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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 17, 2000
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
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(Exact name of registrant
as specified in its charter)
Georgia 000-22571 58-1915632
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1950 Spectrum Circle, Suite B-100, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (678) 264-0400
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 17, 2000, Professional Transportation Group Ltd., Inc. (the
Company") acquired Dedicated Transportation Services, Inc., a California
corporation ("Dedicated"). Dedicated, based in the Los Angeles, California
metropolitan area, is a time-definite less-than-truckload transportation and
logistics services company serving the 48 contiguous U.S. state.
Dedicated was acquired pursuant to an Agreement and Plan of Merger
dated May 17, 2000 by and among, the Company, DTSI Acquisition, Inc., a
wholly-owned subsidiary of the Company ("DTSI Acquisition"), Dedicated and the
stockholders of Dedicated. Under this agreement, Dedicated merged with and into
DTSI Acquisition. Under the terms of the agreement, the stockholders of
Dedicated received 930,000 shares of the Company's common stock and the right to
receive an additional 930,000 shares of common stock on or before September 1,
2000. Because the aggregate number of shares being issued exceeds 20% of the
number of shares of the Company's common stock outstanding on the date of the
agreement, pursuant to the requirements of the Nasdaq Stock Market, the
Company's shareholders will be asked at the Company's annual meeting of
shareholders on June 29, 2000 to approve the issuance of the shares. In the
event that shareholder approval is not obtained, the Company will be required to
pay the deficit in number of shares exceeding 20% in cash, with a deemed value
of $5.00 per share.
In a separate transaction, the Company has loaned the two principals of
Dedicated an aggregate of $4.65 million. Interest on this loan accrues at a rate
of 6.5% per annum and is payable only on the first and second anniversaries of
the loan. On the third anniversary of the loan, all unpaid principal and
interest are due in full. The principals may elect to repay the loans by giving
back to the Company shares of the Company's common stock, with these shares
deemed to have a value of $5.00 per share. In the event that the value of the
shares at such date exceeds $5.00 per share, the Company and the principals will
share the excess on a 50/50 basis.
To provide certain of the funds for the loans, the Company has
completed the sale of 4,300 shares of its convertible Series B preferred stock
to seven accredited investors for an aggregate of $4.3 million. These shares
accrue a semi-annual dividend of 6%. The shares are immediately convertible into
shares of the Company's common stock at a conversion price equal to the lesser
of (1) 90% of the market price (as defined) on the conversion date or (2) $4.00
per share. In no event can the conversion price be less then $1.00 if the
Company meets certain specified financial performance requirements.
As part of the acquisition, the two principals of Dedicated have
executed employment agreements to remain as President and Chief Executive
Officer and Executive Vice President and Chief Operating Officer of DTSI
Acquisition, respectively.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL SCHEDULES AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impractical to provide the required financial statements for
Dedicated at the date of the filing of this Form 8-K. The required financial
statements will be provided as soon as practicable, but not later than 60 days
after the date on which this Form 8-K must be filed.
(b) Pro Forma Financial Information.
It is impractical to provide the required pro forma financial
information at the date of the filing of this Form 8-K. The required pro forma
financial information will be provided as soon as practicable but no later than
60 days after the date on which this Form 8-K must be filed.
(c) Exhibits.
<TABLE>
<CAPTION>
Item No. Exhibit Description
<S> <C>
2.1 Agreement and Plan of Merger dated May 17, 2000 by and among
the Company, DTSI Acquisition, Inc., Dedicated Transportation
Services, Inc. and the stockholders of Dedicated*
10.1 Convertible Preferred Stock and Warrants Purchase Agreement
for the purchase of Convertible Series B Preferred Stock
10.2 Promissory Note dated May 17, 2000 by Serra/Martin Living
Trust to the Company
10.3 Promissory Note dated May 17, 2000 by Mark Kapper to the
Company
10.4 Stock Pledge Agreement dated May 17, 2000 by and between the
Company and Mark Kapper
10.5 Stock Pledge Agreement dated May 17, 2000 by and between the
Company and Serra/Martin Living Trust
10.6 Proceeds Agreement dated May 17, 2000 by and among the Company
and the stockholders of Dedicated
</TABLE>
* Pursuant to Item 601 (b)(2) of Regulation S-K, the Company agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROFESSIONAL TRANSPORTATION GROUP
LTD., INC.
By: /s/ Dennis A. Bakal
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Dennis A. Bakal
Chief Executive Officer
Dated: May 18, 2000
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name
------- ------------
<S> <C>
2.1 Agreement and Plan of Merger dated May 17, 2000 by and among
the Company, DTSI Acquisition, Inc., Dedicated Transportation
Services, Inc. and the stockholders of Dedicated*
10.1 Convertible Preferred Stock and Warrants Purchase Agreement
for the purchase of Convertible Series B Preferred Stock
10.2. Promissory Note dated May 17, 2000 by Serra/Martin Living
Trust to the Company
10.3. Promissory Note dated May 17, 2000 by Mark Kapper to the
Company
10.4. Stock Pledge Agreement dated May 17, 2000 by and between the
Company and Mark Kapper
10.5. Stock Pledge Agreement dated May 17, 2000 by and between the
Company and Serra/Martin Living Trust
10.6. Proceeds Agreement dated May 17, 2000 by and among the Company
and the stockholders of Dedicated
</TABLE>
* Pursuant to Item 601 (b)(2) of Regulation S-K, the Company agrees to
furnish supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY
AND
AMONG
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
DTSI ACQUISITION, INC.
DEDICATED TRANSPORTATION SERVICES, INC.
AND
THE STOCKHOLDERS OF DEDICATED TRANSPORTATION SERVICES, INC.
Dated as of May 17, 2000
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
This Merger Agreement and Plan of Reorganization (the "Agreement") is
made and entered into as of May 17, 2000 by and between Professional
Transportation Group Ltd., Inc., a Georgia corporation (the "Buyer"), DTSI
Acquisition, Inc., a Georgia corporation (the "MergerSub"), Robert Serra and
Susan Martin as Trustees of the Serra/Martin Living Trust, Robert Serra, Susan
Martin and Mark Kapper (collectively, the "Seller"), and, Dedicated
Transportation Services, Inc., a California corporation (the "Company").
WHEREAS, the parties desire that the Company merge with and into
MergerSub upon the terms and conditions set forth herein and in accordance with
the laws of the State of California and the State of Georgia;
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, and intending to be legally bound, it is agreed between the
parties hereto as follows:
ARTICLE 1
THE MERGER
1.1 MERGER, SURVIVING CORPORATION. In accordance with the
provisions of this Agreement and the California Corporations Code, Section
1103, et seq. (the "CCC"), and the Georgia Corporation Code, O.C.G.A.
ss.14-2-1100 (the "GCC"), at the Effective Time (as such term is defined in
Section 1.5 hereof), Company shall be merged with and into MergerSub (the
"Merger"), and MergerSub shall be the surviving corporation in the Merger
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Georgia. At the
Effective Time, the separate existence of the Company shall cease. All
properties, franchises and rights belonging to the Company and MergerSub, by
virtue of the Merger and without further act or deed, shall be deemed to be
vested in the Surviving Corporation, which shall thenceforth be responsible for
all the liabilities and obligations of each of MergerSub and the Company.
1.2 ARTICLES OF INCORPORATION. The Articles of Incorporation of
MergerSub as in effect immediately prior to the Effective Time shall thereafter
continue in full force and effect as the Articles of Incorporation of the
Surviving Corporation until altered or amended as provided therein or by law
and by the Plan of Merger effecting the Merger.
1.3 BYLAWS. The Bylaws of MergerSub immediately prior to the
Effective Time shall thereafter continue in full force and effect as the Bylaws
of the Surviving Corporation until amended as provided by law.
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1.4 DIRECTORS AND OFFICERS. The directors and officers of
MergerSub immediately prior to the Effective Time shall serve as directors and
officers of the Surviving Corporation following the Effective Time in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation and the CCC and the GCC.
1.5 EFFECTIVE TIME. The Merger shall become effective at the time
and date of the acceptance for filing of Agreement of Merger (the "Agreement of
Merger") by the Secretary of State of the State of California in accordance
with the provisions of Section 1103 of the CCC, and the acceptance for filing
of Articles of Merger by the Secretary of State of the State of Georgia in
accordance with the provisions of Section 14-2-1105 of the GCC. The Agreement
of Merger and the Articles of Merger shall have attached as an exhibit thereto
a fully executed plan of merger (the "Plan of Merger") in substantially the
form attached as Exhibit A hereto. The Agreement of Merger and the Articles of
Merger shall be executed by MergerSub and the Company and delivered to the
Secretary of State of the State of California and the State of Georgia for
filing, as stated above, on the Closing Date provided for in Section 1.8. The
date and time when the Merger shall become effective are referred to herein as
the "Effective Time."
1.6 CONVERSION OF COMPANY SHARES. Each share of Common Stock of
the Company (the "Company Common Stock"), issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted at the Effective Time
into the Merger Consideration provided for in Article 2 hereof.
1.7 MERGERSUB COMMON STOCK. At the Effective Time, each share of
Common Stock of MergerSub issued and outstanding immediately prior to the
Effective Time shall remain outstanding as shares of the Surviving Corporation,
without any action on the part of the holder thereof.
1.8 CLOSING; EXCHANGE OF CERTIFICATES. (a) At the Closing
provided for in paragraph (b) below, immediately after the Effective Time of
the Merger, each Seller shall surrender to the Surviving Corporation all of the
outstanding certificates theretofore representing shares of Company Common
Stock in exchange for the Merger Consideration payable to him/her/it at Closing
as provided for herein. Until such certificates are surrendered, outstanding
certificates formerly representing shares of Company Common Stock shall be
deemed for all purposes as evidencing the right to receive the Merger
Consideration into which such shares have been converted as though said
surrender and exchange had taken place.
(b) The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company as
soon as practicable after the execution and delivery of this Agreement and
satisfaction of the conditions to closing (the date of the Closing hereafter
the "Closing Date").
1.9 MERGER CONSIDERATION. All of the issued and outstanding
shares of Common Stock of the Company shall be converted at the Effective Time
of the Merger into the right to receive up
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to 1,860,000 shares (the "Stock Consideration") of Buyer common stock
("Shares") and, under certain conditions, a cash payment in lieu of a portion
of the Stock Consideration (the "Cash Consideration")(collectively, the "Merger
Consideration"), as further provided below, such Merger Consideration to be
payable to the Sellers pro rata in accordance with their holdings of Company
Shares. The Stock Consideration shall be delivered to Sellers not later than
five days after the Effective Time.
At the Closing, Buyer shall deliver to Sellers 930,000 Shares. The
balance of the Stock Consideration shall be paid to Sellers only if Buyer's
shareholders approve such payment at a meeting of Buyer's stockholders to be
held on June 29, 2000. Upon such approval, the balance of the Stock
Consideration shall be paid to Sellers. If such approval is not received by
September 1, 2000, Buyer shall promptly deliver such number of additional
Shares as may be permitted without shareholder approval pursuant to NASDAQ
rules and regulations, and Buyer shall pay the balance to Sellers in cash. The
Stock Consideration for purposes of this provision shall be deemed to have a
value per share of $5.00.
1.10 TAX-FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization to the extent of the Stock
Consideration, and to consummate the Merger in accordance with the provisions
of Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended, and
to take such further actions as may be reasonably be required to qualify this
transaction as an "A" reorganization and not take such further actions as may
disqualify this transaction from such treatment. The parties believe that the
value of the Stock Consideration to be received by Seller in the Merger is
equal to not less than 50% of the value of the Company common stock to be
surrendered in exchange therefor. The Merger Consideration will be paid solely
in exchange for the Company Shares and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to, the
consideration paid for the Company Shares. Buyer represents now, and as of the
Closing, that it presently intends to continue the Company's historic business
or use a significant portion of the Company's business assets in a business.
Sellers acknowledge that they have received independent tax advice and counsel
with respect to the Merger and the transactions contemplated herein and is not
relying on representations relating to personal tax matters made by Buyer or
its counsel, accountants or advisors with respect thereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
Seller and Company represent and warrant to Buyer and to MergerSub as
of the date hereof and as of the Effective Time as follows:
2.1. ORGANIZATION AND STANDING. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, is qualified as a foreign corporation in good standing under the
laws of all of the jurisdictions in which the conduct of its business or the
ownership of its properties requires qualification, and has all corporate power
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and authority to own and lease its properties and to carry on its business as
now conducted. The copies of the Company's Articles of Incorporation, as
amended (including any certificates designating the powers, designation, rights
and preferences of the Company's capital stock) previously provided to Buyer
are true, complete and correct as of the date hereof.
