outstanding due to:
Stock options and warrants outstanding exercisable at
less than proposed initial public offering price 322,730 322,730 322,730
Stock issued in 1996 at a price less than proposed
initial public offering price 6,833,089 6,833,089 3,837,760
----------- ----------- -----------
Total weighted average common stock outstanding 19,564,107 19,564,107 16,568,778
----------- ----------- -----------
Net income applicable to common stockholders per
common share $ .01 $ .24
----------- -----------
Pro forma net income applicable to common stock-
holders per common share $ .50
-----------
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries
------------
Triton Systems International, Inc., a Guam corporation
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Triton Systems, Inc. on
Form S-1 of our report dated January 24, 1997, appearing in the Prospectus,
which is part of this Registration Statement. We also consent to the reference
to us under the headings "Selected Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,518,783
<SECURITIES> 0
<RECEIVABLES> 5,502,146
<ALLOWANCES> 1,030,000
<INVENTORY> 3,044,939
<CURRENT-ASSETS> 12,740,427
<PP&E> 1,120,316
<DEPRECIATION> 241,425
<TOTAL-ASSETS> 13,675,568
<CURRENT-LIABILITIES> 3,400,909
<BONDS> 8,000,000
22,094,000
0
<COMMON> 124,083
<OTHER-SE> (19,943,424)
<TOTAL-LIABILITY-AND-EQUITY> 13,675,568
<SALES> 40,967,899
<TOTAL-REVENUES> 40,967,899
<CGS> 21,350,001
<TOTAL-COSTS> 21,350,001
<OTHER-EXPENSES> 5,235,474
<LOSS-PROVISION> 930,000
<INTEREST-EXPENSE> 185,432
<INCOME-PRETAX> 14,196,992
<INCOME-TAX> 2,650,000
<INCOME-CONTINUING> 11,546,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,546,992
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