2.2. SUBSIDIARIES. Except as set forth in Schedule 2.2, the
Company has no subsidiaries and does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
2.3. CAPITALIZATION. The Company has authorized capital stock
consisting solely of 2,000 shares of common stock, no par value, of which 1,000
shares are issued and outstanding and held of record by Mark Kapper, and 1,000
shares are issued and outstanding to the Serra/Martin Living Trust, of which
the co-trustees are Robert Serra and Susan Martin.
All of the issued and outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, and such shares have
been so issued in full compliance with all federal and state securities laws.
There are no outstanding options, subscriptions, convertible securities,
warrants, preemptive rights, rights of first refusal, proxies, voting
agreements, restrictions (other than restrictions on transfer imposed under
federal or state securities laws) or agreements or understandings of any
character (contingent or otherwise) which restrict or relate to the voting or
transfer of, require the issuance, sale, purchase or redemption of, or
otherwise relate to, such securities.
2.4. TITLE TO SHARES, AUTHORIZATIONS.
(a) Seller Mark Kapper is the owner, beneficially and of
record, of the Shares titled in his name, and such Shares are free and clear of
all liens, encumbrances, security agreements, equities, options, claims,
charges, and restrictions of any kind, other than restrictions on transfer
imposed under federal or state securities laws. Seller Serra/Martin Living
Trust holds legal title to the Shares titled in its name, and such Shares are
beneficially owned by Robert Serra and Susan Martin as community property under
the laws of the State of California. The Serra/Martin Living Trust is the owner
of the Shares titled in its name, and such Shares are free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges,
and restrictions of any kind, other than restrictions on transfer imposed under
federal or state securities laws.
(b) Seller has full power, legal capacity and authority
to execute and deliver this Agreement and to transfer the Shares to Buyer
without obtaining the consent or approval of any other person or governmental
authority.
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(c) This Agreement has been duly and validly executed
and delivered by Seller and constitutes a valid and binding Agreement of Seller
and is enforceable in accordance with its terms; and
(d) The delivery of the Shares to Buyer pursuant to this
Agreement will transfer to Buyer good title thereto, free and clear of any and
all liens, encumbrances and claims of any kind whatsoever.
2.5. FINANCIAL STATEMENTS. Seller has delivered to Buyer: (a)
unaudited balance sheets of the Company as of January 31, 2000 (the "Balance
Sheet" and the "Balance Sheet Date") and each of the fiscal years 1998 through
2000, and the related unaudited statements of income and cash flows for each of
the fiscal years or periods then ended and (b) unaudited financial statements
for the period ended March 31, 2000 (the "Financial Statements"). The Financial
Statements fairly present the financial condition and results of operations of
the Company as of the respective dates thereof and for the periods therein
referred. Except as reflected in the Balance Sheet and to the best knowledge
and belief of Seller, the Company has no actual or contingent liabilities,
except for liabilities arising since the Balance Sheet Date in the ordinary
course of business, not involving borrowings, which are usual and normal in
amount, both individually and in the aggregate and obligations under contracts
and commitments accrued in the ordinary course of business and not required
under generally accepted accounting principles consistently applied to be
reflected in the Financial Statements.
2.6. NO ADVERSE CHANGES. Since the Balance Sheet Date the Company
has not:
(i) to the best knowledge and belief of Seller, suffered
any material adverse change in its condition (financial or otherwise),
operations, assets, properties, business, or prospects and no event has
occurred or is contemplated or threatened, which might reasonably be expected
to cause such a change in the future;
(ii) declared any dividend, made any payment, redemption,
purchase or distribution or set aside any such payment, in respect of shares of
its capital stock or purchased or otherwise acquired any option, warrant or
other right to purchase any such capital stock;
(iii) made any changes in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates); or
(iv) entered into any agreement or commitment (contingent
or otherwise) to do any of the things described in this SECTION 2.6.
2.7. TAXES. The Company has filed within the time and manner
prescribed by law all foreign, federal, state, county and local income, gross
receipts, excise, property, sales, use, transfer, employment and other tax
returns or reports which are required to be filed by, or with respect to, it
and such returns or reports are true and correct in all material respects. The
Company has paid all
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taxes, interest, penalties, assessments or deficiencies shown as due and
payable on such reports. The charges, accruals, and reserves for unpaid taxes
on the books of the Company as of the Balance Sheet Date, are sufficient in all
respects for the payment of all unpaid federal, foreign, state, county and
local taxes of the Company accrued for or applicable to all periods ended on or
before that date. The Company has withheld or collected from each payment made
to each of its employees, the amount of all taxes, including, but not limited
to, federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes, required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers of authorized
depositaries. There are no outstanding waivers or extensions of time with
respect to the assessment or audit of any tax or tax return of the Company, or
claims pending or matters under discussion with any taxing authority with
respect to any tax liability of the Company.
The Company's federal and state tax returns have not been audited nor
has the Company received notice of any audit of federal, state or local income
or excise tax returns of the Company and, to the best knowledge of Seller, no
properties of any kind of the Company which serve as a basis for the imposition
of a tax have been or are in the process of being appraised, examined or
reassessed since the filing of the most recent return relating to, or the
payment of, such a tax. The Company has not elected pursuant to the Internal
Revenue Code of 1986, as amended (the "Code"), to be treated as an S
corporation. The Company has not elected to be treated as a collapsible
corporation pursuant to Section 341(f) of Section 1362(a) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material effect on the business, properties, prospects, or
financial condition of the Company.
2.8. COMPLIANCE WITH LAWS. The Company has complied in all
material respects with all applicable laws and regulations relating to or
affecting the business.
2.9. LIST AND STATUS OF PROPERTIES, CONTRACTS AND OTHER DATA.
Schedule 2.9 sets forth the following:
(i) (A) a complete and accurate legal description
of each parcel of real property owned in whole or in part by the Company,
together with either a true and correct survey or a substantially true and
correct plat of each parcel, a description of all buildings, fixtures and other
improvements located on the properties and a list of all indebtedness secured
by a lien, mortgage or deed of trust thereon, and the address of each such
parcel leased or subleased by the Company, indicating the location of each such
property and, in the case of leased or subleased properties, the name of the
lessor or sublessor and termination dates and renewal conditions of each lease
or sublease. None of the real property owned by the Company or any Subsidiary
has been used as "Agricultural Land" as defined in 7 CFR ss.781.2(b) within
five years prior to the date of this Agreement.
(B) (I) a complete listing of each item of
personal property owned or used by the Company in the business and having more
than a nominal value. Such personal property
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constitutes all such property necessary for the conduct by the Company of the
business as presently conducted.
(II) a listing of all policies of title
and liability insurance held by the Company since January 1, 1997, and all
policies of insurance by which properties, buildings, machinery, equipment,
fixtures or other assets and business of the Company is insured as of the date
hereof. Such policies, with respect to their amounts, scope and types of
coverage, are usual and customary in the Company's industry and reasonably
insure in accordance with industry practices (subject to reasonable
deductibles) the Company's assets and businesses for property damage and loss
of income by fire or other casualty, products liability and against all risks
of loss, including business interruption. Except as shown on Schedule 2.9(ii),
there are no pending claims by, or to the best knowledge and belief of Seller,
against the Company or under such policies or unresolved disputes between the
Company and any carrier in respect of such policies, nor are there any past due
premium payments with respect to such policies nor has there been any claims
history which would cause the Company to become liable for a material
retroactive premium increase with respect to any such policy for any period
prior to the date hereof;
(III) a listing of the following
contracts to which the Company is a party or by which it is bound:
(A) all guaranties or indemnities by
the Company of the obligations of others other than the endorsement of
negotiable instruments for collection in the ordinary course of business;
(B) all licenses or other contracts in
which the Company has granted to others any material rights or interests in
intellectual property rights or in any proprietary information of the Company,
or in which others have granted to the Company any rights or interests in
intellectual property or in any proprietary information;
(C) all consulting, management service
or any other similar type contracts;
(D) all agreements with any labor
union or collective bargaining organization;
(E) all employment agreements,
severance agreements, indemnification agreements, executive compensation plans,
incentive compensation plans, bonus plans, deferred compensation agreements,
employee noncompetition, confidentiality and or secrecy agreements, employee
pension plans or retirement plans, employee profit-sharing plans, employee
stock purchase and stock option plans, group life insurance, hospitalization
and dental insurance, disability insurance, clothing allowance program, service
record award program; performance award program, tuition reimbursement program,
savings plan, or other plans or arrangements providing for benefits for
employees;
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(F) all contracts or agreements
pursuant to which the Company has borrowed or agreed to borrow money, other
than credit transactions in the ordinary course of business and the contracts
set forth in (G), below;
(G) all notes, indentures or
instruments relating to or evidencing indebtedness of the Company, or
mortgaging, pledging or granting or creating a lien or security interest or
other encumbrance on any property of the Company, including the names of each
bank or other lender from which loans, lines of credit or other commitments to
lend money to the Company are outstanding, the amount of each such line or
commitment and the principal terms thereof;
(H) all material contracts with any
manufacturers, dealers, distributors, agents, salesmen, jobbers, advertisers,
commissioned agents or sales representatives;
(I) all powers of attorney given by
the Company to any person or organization for any purpose;
(J) all agreements limiting the
freedom of the Company or its employees to compete in any line of business or
in any geographic area or with any person;
(K) any agreement, indenture or other
instrument which contains restrictions with respect to payment of dividends or
any other distribution in respect of its capital stock;
(L) any agreement, contract or
commitment relating to capital expenditures;
(M) any loan or advance to, or
investment in, any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other entity (each a "Person") or
any agreement, contract or commitment relating to the making of any such loan,
advance or investment;
(N) all other contracts, series of
contracts, leases, arrangements, understandings or agreements which involve
future payments, performance of services or the purchase or sale of goods
and/or materials of an individual amount or value in excess of Five Thousand
Dollars ($5,000);
(O) a true and complete list of all
intangible assets, other than those specifically referred to elsewhere in this
Agreement, and the location of certificates or other evidences of title to
these assets, and
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(P) any agreement, contract or
commitment which might reasonably be expected to have a potential adverse
impact on the business or operations of the Company.
Each of the contracts and agreements listed or described in Schedules
2.9(i), 2.9(ii) and 2.9 (iii)(A)-(P) is in full force and effect, and except as
set forth in such Schedule, there exists no event of noncompliance, default or
event of default by the Company or any party to such contract or agreement, or
to the best of Seller's knowledge, any other party thereto, or any event,
occurrence, condition or act (including the transactions contemplated herein),
which, with the giving of notice, the lapse of time, or both, would become a
default or event of default thereunder, which would constitute an event of
noncompliance which would allow a party thereto to require acceleration of
performance thereunder by the Company, or which would result in the creation of
any material lien, charge, or encumbrance upon any assets of the Company. The
Company has not received notice from any other party that such other party
claims the Company to be in noncompliance or default under the contract
concerned, or intends, either based on a claimed default by the Company under
the contract concerned or based on a claimed right to do so in the absence of
default by the Company, to suspend, cancel, or terminate such contract prior to
the normal date of expiration set forth therein. Except as shown on Schedule
2.9(iii), to Seller's best knowledge, there exists no material dispute between
the Company and any customer of the Company and no such customer is considering
termination or nonrenewal of the agreement or understanding by which it acts as
such for the Company. All such agreements were entered into on an arm's length
basis. Seller has caused to be made available for inspection and copying by
Buyer and its advisers true, complete and correct copies of all documents
(including all amendments, supplements, extensions and modifications) referred
to in this Article 2 or in any Schedule attached hereto.
(iv) the names and annual compensation rates of all
officers, employees, directors, agents, and manufacturers of the Company
earning as a base salary and/or commission in excess of $25,000 per year;
(v) the names of all retired employees of the Company
who are receiving or are entitled to receive any unfunded death or disability,
retirement or welfare benefit, medical benefit or termination payments not
covered by any pension plan to which the Company or any Subsidiary is a party,
their ages and their current annual unfunded payment rates; and
(vi) with respect to the Company, a list of all bank
accounts, safe deposit boxes and credit card charge accounts; together with the
names of the individuals authorized to draw or charge thereon, and with respect
to bank accounts the approximate balances thereof, all restrictions or
limitations as to withdrawal (except for time restrictions applicable to time
certificates of deposit), and a list of certificates of deposit and other debt
instruments issued by banks, governments or other obligors.
2.10. TITLE TO PROPERTIES, ABSENCE OF LIENS AND ENCUMBRANCES. The
Company has good and marketable title to all of its properties and assets used
in its business or owned by it, whether
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real, personal, tangible or intangible. Subject to the terms of their
respective leases, the Company has the right to quiet enjoyment of all its
leased property for the full term of each lease and any renewal option. The
Company has all rights of ingress and egress necessary for all operations
conducted by it.
2.11. ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected in the Balance Sheet represent valid sales in the ordinary course of
business, and are current and collectible in the ordinary course of business
subject to the reserve for doubtful accounts as reflected on the Balance Sheet,
and none of such accounts receivable or other debts is or will at the Closing
Date be subject to any counterclaim or set-off except to the extent of any such
reserves. There has been no material adverse change since the Balance Sheet
Date in the amount of accounts receivable or other debts due the Company or the
Subsidiaries or the allowances with respect thereto, or accounts payable of the
Company from that reflected in the Balance Sheet.
2.12. LICENSES AND PERMITS. The Company has all licenses, permits
and other authorizations (collectively "Licenses") required for the conduct of
its business as presently conducted; all such Licenses are currently in force
and there is no other License required to be held or actions required to be
taken by the Company under the laws and regulations of the United States or any
state or local subdivision thereof, for the Company to own and lease its
properties and to conduct its business in all respects as presently conducted.
Schedule 2.12 contains a list of such licenses, permits and authorizations.
2.13. LABOR MATTERS. The Company is not a party to any collective
bargaining agreement. There has not been, and to the best knowledge of Seller
there will not be, any material adverse change in relations with employees of
the Company as a result of any announcement or consummation of the transactions
contemplated by this Agreement. No severance pay liability of the Company will
result solely from the consummation of the transactions contemplated herein.
None of the employees of the Company or any Subsidiary is obligated under any
contract or other agreement, or subject to any judgment, decree or order of any
court or agency, which materially conflicts with the Company's business as
presently or proposed to be conducted. No officer or key employee of the
Company has notified the Company he or she is planning to terminate his or her
employment. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.14. EMPLOYEE BENEFIT PLANS.
Neither the Company nor any Subsidiary has ever contributed
to any multiemployer pension plan (within the meaning of ss.ss.3(37) or
4001(a)(3) of The Employee Retirement Income Security Act of 1974, as amended
("ERISA")), nor has any of them incurred any withdrawal liability (either as a
contributing employer or as part of a controlled group which includes a
contributing employer) in connection with any complete or partial withdrawal
for any such plan.
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The Company has never sponsored or otherwise maintained any employee
pension benefit plan (within the meaning of ss.3(2) of ERISA) or severance pay
plan.
2.15. LITIGATION. Except as provided in Schedule 2.15, there is no
litigation, action, suit, governmental investigation, arbitration, proceeding
(including administrative proceedings) (collectively referred to as
"Litigation") presently pending or to the best knowledge and belief of Seller
and the Company, presently threatened against or involving the Company or any
of their assets or rights or which could affect the performance of this
Agreement or the consummation of the transactions contemplated hereby and
Seller knows of no valid basis for any potential litigation. There are no
outstanding judgments, awards, orders or decrees against or involving the
Company or any of its assets. The Company is not in default with respect to any
order, writ, injunction, or decree of any federal, state, local, or foreign
court, department, agency, or instrumentality. The Company is not presently
engaged in any legal action to recover moneys due to it or damages sustained by
it.
2.16. NO VIOLATION OF AGREEMENTS. The execution, delivery and
performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby and thereby do not and will not conflict with
or violate any provision of the Articles of Incorporation of Seller and, do not
and will not conflict with, violate, result in a breach of, cause a default
under an accelerated performance under or accelerate performance under (whether
with notice or lapse of time or otherwise), (i) any provision of law or
regulation relating to the business of the Company, (ii) any provision of any
order, arbitration award, judgment or decree to which Seller or the Company is
subject (iii) any provision of any agreement, license or instrument to which
Seller or the Company or any of their assets is subject, or (iv) any other
restriction of any kind or character to which the Company or any of its
properties is subject, which conflicts, violations, breaches, defaults or
accelerations in each of clauses (i), (ii), (iii) or (iv) above would,
individually or in the aggregate, adversely affect the Company or which would
prohibit or restrict the consummation of the transactions contemplated by this
Agreement.
2.17. CONSENTS REQUIRED. The execution, delivery and performance of
this Agreement by Seller will not require Seller or the Company to obtain any
consent, approval or other action to avoid: (I)the loss of any permit or
license or other governmental authorization hold by the Company, (ii) the
violation or breach of, or a default under any real property lease or any
commitment, note, indenture, mortgage, lien, instrument, license, contract or
agreement to which Seller or the Company or any of their assets are subject, or
(iii) giving to others any interests or rights, including rights of
termination, acceleration or cancellation, in or with respect to any of the
real property leases or material properties, agreements, contracts or business
of the Company.
2.18. CUSTOMERS AND SALES. Schedule 2.18 is a correct and current
list of all customers of the Company together with summaries of the sales made
to each customer during the most recent fiscal year. Except as indicated in
Schedule 2.18, neither the Company nor Seller has any information, or is aware
of any facts, indicating that any of these customers intend to cease doing
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business with the Company or materially alter the amount of the business they
are presently doing with the Company.
2.19. DOCUMENTS, BOOKS AND RECORDS. The Company has made available
for inspection by Buyer or its advisors, originals or true and correct copies
of all documents listed in any Schedule delivered by Seller to Buyer pursuant
to this Agreement which Buyer has requested to inspect. The minute books of the
Company, as previously made available to the Buyer and its representatives,
contain accurate records of all meetings of, and corporate actions taken by
(including actions taken by written consent) the respective shareholders and
Boards of Directors of the Company. The Company has no records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or hold by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
2.20. TRANSACTIONS WITH MANAGEMENT. Except as set forth in Schedule
2.20, the Company is not a party to any contract, agreement, lease or
commitment with Seller, any affiliate of Seller, the Company, or any officer or
director of Seller, the Company, or any "associates" of any such officers or
directors (as the term "associates" is defined in Rule 405 of the rules and
regulations under the Securities Act of 1933), none of such officers or
directors or their associates owns, directly or indirectly, any interest
(equity or debt) in any entity which is a supplier, customer or competitor of
the Company (other than the ownership of one percent (1%) or less of the
outstanding capital stock of a publicly-held company), and there are no loans
or advances outstanding to any of such persons from the Company (excluding
advances for normal reimbursable business expenses).
2.21 ACCOUNTING CONTROLS. Neither the Company, nor any director,
officer, agent, employee, consultant or other person associated with or acting
on behalf of the Company (including, without limitation, any shareholder), has
(a) used any corporate funds for any unlawful contributions, gifts,
entertainment or any other unlawful expenses relating to political activity, or
(b) made any direct or indirect unlawful payments to government officials or
others from corporate funds or established or maintained any unlawful or
unrecorded funds. The Company makes and keeps accurate books and records
reflecting its assets and maintains internal accounting controls which provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of the Company's financial statements and to maintain
accountability for the earnings and assets of the Company, and (iii) access to
the assets of the Company is permitted only in accordance with management's
authorization, and the recorded accountability of the assets of the Company is
compared with its existing assets at reasonable intervals.
2.22. DISCLOSURE. None of this Agreement, the financial statements
referred to in SECTION 2.5 hereof (including the footnotes thereto); any
Schedule, Exhibit or certificate attached hereto or delivered in accordance
with the terms hereof or any document or statement in writing which has been
supplied by or on behalf of the Seller or by any of the Company's directors or
officers in
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connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact, or omits any statement of a material fact
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Seller and not known to Buyer which
materially and adversely affects the business, prospects or financial condition
of the Company or its properties or assets, which has not been set forth in
this Agreement, the financial statements referred to in SECTION 2.5 hereof
(including the footnotes thereto), any Schedule, Exhibit or certificate
attached hereto or delivered in accordance with the terms hereof or any
document or statement in writing which has been supplied by or on behalf of the
Seller or by any of the Company's directors or officers in connection with the
transactions contemplated by this Agreement.
2.23. PURCHASE FOR INVESTMENT. Seller understands that the Stock
Consideration is being offered and sold under exemptions from registration
provided for under U.S. and state securities laws, that they are purchasing an
interest in Buyer without being furnished any offering literature other than
Buyer's Form 10-K for fiscal 1999 (the "Buyer SEC Reports")(which each Seller
hereby represents and warrants that he or she has received and read), that this
transaction has not been scrutinized by any administrative agency charged with
the administration of the securities laws of any jurisdiction because of the
private aspects of the offering, that all documents, records and books,
pertaining to this investment, have been made available to the Seller and his
representatives, including his attorney, his accountant and/or his purchaser
representative, and that the books and records of the Buyer will be available
upon reasonable notice for inspection by investors during reasonable business
hours at its principal place of business.
The Stock Consideration is being acquired by Seller in good faith
solely for his own personal account, for investment purposes only, and are not
being purchased for resale, resyndication, distribution, subdivision or
fractionalization thereof; and he understands that as a result he must bear the
economic risk of the investment for an indefinite period of time because the
shares have not been registered under applicable securities laws and,
therefore, cannot be sold unless they are subsequently registered under such
laws (and the Buyer agrees to use its reasonable best efforts on or before July
15, 2000 to file a registration statement with the SEC on the appropriate form,
which registration statement will include the Stock Consideration) or unless an
exemption from such registration is available. Sellers will not be subject to
any restrictions on resale upon release of the Stock Consideration from the
Price Adjustment Agreement transfer restrictions other than those imposed under
applicable securities laws.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERSUB
Buyer and MergerSub represent and warrant to Seller as of the date
hereof and as of the Effective Time as follows:
3.1. ORGANIZATION, STANDING AND AUTHORITY. Each of Buyer and
MergerSub is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective
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3.2. NO VIOLATION OF LAW, AGREEMENTS. The execution, delivery and
performance of this Agreement by Buyer and MergerSub and the consummation of the
transactions contemplated hereby and thereby do not and will not conflict with
or violate any provision of the Articles of Incorporation of Buyer or MergerSub
and, do not and will not conflict with, violate, result in a breach of, cause a
default under an accelerated performance under or accelerate performance under
(whether with notice or lapse of time or otherwise), (i) any provision of law or
regulation relating to the business of the Buyer, (ii) any provision of any
order, arbitration award, judgment or decree to which Buyer or MergerSub is
subject (iii) any provision of any agreement, license or instrument to which
Buyer or MergerSub or any of their assets is subject, or (iv) any other
restriction of any kind or character to which the Buyer or MergerSub or any of
its properties is subject, which conflicts, violations, breaches, defaults or
accelerations in each of clauses (i), (ii), (iii) or (iv) above would,
individually or in the aggregate, adversely affect the Buyer or which would
prohibit or restrict the consummation of the transactions contemplated by this
Agreement.
3.3. CONSENTS REQUIRED. The execution, delivery and performance of this
Agreement by Buyer and MergerSub will not require Buyer or MergerSub to obtain
any consent, approval or other action to avoid: (i) the loss of any permit or
license or other governmental authorization hold by the Company, (ii) the
violation or breach of, or a default under any real property lease or any
commitment, note, indenture, mortgage, lien, instrument, license, contract or
agreement to which Buyer or MergerSub or any of their assets are subject, or
(iii) giving to others any interests or rights, including rights of termination,
acceleration or cancellation, in or with respect to any of the real property
leases or material properties, agreements, contracts or business of Buyer, which
consent has not already been obtained.
3.4. BUYER SEC REPORTS. Buyer has delivered to each Seller copies of
the Buyer SEC Reports as filed by Buyer with the Securities and Exchange
Commission. All of the Buyer SEC Reports are delivered without exhibits. The
financial statements contained in the Buyer SEC Reports (the "Buyer Financial
Statements") fairly present the consolidated financial condition and results of
operations of Buyer as at and for the periods therein specified in accordance
with generally accepted accounting principles consistently applied, all as more
particularly set forth in such financial statements and the notes thereto. The
Buyer SEC Reports do not contain any untrue statements of a material fact or
omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 4
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COVENANTS PENDING CLOSING
4.1. COVENANTS OF THE COMPANY AND THE SELLERS PENDING THE CLOSING. From
the date hereof to the Closing Date, the Company and the Sellers shall use their
best efforts to satisfy the conditions precedent to the consummation of this
transaction to be performed by them or their agents or representatives and the
Company shall, and the Sellers shall cause the Company to:
(i) Operate its business diligently in the usual, regular and
ordinary course consistent with past practice, to preserve intact its present
business organization and good will, keep available the services of its present
officers and employees, and preserve its relationships with licensors, lenders,
creditors, suppliers, distributors, customers and others having business or
financial dealings with it, and not to institute any changes to its methods of
accounting, manufacture; operation or management.
(ii) Not (a) amend its Articles of Incorporation or bylaws;
(b) issue any shares of its capital stock; (c) issue or create any warrants,
obligations, subscriptions, options, convertible securities, or other
commitments under which any additional shares of its capital stock of any class
might be directly or indirectly authorized, issued, or transferred from
treasury; (d) declare, set aside, or pay any dividend or make any distribution
in respect of its capital stock except for a distribution of accounts
receivable; (e) directly or indirectly purchase, redeem, or otherwise acquire
any shares of its capital stock; or (f) agree to do any of the acts listed
above.
(iii) Not enter into any contract, commitment or transaction
not in the usual and ordinary course of its business or involving an amount
exceeding $10,000 individually or $50,000 in the aggregate or modify, amend,
cancel, or terminate any of its existing contracts or agreements, or agree to do
any of those acts.
(iv) Not make or commit to make any capital expenditures in
excess of $10,000 for any single item or $50,000 in the aggregate, or enter into
any leases of capital equipment or property under which the annual lease charge
is in excess of $10,000.
(v) Maintain all its material property in customary repair,
order and condition, reasonable wear and use excepted, and maintain its
insurance policies in full force and effect.
(vi) Not enter into or amend or modify any collective
bargaining agreement, employee benefit plans or arrangements or any contracts of
employment with officers, directors or shareholders, or grant any increase
(except for increases made in accordance with established compensation policies
of the Company applied on a basis consistent with past practice) in salaries,
wages, commissions or benefits payable or to become payable to any officer,
employee, agent or representative, or grant any bonuses to officers or
employees, or agree to do any of the foregoing.
(vii) Not sell, dispose of, lease, or encumber any of its
property or assets or make any acquisition or engage in any activity or
transaction, amend or terminate any material contracts,
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licenses or commitments, or agree to do any of the foregoing, except in the
ordinary course of business and replace any assets transferred with assets of
equal value, quality and usefulness.
(viii) Not borrow any funds or, except in the ordinary course
of business, issue any evidences of indebtedness or increase any existing
borrowings or perform, pay or otherwise discharge any obligation or liability
(fixed or contingent) other than current liabilities, waive or compromise any
right or claim, cancel, without full payment, any note, loan, or other
obligation owing to the Company, or agree to do any of the foregoing.
(ix) Cooperate with Buyer and MergerSub, to the extent
cooperation on the part of the Company is needed, in Buyer's' and MergerSub's
efforts to obtain the consents referred to in SECTION 3.3 of this Agreement
provided, however, that Buyer and MergerSub shall not be obligated under this
paragraph to execute any guaranty, assumption of liability, or other document or
instrument requiring it to assume obligations not contemplated by this
Agreement.
(x) Use its best efforts to obtain, to the extent action on
the part of the Company is needed, the consents referred to in SECTION 2.17 of
this Agreement.
(xi) Grant to Buyer and its counsel, accountants and other
representatives full access during normal business hours to all key employees,
properties, books, accounts, records, contracts and documents of or relating to
the Company and furnish or cause to be furnished to Buyer and its
representatives all data and information concerning the organization, business,
finances and properties of the Company that Buyer may reasonably request, but no
investigation pursuant to this SECTION 4.1 shall affect any representations or
warranties of the Company or Sellers, or the conditions to the obligations of
Buyer and MergerSub to consummate the transactions contemplated by this
Agreement.
(xii) Confer on a regular and frequent basis with Buyer's
representatives to report material matters concerning the business, operations
and financial condition of the Company and to promptly notify Buyer of any
extraordinary event concerning the Company or any fact or information which, if
known on the date hereof, would cause any of the representations and warranties
in Article 2 to be materially false or incorrect.
(xiii) Refrain from taking any of the actions referred to in
SECTION 2.6 hereof.
(xiv) Refrain from taking any action or series of actions
which would cause the representations and warranties contained in Article 2
hereof to be materially untrue or incorrect.
(xv) Use their best efforts to cause the Company and its
officers, employees, agents, and representatives (including any investment
banker) not, directly or indirectly, to solicit, encourage, initiate or engage
in any discussions with, or negotiate or otherwise deal with or provide any
information to, any person other than Buyer, MergerSub, and their respective
officers, employees, and agents, concerning any mergers sale of substantial
assets, or similar transaction
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involving the Company or division of the Company, or any sale of any of its
capital stock. The Company will notify Buyer immediately upon receipt of any
inquiry, offer, or proposal relating to any of the foregoing.
(xvi) At the written request of Buyer, Company will within
five days document and describe any of its trade secrets, processes, or business
procedures specified by Buyer, in form and content satisfactory to Buyer.
(xvii) Notify Buyer of any changes, additions, or events which
may cause any change in or addition to the Schedules delivered by it under this
Agreement promptly after the occurrence of the same and again at the Closing by
delivery of appropriate updates to all such Schedules. No such notification made
pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless Buyer specifically
agrees thereto in writing, nor shall any such notification be considered to
constitute or give rise to a waiver by Buyer of any condition set forth in this
Agreement.
4.2. Covenants of Buyer and MergerSub Pending the Closing. Buyer and
MergerSub agree that from the date hereof to the Closing Date, Buyer and
MergerSub will use their best efforts:
(i) To satisfy the conditions precedent to consummation of the
transactions contemplated by this Agreement to the extent they are to be
performed by them, their agents or representatives.
(ii) To cooperate with the Company, to the extent cooperation
on the part of Buyer and MergerSub is needed, in the Company's efforts to obtain
the consents referred to in SECTION 2.17 of this Agreement.
(iii) To use their best efforts to obtain the consents
referred to in Section 3.3 of this Agreement.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND SELLERS
The obligations of the Company and the Sellers to consummate the Merger
are subject to the fulfillment of the following conditions, unless waived by the
Company and the Sellers in their sole discretion, prior to or at the Closing:
5.1. REPRESENTATIONS AND COVENANTS. The representations and warranties
of Buyer and MergerSub set forth in this Agreement shall be true and correct in
all material respects on the Closing Date as if made on and as of such date, and
Buyer and MergerSub shall have duly performed, complied with and satisfied, in
all material respects, with all covenants, agreements and
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conditions to be performed, complied with or satisfied by Buyer and MergerSub
on or prior to the Closing Date. The Company and the Sellers shall have received
a certificate of a duly authorized officer of Buyer and MergerSub, dated the
Closing Date, certifying as to the fulfillment of the conditions specified in
this SECTION 5.1.
5.2. LITIGATION. On the Closing Date, there shall be no Litigation
existing to the transactions contemplated herein pending or threatened which, in
the reasonable opinion of counsel to the Sellers, would have a material adverse
effect on the benefits to be received by the Sellers as a result of the
consummation of the transactions contemplated hereby.
5.3. ABSENCE OF ADVERSE GOVERNMENTAL ACTION. No action shall have been
taken or threatened and no statute, rule, regulation or order shall have been
enacted or entered by any governmental body, agency or by any court which would
prohibit, delay or establish material conditions to the consummation of the
transactions contemplated herein which the Company reasonably deems
unacceptable.
5.4. PROCEEDINGS. All proceedings to be taken in connection with this
Agreement and all documents related thereto shall be satisfactory in all
reasonable respects to the Company, the Sellers, and their counsel.
5.5. CORPORATE ACTION. The Company shall have received certified copies
of Buyer and MergerSub's corporate approvals of the execution, delivery and
performance of this Agreement and the transactions contemplated hereby and
incumbency certificates with respect to the officers of Buyer and MergerSub
executing this Agreement or any documents, instruments or certificates delivered
to the Company and the Sellers in connection with the transactions contemplated
hereby.
5.6. CONSENTS AND APPROVALS. All waivers, licenses, agreements,
permits, consents, approvals or authorizations of third parties or governmental
agencies, domestic or foreign, shall have been obtained, and any material
modifications or amendments to existing agreements with third parties required
under SECTION 2.17 and SECTION 3.3 shall have been obtained, provided that such
modifications or amendments shall have been approved by the Company in writing
prior to the Closing, which approval shall not be unreasonably withheld or
delayed.
5.7. EMPLOYMENT AGREEMENTS. MergerSub and Sellers Mark Kapper and
Robert Serra shall have entered into an employment agreement on terms and
conditions agreeable to each such Seller.
5.8. NO MATERIAL ADVERSE CHANGES. There shall not have been any
material adverse change in the assets, business, labor relations, operations or
condition (financial or otherwise) or prospects of the Buyer.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGERSUB
The obligations of Buyer and MergerSub to consummate the purchase and
sale of the Shares under this Agreement are subject to the fulfillment of the
following conditions, unless waived by Buyer and MergerSub in their sole
discretion, prior to or at the Closing:
6.1. REPRESENTATIONS AND COVENANTS. The representations and warranties
of the Company and the Sellers set forth in this Agreement shall be true and
correct in all material respects on the Closing Date as if made on and as of
such date, and the Company and Sellers shall have duly performed, complied with
and satisfied, in all material respects, all covenants, agreements and
conditions to be performed, complied with or satisfied by the Company and
Sellers on or prior to the Closing Date. Buyer shall have received a certificate
executed by the Company and Sellers, dated the Closing Date, certifying as to
the fulfillment of the conditions specified in this SECTION 6.1.
6.2. LITIGATION. On the Closing Date, there shall be no Litigation
relating to the transactions contemplated herein pending or threatened, which in
the reasonable opinion of counsel to Buyer, would materially adversely affect
the business, assets, financial condition or operations of the Surviving
Corporation, or otherwise materially affect the benefits of the transactions
contemplated herein to Buyer and MergerSub.
6.3. ABSENCE OF GOVERNMENTAL ACTION. No action shall have been taken or
threatened and no statute, rule, regulation or order shall have been enacted or
entered by any governmental body, agency or by any court which would prohibit,
delay or establish material conditions to the consummation of the transactions
contemplated herein which Buyer reasonably deems unacceptable or which would
materially adversely affect the assets, business; financial condition, business
prospects or operations of the Surviving Corporation.
6.4. PROCEEDINGS. All proceedings to be taken in connection with this
Agreement and all documents relating thereto shall be satisfactory in all
reasonable respects to Buyer and its counsel.
6.5. CORPORATE ACTION. Buyer shall have received certified copies of
the resolutions of the Company approving the execution, delivery and performance
of this Agreement and the transactions contemplated hereby and incumbency
certificates with respect to the officers of Buyer executing this Agreement or
any documents, instruments or certificates delivered to Buyer in connection with
the transactions contemplated hereby. The Merger Agreement and related Plan of
Merger shall have been unanimously approved by the Sellers.
6.6. CONSENT AND APPROVALS. All waivers, licenses, agreements, permits,
consents, approvals or authorizations of third parties or governmental agencies,
domestic or foreign shall have been obtained and any material modifications or
amendments to existing agreements with third parties required under Section 2.17
and Section 3.3 shall have been obtained, provided that such
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modifications or amendments shall have been approved by Buyer in writing prior
to the Closing, which approval shall not be unreasonably withheld or delayed.
6.7. EMPLOYMENT AGREEMENTS. Surviving Corporation and each of Sellers
Mark Kapper and Robert Serra shall have entered into an agreement regarding
employment with the Surviving Corporation following the Closing in form and
substance reasonably satisfactory to Buyer and such individual.
6.8 LEGAL OPINION. Buyer and MergerSub shall have received the legal
opinion of the Company's legal counsel in substantially the form set forth in
Schedule 6.8.
6.9. NO MATERIAL ADVERSE CHANGES. There shall not have been any
material adverse change in the assets, business, labor relations, operations or
condition (financial or otherwise) or prospects of the Company.
6.10. FILINGS. The Agreement of Merger and the Articles of Merger shall
have been filed as provided in Article 1 in order for the Merger to become
effective, or Buyer shall have satisfied itself that all such filings will be or
are capable of being made effective as of the Closing Date.
6.11. SCHEDULES. Target shall have delivered the Schedules, updated
through the Closing Date. In its sole and absolute discretion, Buyer shall be
satisfied with any matter reflected, listed, or disclosed in the updated
Schedules that was not reflected, listed, or disclosed in the original
Schedules.
ARTICLE 7
TERMINATION; AMENDMENT AND WAIVER
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Closing by the mutual written consent of Buyer, MergerSub,
the Company and the Sellers.
7.2. TERMINATION BY EITHER PARTY. If any condition precedent to the
Company's and Seller's obligations hereunder is not satisfied and such condition
is not waived by the Company and Seller at or prior to the Closing Date, or if
any condition precedent to Buyer' or MergerSub's obligations hereunder is not
satisfied and such condition is not waived by Buyer and MergerSub at or prior to
the Closing Date, the Company and the Sellers, or Buyer and MergerSub, as the
case may be, may terminate this Agreement at their option by written notice to
the other party unless the terminating party shall be in default of its
obligations hereunder or unless the failure of condition is the result of the
material breach of this Agreement by the party seeking to terminate. In the
event that a condition precedent to its obligations is not satisfied, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby or permit the other party additional time to
21
<PAGE> 22
attempt to satisfy such condition precedent. If the Closing Date has not
occurred by June 30, 2000 any party may terminate this Agreement by written
notice to the other parties.
7.3. AMENDMENT. This Agreement may be amended or modified in whole or
in part at any time but only by an agreement in writing executed in the same
manner as this Agreement.
ARTICLE 8
PURCHASE PRICE ADJUSTMENT
8.1 Adjustments to Purchase Price.
(a) The Stock Consideration will be adjusted downward based upon any
variation in the Company's EBITDA as reflected on its financial statements as of
January 31, 2000 and the determination of the Company's EBITDA as determined by
Buyer. The parties agree and acknowledge that the Merger Consideration was
determined based upon an assumed EBITDA of the Company of $1,500,000 multiplied
by six, plus $300,000 for the Company's operating system. The Merger
Consideration shall be increased or diminished (as the case may be) by using
this same capitalization rate of six. For purposes of this provision, the
parties agree that the Stock Consideration shall be diminished by no more than
60,000 Shares (having an agreed value per share of $5.00.
(b) Buyer shall have primary responsibility for preparing an initial
accounting reflecting the adjustments called for by this Section 8.1. If Seller
does not object to Buyer's determination within 30 days after receipt by Seller
of Buyer's determination, the Seller shall be deemed to have agreed to Buyer's
determination. In the event that Seller objects, Seller shall transmit to the
Buyer within 30 days' after Seller receives Buyer's determination its objection,
which shall set forth the basis for Seller's objection. In the event that Seller
and Buyer are unable to agree upon the accuracy of the accounting and the
adjustments provided for herein within 15 days after the Buyer receives Seller's
objection, the Buyer and the Seller shall retain, at their joint expense, the
accounting firm of Ernst & Young LLP, Certified Public Accountants, to determine
such adjustments, whose determination shall be final and binding on the parties.
ARTICLE 9
INDEMNIFICATION
9.1. INDEMNIFICATION BY SELLER. Sellers shall jointly and severally
indemnify, defend and hold harmless Buyer and MergerSub, and Buyer's and
MergerSub's officers, directors, employees, affiliates and agents, against and
in respect of any and all losses, costs, expenses, obligations, liabilities,
damages, recoveries, and deficiencies, including interest, penalties and
reasonable attorneys' fees (collectively "Damages") that any of them shall incur
or suffer, and to the extent not otherwise compensated by insurance, which
arise, result from, or relate to the failure of any Seller's
22
<PAGE> 23
or the Company's representations or warranties to be true and correct, or any
breach by Seller or the Company of, or any failure by Seller or the Company to
perform, any of its representations, warranties, covenants or agreements in this
Agreement or in any certificate, exhibit or other instrument furnished or to be
furnished by Seller or the Company under this Agreement; provided, however that
a Damages Certificate (as such term is defined in SECTION 9.3) covering any item
of claimed Damages for which indemnification is sought pursuant to this SECTION
9.1 shall have been delivered to Seller prior to the termination of the Survival
Period (as defined in SECTION 9.7) applicable to such representation, warranty,
covenant or agreement. Notwithstanding the foregoing, Sellers shall be jointly
and severally responsible for all Damages incurred or suffered by the Company
attributable to the matter described in Schedule 2.15.
9.2. INDEMNIFICATION BY BUYER AND MERGERSUB. Buyer and MergerSub shall
jointly and severally indemnify, defend and hold harmless Seller in respect of
any and all losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and reasonable
attorneys' fees (collectively "Damages") that any of them shall incur or suffer,
and to the extent not otherwise compensated by insurance, which arise, result
from, or relate to the failure of any of Buyer's or MergerSub's representations
or warranties to be true and correct, or any breach by Buyer or MergerSub of, or
any failure by Buyer or MergerSub to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any certificate,
exhibit or other instrument furnished or to be furnished by Buyer or MergerSub
under this Agreement provided, however, that a Damages Certificate covering any
item of claimed Damages for which indemnification is sought pursuant to this
SECTION 9.2 shall have been delivered to Buyer prior to termination of the
Survival Period (as defined in SECTION 9.7) applicable to such representation,
warranty, covenant or agreement.
9.3. DAMAGES CERTIFICATE. If any Damages shall be paid or accrued by
any person entitled to be indemnified under this Article 9 (an "Indemnitee") or
a claim or proceeding shall be asserted or pending against an Indemnitee which
may give rise to any Damages with respect to which such Indemnitee would be
entitled to be indemnified hereunder by the other party hereto (an
"Indemnitor"), such Indemnitee shall deliver a certificate signed by Seller, in
the case of a claim against Buyer or MergerSub, or by an officer of Buyer or
MergerSub, in the case of a claim against Seller (a "Damages Certificate"),
which Damages Certificate shall:
(a) state that the Indemnitee has paid or properly accrued
Damages, or that a claim has been asserted against such
Indemnitee, or a proceeding is pending, which claim or
proceeding, in the Indemnitee's judgment, may result in the
incurrence of Damages to which the Indemnitee is entitled to
indemnification pursuant hereto; and
(b) specify in reasonable detail each individual item of paid
or accrued Damages or each such claim or proceeding and the
amount of such paid or accrued Damages or the amount of Damage
that, in Indemnitee's judgment, may arise from such claim or
proceeding.
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<PAGE> 24
9.4. OBJECTIONS TO CLAIMS. If an Indemnitor shall object to the
indemnification of an Indemnitee in respect of any claim or claims specified in
any Damages Certificate, the Indemnitor shall, within 30 days after delivery to
the Indemnitor of such Damages Certificate, deliver to the Indemnitee a Damages
Certificate to such effect, and the Indemnitor and the Indemnitee shall, within
the 30 day period beginning on the date of delivery to the Indemnitee of such
written objection, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims to which the Indemnitor
shall have so objected. If the Indemnitee and the Indemnitor shall succeed in
reaching agreement on their respective rights with respect to any of such
claims, the Indemnitee and the Indemnitor shall promptly prepare and sign a
memorandum setting forth such agreement.
9.5. THIRD PARTY CLAIMS. Promptly after the assertion by any third
party of any claim against any Indemnitee that, in the judgment of such
Indemnitee, may result in the incurrence by such Indemnitee of Damages for which
such Indemnitee would be entitled to indemnification pursuant to this Agreement,
such Indemnitee shall deliver to the Indemnitor from whom such indemnification
could be sought an Damages Certificate with respect to such claim, and such
Indemnitor may, at its option, assume and control the defense (including any
settlement thereof) of the Indemnitee against such claim. Any Indemnitee shall
receive notice of the status, any current developments and management of the
claims, and prior written notice of any proposed settlement or conclusion of
such claim, and shall have the right to employ separate counsel in any such
action or claim and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be an expense of the Indemnitor unless (i)
the Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such claim as provided in the
preceding sentence, to assume the defense of such claim, or (ii) the employment
of such counsel has been specifically authorized by the Indemnitor. If there is
a final judgment against an Indemnitee under this Agreement in any such action,
or if there is a settlement of any such action effected with the consent of such
Indemnitor, such Indemnitor shall, subject, in the case of claims for
indemnification against the Seller, to the provisions of SECTION 9.1, and, in
the case of claims for indemnification against Buyer, to the provisions of
SECTION 9.2, indemnify and hold harmless each Indemnitee from and against any
Damages by reason of such judgment or settlement.
9.6. AGREED CLAIMS. Claims specified in any Damages Certificate to
which an Indemnitor shall not object in writing within 30 days after receipt by
such Indemnitor of such Damages Certificate, claims covered by a memorandum of
agreement of the nature described in SECTION 9.4 and claims which have been
reduced to non-appealable judgment or settled with the consent of the Indemnitor
as provided in SECTION 9.5 are hereinafter referred to, collectively, as "Agreed
Claims." The amount of any Agreed Claim shall be paid, in cash, by the
Indemnitor to the Indemnitee with respect thereto promptly after the
determination thereof.
9.7. SURVIVAL PERIOD. Except for the representations made by Seller and
the Company under Sections 2.3 and 2.4, and representations breached
fraudulently, all of which representations shall survive until the applicable
statute of limitations has expired, the representations, warranties, covenants
and agreements of Seller and the Company and the indemnification by Seller with
respect
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<PAGE> 25
thereto provided for herein shall survive the Closing for a period of three
years from the Closing Date, except that Seller's covenant to indemnify Buyer
and MergerSub under this Article 9 shall survive such three-year period until
all claims properly and timely asserted by Buyer or MergerSub under this Article
9 have been satisfied as provided in this Article 9. The representations,
warranties, covenants and agreements of Buyer and MergerSub, and the
indemnification by Buyer and MergerSub with respect thereto, shall survive the
Closing for a period of three years from the Closing Date, except that Buyer's
and MergerSub's covenant to indemnify the Sellers under this Article 9 shall
survive such three-year period until all claims properly and timely asserted by
Sellers under this Article 9 have been satisfied as provided in this Article 9.
For purposes of this Article 9, the respective period of survival of any such
representations, warranties, covenants and agreements is referred to as the
"Survival Period."
9.8. LIMITATIONS ON INDEMNITY. Sellers shall not be required to
indemnify Buyer or MergerSub until Damages caused by Sellers or the Company
under this Agreement exceed in the aggregate $50,000 (the "Deductible"). Neither
Buyer nor MergerSub shall be required to indemnify Sellers until Damages caused
by Buyer or MergerSub under this Agreement exceed in the aggregate the
"Deductible". Notwithstanding the foregoing, this limitation shall not apply to
Damages attributable to the matter disclosed on Schedule 2.15.
ARTICLE 10
MISCELLANEOUS
10.1. GOVERNING LAW, ARBITRATION. This Agreement and the legal
relations between the parties shall be governed by and construed in accordance
with the laws of the State of Georgia, without regard to conflicts of laws
principles. In the event that there shall be a dispute arising out of or
relating to this Agreement, any document referred to herein or centrally related
to the subject matter hereof, or the subject matter of any of the same, the
parties agree that such dispute shall be submitted to binding arbitration in
Orange County, California, under the auspices of, and pursuant to the rules of
the American Arbitration Association, as then in effect, or such other
procedures as the parties may agree to at the time, before a tribunal of three
arbitrators, one of which shall be selected by each of the parties to the
dispute and the third of which shall be selected by the two arbitrators so
selected. Any award issued as a result of such arbitration shall be final and
binding between the parties, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought. The costs of the
arbitration shall be shared equally by the parties, provided that the fees,
costs, and expenses of the prevailing party (as reasonably determined by the
arbitrators), including arbitrators' and reasonable attorney fees incurred in
connection with any such arbitration, shall be paid by the losing party in the
event the arbitrators determine the proceeding was brought or defended in bad
faith by the losing party. The costs and expenses of the prevailing party in
collecting any such award shall be paid by the non-prevailing party.
In such arbitration proceedings, each of the parties shall submit to
the arbitrators in writing their respective positions with respect to the
dispute for which arbitration proceedings have been
25
<PAGE> 26
commenced, together with such supporting documentation as such party deems
necessary or as such arbitrators request. Such arbitrators shall, as soon as
practicable after receiving the written positions of both parties and all
subsequent supporting documentation requested by such arbitrators, and after
having heard such testimony as they may deem appropriate, render their decisions
as to such dispute, which decision shall be in writing and final and binding on,
and nonappealable by, (except as provided by law), the parties hereto. The
arbitrators shall issue any injunctive or similar order they deem appropriate.
If the arbitrators notify the parties that they believe a portion of a dispute
(which may be the entire dispute) is essentially reducible to monetary terms,
the arbitrators shall accept the entire position of one of the parties with
respect thereto, it being understood that, in such circumstances, such
arbitrators shall have no discretion to accept only part of either party's
position with respect thereto.
10.2. COSTS. Seller and Buyer shall each bear those expenses
attributable to them in connection with the Merger and negotiating and entering
into this Agreement, including their own fees of counsel and brokerage fees.
10.3. BROKERS. Buyer and MergerSub on one hand and Seller and the
Company on the other hand warrant and represent to each other party hereto that
no person is entitled to any commission or finder's fee in connection with the
transactions contemplated in this Agreement. Each party hereto agrees to
indemnify, defend and hold harmless each other party hereto and the Company
against any claim, loss, liability or expense for any such commission or fee
incurred by reason of any act, omission or statement of the indemnifying party.
The Company does not have any obligation to pay finder's or broker's fees or
commissions in connection with the exercise of options to renew or extend real
estate leases to which the Company is a party.
10.4. COUNTERPARTS. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on
each of the parties, notwithstanding that all the parties are not signatory to
the original or the same counterpart.
10.5. NO ASSIGNMENT. This Agreement may not be assigned, transferred or
hypothecated by any party hereto other than by operation of law except that
Buyer may assign in whole or in part its rights and obligations hereunder to any
affiliate company. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties' respective heirs, successors and
assigns.
10.6. PUBLICITY. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by Buyer and Seller. Unless otherwise required by
applicable laws, neither of the parties shall act unilaterally in this regard
without the prior approval of the other party, which approval shall not be
unreasonably withheld.
10.7. SEVERABILITY. If any portion of this Agreement shall be deemed
unenforceable by a court of competent jurisdiction, the remaining portions shall
remain valid and enforceable.
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10.8. NO THIRD PARTY BENEFICIARIES. Except as expressly provided
herein, each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
10.9. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent. In the event an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
person or entity by virtue of the authorship of any of the provisions of this
Agreement.
10.10. COVENANT NOT TO COMPETE. In consideration for the payments by
Buyer to be made hereunder, each Seller agrees he will not at any time within
the five year period following the Closing Date compete with the Company,
solicit the customers of the Company, or directly or indirectly solicit for
employment any employees of Company. For purposes of this paragraph the term
"compete" means engaging in the same or any business competitive with the
Company as engaged in by Company immediately prior to the Closing Date in any
manner whatsoever (other than as a passive investor), including without
limitation, as a proprietor, partner, investor, shareholder, director, officer,
employee, consultant, independent contractor, or otherwise, within any county in
the territory in which the business of the Company was conducted at the Closing
Date. For purposes of Sections 10.10 through 10.12 hereof, "Company" shall
include any entity into which the Company may be merged (including without
limitation the Surviving Corporation) or to which the business and assets of the
Company is transferred.
10.11. REASONABLENESS OF RESTRICTIONS.
(a) Each Seller has carefully read and considered the
provisions of Section 10.10 and, having done so, agrees that the restrictions
set forth therein, including, but not limited to, the time period of restriction
and geographical areas of restriction, are fair and reasonable and are
reasonably required for the protection of the interests of the Buyer.
(b) If, notwithstanding the foregoing, any of the provisions
of Section 10.10 shall be held to be invalid or unenforceable, the remaining
provisions shall nevertheless continue to be valid and enforceable as though the
invalid or unenforceable parts had not been included. In the event that any
provision of Section 10.10 relating to the time period and/or the areas of
restriction and/or related aspects shall be declared by a court of competent
jurisdiction to exceed the maximum restrictiveness such court deems reasonable
and enforceable, the time period and/or areas of restriction and/or related
aspects deemed reasonable and enforceable by the court shall become the maximum
restriction in such regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
10.12. REMEDIES FOR BREACH. In the event of a breach or threatened
breach of any of the covenants in Section 10.10, the Buyer shall have the right
to seek equitable relief, including specific
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performance by means of an injunction against the Seller and against the
Seller's partners, agents, representatives, servants, employers, employees,
and/or any and all persons acting directly or indirectly by or with it or them,
to prevent or restrain any breach or further breach. In the event such Buyer
obtains any such equitable relief, the party against whom relief is obtained
shall reimburse Buyer for its reasonable attorney's fees and costs related
thereto.
10.13. SURVIVAL. Sections 10.9 through 10.12 shall survive Closing of
the transactions contemplated herein.
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IN WITNESS WHEREOF, Buyer, MergerSub, Seller and the Company have duly
executed and delivered this Agreement as of the date first above written.
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
BY: /s/ Dennis A. Bakal
---------------------------------
Dennis A. Bakal, President
DTSI ACQUISITION, INC.
BY: /s/ Dennis A. Bakal
---------------------------------
Dennis A. Bakal, Director
DEDICATED TRANSPORTATION SERVICES, INC.
BY:/s/ Robert Serra
---------------------------------
Robert Serra, President
SERRA/MARTIN LIVING TRUST
BY:/s/ Robert Serra
---------------------------------
Robert Serra, Trustee
BY:/s/ Susan Martin
---------------------------------
Susan Martin, Trustee
/s/ Robert Serra
---------------------------------
Robert Serra
/s/ Mark Kapper
---------------------------------
Mark Kapper
/s/ Susan Martin
---------------------------------
Susan Martin
29
<PAGE> 1
EXHIBIT 10.1
CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT
BETWEEN
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
AND
THE INVESTORS SIGNATORY HERETO
CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT dated as of
April 28, 2000 (the "Agreement"), between the Investors signatory hereto (each
an "Investor" and together the "Investors"), and Professional Transportation
Group Ltd., Inc., a corporation organized and existing under the laws of the
State of Georgia (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate, (i) $4,300,000 Stated Value
of Convertible Preferred Stock (as defined below) and (ii) Warrants (as defined
below) to purchase up to 266,666 shares of the Common Stock (as defined below)
at Four Dollars ($4.00) per share.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and/or 4(6) of the United States Securities Act
and/or Regulation D ("Regulation D") and the other rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in securities to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any Warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3. "Certificate of Designations" shall mean the Certificate of
Designations setting forth the terms of the Convertible Preferred Stock in the
form of Exhibit A hereto.
<PAGE> 2
Section 1.4. "Closing" shall mean the closing of the purchase and sale of
the Convertible Preferred Stock and Warrants pursuant to Section 2.1.
Section 1.5. "Closing Date" shall mean the date on which all conditions to
the Closing have been satisfied (as defined in Section 2.1 (b) hereto) and the
Closing shall have occurred.
Section 1.6. "Common Stock" shall mean the Company's common stock, no par
value per share.
Section 1.7. "Conversion Shares" shall mean the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock and any shares of
Common Stock issued as dividends upon the Convertible Preferred Stock.
Section 1.8. "Convertible Preferred Stock" shall mean the $4,300,000 Stated
Value of Series B Convertible Preferred Stock, as described in the Certificate
of Designations to be issued to the Investors pursuant to this Agreement.
Section 1.9. "Damages" shall mean any loss, claim, damage, judgment,
penalty, deficiency, liability, costs and expenses (including, without
limitation, reasonable attorney's fees and disbursements and reasonable costs
and expenses of expert witnesses and investigation).
Section 1.10. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.11. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.12. "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit D hereto executed and delivered
contemporaneously with this Agreement.
Section 1.13. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
Section 1.14. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.15. "Market Price" on any given date shall mean the average of the
lowest three (3) closing bid prices on the Principal Market, or, at each
Investor's option, on the pink sheets or any other trading market (as reported
by Bloomberg L.P.) of the Common Stock during the twenty-two (22) consecutive
Trading Day period ending on the Trading Day immediately prior to the date for
which the Market Price is to be determined.
Section 1.16. "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, stock price or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Certificate of
Designations or the Warrants in any material respect.
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<PAGE> 3
Section 1.17. "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.18. "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.19. "Principal Market" shall mean the American Stock Exchange,
the New York Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap
Market or the OTC Bulletin Board, whichever is at the time the principal trading
exchange or market for the Common Stock, based upon share volume.
Section 1.20. "Purchase Price" shall mean the Stated Value per share of
Convertible Preferred Stock, as defined in the Certificate of Designations.
Section 1.21. "Registrable Securities" shall mean the Conversion Shares and
the Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC, and all Conversion Shares and Warrant Shares have been
disposed of pursuant to the Registration Statement, (ii) all Conversion Shares
and Warrant Shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.22. "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor as of
the Closing Date in the form annexed hereto as Exhibit C.
Section 1.23. "Registration Statement" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale by the Investors
of the Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.24. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.25. "SEC" shall mean the Securities and Exchange Commission.
3
<PAGE> 4
Section 1.26. "Section 4(2)" and "Section 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.27. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28. "SEC Documents" shall mean the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
Section 1.29. "Shares" shall have the meaning set forth in Section 1.16.
Section 1.30. "Stated Value" shall have the meaning set forth in the
Certificate of Designations.
Section 1.31. "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.32. "Warrants" shall mean the Warrants substantially in the form
of Exhibit B to be issued to the Investors hereunder.
Section 1.33. "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to exercise of the
Warrants.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE PREFERRED STOCK AND WARRANTS
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and the Investors agree to purchase the Convertible
Preferred Stock together with the Warrants at the Purchase Price on the Closing
Date as follows:
(i) Upon execution and delivery of this Agreement, each
Investor shall deliver to the Escrow Agent
immediately available funds in their proportionate
amount of the Purchase Price as set forth on the
signature pages hereto, and the Company shall deliver
the Convertible Preferred Stock certificates and the
Warrants to the Escrow Agent, in each case to be held
by the Escrow Agent pursuant to the Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in
Section 2.1(b), the Closing ("Closing") shall occur
at the offices of the Escrow Agent at which time the
Escrow Agent (x) shall release the Convertible
Preferred Stock and the Warrants to the Investors and
(y) shall release the Purchase Price to the
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<PAGE> 5
Company (after all fees have been paid as set forth
in the Escrow Agreement), pursuant to the terms of
the Escrow Agreement.
(b) The Closing is subject to the satisfaction or waiver by the
party to be benefited thereby of the following conditions:
(i) acceptance and execution by the Company and by the
Investors, of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Investor of immediately
available funds in the amount of the Purchase Price
of the Convertible Preferred Stock and the Warrants,
as more fully set forth in the Escrow Agreement;
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Investors'
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Convertible Preferred Stock and
Warrants, or shall have the availability of
exemptions therefrom;
(vi) the sale and issuance of the Convertible Preferred
Stock and the Warrants hereunder, and the proposed
issuance by the Company to the Investors of the
Common Stock underlying the Convertible Preferred
Stock and the Warrants upon the conversion or
exercise thereof shall be legally permitted by all
laws and regulations to which the Investors and the
Company are subject and there shall be no ruling,
judgment or writ of any court prohibiting the
transactions contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Preferred Stock certificates and Warrants
certificates to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of Smith,
Gambrell & Russell, LLP, counsel to the Company, in
the form of Exhibit E hereto;
(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached
hereto as Exhibit F; and
(x) delivery to the Escrow Agent of the Registration
Rights Agreement.
(xi) delivery to the Escrow Agent of the written
agreements of each officer and director of the
Company addressed to the Investors, agreeing to vote
all shares of Common Stock over which they have
voting control in favor of a shareholder proposal
permitting the issuance of a number of Conversion
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Shares in excess of 19.9% of the number of shares of
Common Stock issued and outstanding on the Closing
Date.
Section 2.2. Liquidated Damages. The parties hereto acknowledge and
agree that the sums payable pursuant to the Registration Rights Agreement shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amounts specified in such Sections bear
a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investors in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Intent. The Investor is entering into this Agreement for its
own account and not with a view to or for sale in connection with any
distribution of the Common Stock. The Investor has no present arrangement
(whether or not legally binding) at any time to sell the Convertible Preferred
Stock, the Warrants, any Conversion Shares or Warrant Shares to or through any
person or entity; provided, however, that by making the representations herein,
the Investor does not agree to hold such securities for any minimum or other
specific term and reserves the right to dispose of the Conversion Shares and
Warrant Shares at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in the Convertible Preferred
Stock, the Warrants and the underlying Common Stock. The Investor acknowledges
that an investment in the Convertible Preferred Stock, the Warrants and the
underlying Common Stock is speculative and involves a high degree of risk.
Section 3.3. Authority. This Agreement and each agreement attached as an
Exhibit hereto which is required to be executed by Investor has been duly
authorized and validly executed and delivered by the Investor and is a valid and
binding agreement of the Investor enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
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Section 3.5. Absence of Conflicts. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and executed
by the Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor or (a) violate
any provision of any indenture, instrument or agreement to which Investor is a
party or is subject, or by which Investor or any of its assets is bound; (b)
conflict with or constitute a material default thereunder; (c) result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
Investor to any third party; or (d) require the approval of any third-party
(which has not been obtained) pursuant to any material contract, agreement,
instrument, relationship or legal obligation to which Investor is subject or to
which any of its assets, operations or management may be subject.
Section 3.6. Disclosure; Access to Information. The Investor has received
all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
the Investor. The Company is subject to the periodic reporting requirements of
the Exchange Act, and the Investor has reviewed copies of all SEC Documents
deemed relevant by Investor.
Section 3.7. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and Warrants to the Investors that, except as set forth
on the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Georgia and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Convertible Preferred Stock, the Conversion Shares,
the Warrants and the Warrant Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Certificate of Designations, the
Convertible Preferred
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Stock certificates and the Warrants by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Convertible Preferred
Stock certificates and the Warrants have been duly executed and delivered by the
Company and at the Closing shall constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the conversion of the Convertible
Preferred Stock and for the exercise of the Warrants. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Conversion Shares and, upon any exercise of the Warrants, the
Warrant Shares. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Convertible Preferred Stock and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). The Company shall not
seek judicial relief from its obligations hereunder except pursuant to the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. ss. 362 in respect of the conversion of the
Convertible Preferred Stock and the exercise of the Warrants. The Company
agrees, without cost or expense to the Investors, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. ss. 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, no par value; of which 6,930,626
shares are issued and outstanding as of April 12, 2000, and 100,000 shares of
preferred stock, no par value; of which 217 shares of its Convertible Series A
Preferred Stock are issued and outstanding. The Company has duly and validly
designated 4,300 shares of its preferred stock as Series B Convertible Preferred
Stock. Except for outstanding options and warrants as set forth in the SEC
Documents, there are no outstanding Capital Shares Equivalents nor any
agreements or understandings pursuant to which any Capital Shares Equivalents
may become outstanding. Except as set forth on Schedule 4.3, the Company is not
a party to any agreement granting registration or anti-dilution rights to any
person with respect to any of its equity or debt securities. All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.
Section 4.4. Common Stock. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on, the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq SmallCap
Market and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such
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listing. The foregoing sentence is modified by the fact that the Company had
received correspondence from the Principal Market dated January 7, 2000 and
January 11, 2000 that it is now in full compliance with the Principal Market's
continued listing requirements.
Section 4.5. SEC Documents. The Company has made available to the
Investors true and complete copies of the SEC Documents. The Company has not
provided to the Investors any information that, according to applicable law,
rule or regulation, should have been disclosed publicly prior to the date hereof
by the Company, but which has not been so disclosed. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act, and rules and regulations of the SEC promulgated thereunder
and the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investors' representations in Article III, the sale of the
Convertible Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When issued and paid for in accordance with the
Warrants and validly converted in accordance with the terms of the Convertible
Preferred Stock, the Conversion Shares and the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sales of the
Convertible Preferred Stock, the Conversion Shares, the Warrants or the Warrant
Shares pursuant to, nor the Company's performance of its obligations under, this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Certificate of Designations or the Warrants will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Convertible Preferred Stock, the Conversion Shares, the Warrants or the
Warrant Shares or, except as contemplated herein, any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other rights to subscribe for or acquire the Capital Shares or other
securities of the Company. The Convertible Preferred Stock,
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the Conversion Shares, the Warrants and the Warrant Shares shall not subject the
Investors to personal liability to the Company or its creditors by reason of the
possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Convertible
Preferred Stock or the Warrants, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Convertible Preferred Stock, the
Conversion Shares, the Warrants or the Warrant Shares under the Securities Act.
Section 4.8. No Conflicts. Except as set forth on Schedule 4.8, the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, including
without limitation the issuance of and payment of dividends upon the Convertible
Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares, do
not and will not (i) result in a violation of the Company's Articles of
Incorporation or By-Laws or (ii) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument, or any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company is a party, or (iii) result in a violation of any federal, state or
local law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
material property or asset of the Company is bound or affected, nor is the
Company otherwise in violation of, conflict with or default under any of the
foregoing (except in each case for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not have,
individually or in the aggregate, a Material Adverse Effect). The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations that
either singly or in the aggregate would not have a Material Adverse Effect. The
Company is not required under any federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Convertible Preferred Stock or the Warrants in accordance with the
terms hereof (other than any SEC, Principal Market or state securities filings
that may be required to be made by the Company subsequent to Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Principal Market); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investors herein.
Section 4.9. No Material Adverse Change. Since December 31, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.10. No Undisclosed Events or Circumstances. Since December
31, 1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties,
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prospects, operations or financial condition, that, under applicable law, rule
or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed
in the SEC Documents.
Section 4.11. No Integrated Offering. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, or pursuant to its discussion with the
Investors in connection with the transactions contemplated hereby, the Company
has not issued, offered or sold the Convertible Preferred Stock, the Warrants or
any shares of Common Stock (including for this purpose any securities of the
same or a similar class as the Convertible Preferred Stock, the Warrants or
Common Stock, or any securities convertible into a exchangeable or exercisable
for the Convertible Preferred Stock or Common Stock or any such other
securities) within the six-month period next preceding the date hereof, and the
Company shall not permit any of its directors, officers or affiliates directly
or indirectly to take, any action (including, without limitation, any offering
or sale to any Person of the Convertible Preferred Stock, Warrants or shares of
Common Stock), so as to make unavailable the exemption from Securities Act
registration being relied upon by the Company for the offer and sale to
Investors of the Convertible Preferred Stock (and the Conversion Shares) or the
Warrants (and the Warrant Shares) as contemplated by this Agreement.
Section 4.12. Litigation and Other Proceedings. Except as disclosed in the
SEC Documents, there are no lawsuits or proceedings pending or, to the knowledge
of the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.13. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Preferred Stock or the
Warrants in connection with the transaction contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
Section 4.14. Material Non-Public Information. The Company has not disclosed
to the Investors any material non-public information that (i) if disclosed,
would reasonably be expected to have a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
Section 4.15. Insurance. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
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insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and has been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
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"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 4.17. Property. Neither the Company nor any of its subsidiaries owns
any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property, mineral or water rights, and buildings held under
lease by the Company as tenant are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and intended to be made of such property and buildings by the
Company.
Section 4.18. Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no adverse
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.19. Internal Controls and Procedures. The Company maintains books
and records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party or
by which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.20. Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any
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foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.21. No Misrepresentation. The representations and warranties
of the Company contained in this Agreement, any schedule, annex or exhibit
hereto and any agreement, instrument or certificate furnished by the Company to
the Investors pursuant to this Agreement, do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, covenants with the Company
that:
Section 5.1. Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. No Short Sales. On any give Trading Day, in the event that
the closing bid price of the Common Stock is less than $4.00 per share, the
Investor and its affiliates shall not engage in short sales of the Company's
Common Stock on the subsequent Trading Day (as defined in applicable SEC and
NASD rules) so long as the Investor holds any unconverted shares of Convertible
Preferred Stock.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to issue the Conversion Shares and the
Warrant Shares pursuant to any conversion of the Convertible Preferred Stock or
exercise of the Warrants. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered pursuant to any conversion of the
Convertible Preferred Stock or exercise of the Warrants and the number of shares
so reserved shall be increased or decreased to
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reflect potential increases or decreases in the Common Stock that the Company
may thereafter be obligated to issue by reason of adjustments to the Warrants.
In the event that the Corporation has not reserved a sufficient number of shares
for issuance upon conversion of all of the outstanding shares of Series B
Convertible Preferred Stock, the shares of Series B Convertible Preferred Stock
reserved shall be pro rated among the original purchasers of such shares and
their respective subsequent transferees.
Section 6.3. Listing of Common Stock. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to list the Conversion Shares and the Warrant
Shares on the Principal Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Conversion Shares and the Warrant Shares, and
will take such other action as is necessary or desirable in the opinion of the
Investors to cause the Conversion Shares and Warrant Shares to be listed on such
other Principal Market as promptly as possible. The Company will take all action
to continue the listing and trading of its Common Stock on a Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market until the
Investors have disposed of all of their Registrable Securities. The Company
agrees to present a proposal for stockholder approval at the next annual meeting
of stockholders to permit the Company to issue a number of Conversion Shares and
Warrant Shares which is in excess of 19.9% of the number of the Company's issued
and outstanding shares of Common Stock on the Closing Date, with the
recommendation of the Board of Directors that such proposal be approved. If such
proposal is not approved, the Company shall either (i) voluntarily de-list its
Common Stock from any Principal Market which requires such approval, within five
(5) Trading Days of such vote, or (ii) redeem any un-convertible Convertible
Stock pursuant to Section 7 of the Certificate of Designations, pro-rata among
the Investors, within five (5) Trading Days of such vote.
Section 6.4. Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(b) or (g) of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act until the Investors
have disposed of all of their Registrable Securities.
Section 6.5. Legends. The certificates evidencing the Registrable
Securities shall be free of legends, except as set forth in Article IX.
Section 6.6. Corporate Existence; Conflicting Agreements.
The Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement, the
terms of which agreement would restrict or impair the right or ability of the
Company to perform any of its obligations under this Agreement or any of the
other agreements attached as exhibits hereto or under the Certificate of
Designations.
Section 6.7. Consolidation; Merger. The Company shall not, at any
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or
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<PAGE> 16
substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument or by operation of law the
obligation to deliver to the Investors such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement and the
Certificate of Designations.
Section 6.8. Issuance of Convertible Preferred Stock and Warrant Shares.
The sale of the Convertible Preferred Stock and the Warrants and the issuance of
the Warrant Shares pursuant to exercise of the Warrants and the Conversion
Shares upon conversion of the Convertible Preferred Stock shall be made in
accordance with the provisions and requirements of Section 4(2), 4(6) or
Regulation D and any applicable state securities law. The Company shall make any
necessary SEC and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to the Investors as required by all
applicable laws, and shall provide a copy thereof to the Investors promptly
after such filing.
Section 6.9. Limitation on Future Financing. The Company agrees that it
will not enter into any sale of its securities for cash at a discount to Market
Price or a variable rate transaction (a "Subsequent Placement") until one
hundred eighty (180) days after the effective date of the Registration Statement
except for any sales (i) pursuant to any presently existing employee benefit
plan which plan has been approved by the Company's stockholders, (ii) pursuant
to any compensatory plan for a full-time employee or key consultant, or (iii)
with the prior approval of a majority in interest of the Investors, which will
not be unreasonably withheld, in connection with a strategic partnership or
other business transaction, the principal purpose of which is not simply to
raise money. In the event the Company enters into a sale of its securities at a
discount to Market Price or a variable rate transaction pursuant to this Section
6.9, (A) the Company delivers to the Investors a written notice (the "Subsequent
Placement Notice") of its intention to effect such Subsequent Placement, which
Subsequent Placement Notice shall describe in reasonable detail the proposed
terms of such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the persons and/or entities with whom such Subsequent Placement
shall be effected, and attached to which shall be a term sheet or similar
document relating thereto and (B) the Investors shall not have notified the
Company by 6:30 p.m. (New York City time) on the third (3rd) Trading Day after
their receipt of the Subsequent Placement Notice of their willingness to provide
(or to cause its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on conversion, reset and
pricing terms (including original issue discount, if any) and substantially on
such other terms as set forth in the Subsequent Placement Notice. If the
Investors shall fail to notify the Company of their intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the persons and/or entities (or
Affiliates of such persons and/or entities) set forth in the Subsequent
Placement Notice; provided, however, that the Company shall provide the
investors with a second Subsequent Placement Notice, and the Investors shall
again have the right of first refusal set forth above in this Section, if the
Subsequent Placement subject to the initial subsequent Placement Notice shall
not have been consummated for any reason on conversion, reset and pricing terms
(including original issue discount, if any) and substantially on such other
terms set forth in such Subsequent Placement Notice within thirty (30) Trading
Days after the date of the initial Subsequent Placement Notice with the persons
and/or entities (or an Affiliate of such persons and/or entities) identified in
the Subsequent Placement Notice. If an Investor shall
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<PAGE> 17
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Investor shall be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Investor's pro rata portion of the aggregate number of Shares purchased by
such Investor under this Agreement, but the Company shall not be required to
accept financing from the Investors in an amount less than or in excess of the
amount set forth in the Subsequent Placement Notice. In addition, each Investor
may elect to exchange its Convertible Preferred Stock and Warrants for the
securities to be issued in the Subsequent Placement, valued at the Purchase
Price originally paid by the Investor for the Convertible Preferred Stock, on
the same terms as the other investors in such Subsequent Placement.
Section 6.10. Pro-Rata Redemption. The Company agrees that if it shall
redeem any of the Convertible Preferred Stock, that it shall make such
redemption pro-rata among all Investors in proportion their respective initial
purchases of such securities pursuant to this Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. Survival. The representations, warranties and covenants made
by each of the Company and each Investor in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement and certificate
entered into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby. In the
event of a breach or violation of any of such representations, warranties or
covenants, the party to whom such representations, warranties or covenants have
been made shall have all rights and remedies for such breach or violation
available to it under the provisions of this Agreement, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and
hold harmless the Investors, their respective Affiliates and their respective
officers, directors, partners and members (collectively, the "Investor
Indemnitees"), from and against any and all Damages, and agrees to reimburse the
Investor Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Investor Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
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<PAGE> 18
(iii) any action instituted against the Investors, or any
of them, by any stockholder of the Company who is not an Affiliate of
an Investor, with respect to any of the transactions contemplated by
this Agreement.
(b) Each Investor, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and agrees to reimburse the
Company Indemnitees for reasonable all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with any misrepresentation, omission of fact, or breach of any of the
Investor's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Investor pursuant to this Agreement
or any failure by the Investor to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Investor pursuant to this Agreement
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission so to notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent
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of the Indemnified Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being asserted
by a third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party. If the Indemnified Party disputes the claim,
such dispute shall be resolved by mutual agreement of the Indemnified Party and
the Indemnifying Party or by binding arbitration conducted in accordance with
the procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company
shall make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all SEC Documents and other filings with the SEC, and all other publicly
available corporate documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's officers,
directors and employees to supply all such publicly available information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information
to the Investors, advisors to or representatives of the Investors unless prior
to disclosure of such information the Company identifies such information as
being non-public information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investors' advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory to the
Company and the Investors.
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(b) Nothing herein shall require the Company to disclose material
non-public information to the Investors or their advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investors (without the written consent of the Investors prior to
disclosure of such information as set forth in Section 8.2(a)) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
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ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 9.2. Transfer Agent Instructions. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be.
Section 9.3. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Registrable Securities and no instructions
or "stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX.
Section 9.4. Investors' Compliance. Nothing in this Article shall affect
in any way each Investor's obligations to comply with all applicable securities
laws upon resale of the Common Stock.
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ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1. Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation
law of the company's state of incorporation, in which event the corporation law
of such jurisdiction shall govern such issue. To the extent practical, decisions
of the Board of Arbitration shall be rendered no more than thirty (30) calendar
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period) shall
be final, binding and conclusive on the parties to the dispute, and entitled to
be enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The Board of Arbitration shall be authorized and is
hereby directed to enter a default judgment against any party failing to
participate in any proceeding hereunder within the time periods set forth in the
AAA rules. The non-prevailing party to any arbitration (as determined by the
Board of Arbitration) shall pay the expenses of the prevailing party, including
reasonable attorney's fees, in connection with such arbitration. Any party shall
be entitled to obtain injunctive relief from a court in any case where such
relief is available, and the non-prevailing party to any such injunctive
proceeding shall pay the expenses of the prevailing party, including reasonable
attorney's fees, in connection with such proceeding.
ARTICLE XI
ASSIGNMENT
Section 11.1. Assignment. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any permitted transferee
of any of the Convertible Preferred Stock or Warrants purchased or acquired by
any Investor hereunder with respect to the Convertible Preferred Stock or
Warrants held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld or delayed, each
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any Affiliate of
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the Investor) who agrees to make the representations and warranties contained in
Article III and who agrees to be bound by the terms of this Agreement.
ARTICLE XII
NOTICES
Section 12.1. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) hand delivered, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the first business day following the date of sending by reputable
courier service, fully prepaid, addressed to such address, or (c) upon actual
receipt of such mailing, if mailed. The addresses for such communications shall
be:
<TABLE>
<S> <C>
If to the Company: Professional Transportation Group Ltd., Inc.
1950 Spectrum Circle
Suite B-100
Marietta, Georgia 30067
Attention: Dennis A. Bakal
Telephone: (678) 264-0400
Facsimile:
with a copy to (shall not constitute Smith, Gambrell & Russell, LLP
notice): Promenade II
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, Georgia 30309
Attention: Jon H. Klapper, Esq.
Telephone: (404) 815-3722
Facsimile: (404) 685-7022
if to the Investors: As set forth on the signature pages hereto
with a copy to: Robert F. Charron, Esq.
(shall not constitute notice) Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York
Telephone: (212) 351-4500
</TABLE>
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Facsimile: (212) 661-0989
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Certificate of
Designations, the Warrants, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 13.4. Headings. The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
Section 13.5. Number and Gender. There may be one or more Investors parties
to this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investors and the Company shall be required to employ any other reporting
entity.
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Section 13.7. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Preferred Stock or any
Conversion Shares or Warrants or any Warrant Shares and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
(which shall not include the posting of any bond) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Epstein Becker & Green, P.C., counsel to the Investors, in an
amount equal to $10,000, all as set forth in the Escrow Agreement.
Section 13.9. Brokerage. Except for the finder's fee of $125,000 payable by
the Company to Andrew Worden, each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investors, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.10. Publicity. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from their
receipt of such proposed release. No release shall name the Investors without
their express consent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as this __ day of April,
2000.
<TABLE>
<S> <C>
PROFESSIONAL TRANSPORTATION
GROUP LTD., INC.
By: /s/ Dennis A. Bakal
------------------------------------
Dennis A. Bakal, President & CEO
INVESTORS:
Address: c/o Utra Finance
Grossmunster Platz 26 AMRO INTERNATIONAL, S.A.
Zurich CH 8022
Switzerland
Amount subscribed for:
1,050 shares of Convertible
Preferred Stock
Warrants: By: /s/ H.U. Bachofen
------------------------------------
H.U. Bachofen, Director
Fax: 011-411 212-5515
Amount subscribed for:
1,000 shares of Convertible
Preferred Stock
Warrants: 65,117
Total Purchase Price: /s/ John P. O'Shea
$1,050,000 -------------------------------------
John P. O'Shea
Address: c/o Westminster Securities, Inc.
100 Park Avenue, #2800
New York, NY 10017
Tel:
Fax: (212) 480-2549
Amount subscribed for:
200 shares of Convertible
Preferred Stock
Warrants: 18,604
Total Purchase Price:
$300,000
</TABLE>
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<TABLE>
<S> <C> <C>
Address: 14/14 Divrei Chaim Street The Endeavour Capital Fund, S.A.
Jerusalem 94479 Israel By: Endeavour Management, Inc.
Fax: 011-9722-582-4443 By: /s/ Shmuli Margulies
Amount subscribed for: --------------------------------------
1,500 shares Shmuli Margulies, President
Warrants: 93,024
Total Purchase Price: $1,500,000
CELESTE TRUST REG
Address: c/o Trevisa-Trevland-Anstalt
Landstrasse 8
Furstentums 9496 By: /s/ Thomas Hakl
Balzers, Liechtenstein -------------------------------------------
Thomas Hakl, Authorized Signatory
Fax: 011-431-534-532-895
Amount subscribed for:
500 shares
Warrants: 31,008
Total Purchase Price: $500,000
Address: c/o Trident Chambers BALMORE S.A.
Road Town Tortola
British Virgin Islands
By: /s/ Francois Moras
-------------------------------------------
Francois Moras, Authorized Signatory
Fax: 011-411-201-4800
Amount subscribed for:
750 shares
Warrants: 46,511
Total Purchase Price: $750,000
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C>
NESHER LIMITED
By: /s/ John Clarke
-----------------------------------------
John Clarke, Authorized Signatory
Fax: 011-441-624-661-594
Amount subscribed for:
100 shares
Warrants: 6,201
Total Purchase Price: $100,000
WEST CAPITAL MANAGEMENT, INC.
By: /s/ Thierry Ulmann
------------------------------------------
Thierry Ulmann, Authorized Signatory
Fax: 011-412-232-10807
Amount subscribed for:
100 shares
Warrants: 6,201
Total Purchase Price: $100,000
</TABLE>
28
<PAGE> 29
EXHIBIT A
TO EXHIBIT 10.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
PURSUANT TO SECTION 14-2-602 OF THE STATE OF GEORGIA
BUSINESS CORPORATION CODE
The undersigned, being the President and Chief Executive
Officer of Professional Transportation Group Ltd., Inc., a corporation organized
and existing under and by virtue of the laws of the State of Georgia
(hereinafter the "Corporation"), DO HEREBY CERTIFY:
FIRST: That pursuant to authority expressly granted and vested in the
Board of Directors of said Corporation by the provisions of the Corporation's
Articles of Incorporation, said Board of Directors adopted the following
resolution on April 6, 2000 determining the designations, preferences and rights
of its Series B Convertible Preferred Stock which will replace in its entirety
the Series B Preferred Stock that was designated and created in December 1999:
RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by the Corporation's Articles of Incorporation (the
"Articles of Incorporation"), a series of Preferred Stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series B
Convertible Preferred Stock (the "Series B Convertible Preferred Stock"), to
consist of 4,300 shares, no par value per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be as set forth in the Certificate of Designations annexed
hereto:
1. NUMBER OF SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK. Of
the 100,000 shares of authorized but undesignated Preferred Stock ("Preferred
Stock") of the Corporation, four thousand three hundred (4,300) shares shall be
designated and known as Series B Convertible Preferred Stock, no par value
("Series B Convertible Preferred Stock").
2. VOTING.
(a) Unless required by law, no holder of any shares of
Series B Convertible Preferred Stock shall be entitled to vote their respective
shares of Series B Convertible Preferred Stock at any meeting of stockholders of
the Corporation (or any written actions of stockholders in lieu of meetings)
with respect to any matters presented to the stockholders of the Corporation for
their action or consideration. Notwithstanding the foregoing, the Corporation
shall provide each holder of record of Series B Convertible Preferred Stock with
timely notice of every meeting of
<PAGE> 30
stockholders of the Corporation and shall provide each holder with copies of all
proxy materials distributed in connection therewith.
(b) So long as any shares of Series B Convertible
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by the Georgia
Business Corporation Code) of the holders of at least 85% in interest of the
then outstanding shares of Series B Convertible Preferred Stock:
(i) alter or change the rights, preferences or
privileges of the Series B Convertible Preferred Stock;
(ii) create any new class or series of capital
stock having parity with or a preference over the Series B Convertible Preferred
Stock as to payment of dividends or distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series B Convertible Preferred Stock;
(iii) increase the authorized number of shares of
Series B Convertible Preferred Stock; or
(iv) do any act or thing not authorized or
contemplated by this Certificate of Designations which would result in taxation
of the holders of shares of the Series B Convertible Preferred Stock under
Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least eighty-five percent (85%) in
interest of the then outstanding shares of Series B Convertible Preferred Stock
agree to allow the Corporation to alter or change the rights, preferences or
privileges of the shares of Series B Convertible Preferred Stock, pursuant to
subsection (b) above, so as to affect the Series B Convertible Preferred Stock,
then the Corporation will deliver notice of such approved change to the holders
of the Series B Convertible Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and Dissenting Holders shall
have the right for a period of thirty (30) days from the date of notice thereof
to convert any and all shares of then held Series B Convertible Preferred Stock
pursuant to the terms of this Certificate of Designation as in effect prior to
such alteration or change, or else to continue to hold their shares of Series B
Convertible Preferred Stock pursuant to the altered or changed terms.
3. DIVIDENDS.
The holders of shares of Series B Convertible Preferred Stock
shall be entitled to receive, before any cash dividend shall be declared and
paid upon or set aside for the Common Stock or any other series of securities
created hereafter, in any fiscal year of the Corporation, out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share for such fiscal year equal to $60.00 (6%). Such dividends shall accrue
daily and be payable semi-annually on June 30 and December 31 of each year,
commencing June 30, 2000. In the event that the Corporation's Common Stock shall
cease for any reason to be listed on The Nasdaq SmallCap Market or any national
securities exchange, the cash dividend from such date forward shall be at the
rate of $120 (12%) per share.
2
<PAGE> 31
4. LIQUIDATION. (a) If the Corporation shall commence a voluntary
case under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation other than Senior Securities (as defined
above) upon such Liquidating Event unless prior thereto, the holders of shares
of Series B Convertible Preferred Stock shall have received the Liquidation
Preference (as defined in Section 4(c)) with respect to each share. If upon the
occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series B Convertible Preferred Stock and
holders of securities ranking pari passu as to preference upon liquidation with
the Series B Convertible Preferred Stock shall be insufficient to permit the
payment to such holders of the preferential amounts payable thereon, then the
entire assets and funds of the Corporation legally available for distribution to
the Series B Convertible Preferred Stock and such pari passu securities shall be
distributed ratably among such shares in proportion to the ratio that that
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) At the option of each holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series or related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of the
Corporation with or into any other person or persons when the Corporation is not
the survivor shall be deemed to be a liquidation, dissolution or winding up of
the Corporation pursuant to which the Corporation shall be required to
distribute, upon consummation of and as a condition to such transaction an
amount equal to the Liquidation Preference with respect to each outstanding
share of Series B Convertible Preferred Stock held by such holder in accordance
with and subject to the terms of this Section 4.
(c) The Liquidation Preference shall be the "Stated
Value" of $1,000 per share of Series B Convertible Preferred Stock, plus all
accrued but unpaid dividends.
3
<PAGE> 32
5. OPTIONAL CONVERSION. The holders of shares of Series B
Convertible Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT; CONVERSION PRICE. Subject to the
terms, conditions, and restrictions of this Section 5, on or after the Original
Issuance Date, the holder of any shares of Series B Convertible Preferred Stock
shall have the right to convert each such share of Series B Convertible
Preferred Stock (except that upon any Liquidating Event, the right of conversion
shall terminate at the close of business on the business day fixed for payment
of the amount distributable on the Series B Convertible Preferred Stock) into
that number of shares of Common Stock equal to the Stated Value of such share or
shares of Series B Convertible Preferred Stock divided by the lesser of (i)
ninety percent (90%) of the Market Price on the Trading Day on which the
Conversion Notice (as defined below) is transmitted by the Holder(s), and (ii)
Four Dollars ($4.00) per share (the "Conversion Price"); provided, however, the
Conversion Price shall not be less than One Dollar ($1.00) per share if the
following projections are met by the Corporation:
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
JUNE 30, 2000 SEPT. 30, 2000 DEC. 31, 2000 MARCH 31, 2001
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
REVENUE $23,000,000 $34,000,000 $40,000,000 $21,000,000
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
NET INCOME $1,800,000 $2,700,000 $3,100,000 $1,600,000
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
CASH & CASH $25,000,000 $25,000,000 $28,000,000 $35,000,000
EQUIVALENTS*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
If the Corporation fails to meet the above projections on any
of the above dates, as reported in the Corporation's Form 10-Q or 10-K filings
with the SEC for such period-ends, the Conversion Price may be less than One
Dollar ($1.00) per share thereafter regardless of whether the Corporation meets
the projections on subsequent dates.
Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the applicable rules of
the Principal Market, if any, the Corporation shall not issue shares of Common
Stock upon conversion of any shares of Series B Convertible Preferred Stock if
such issuance of Common Stock, when added to the number of shares of Common
Stock previously issued by the Corporation upon conversion of shares of the
Series B Convertible Preferred Stock, or issued upon exercise of the Stock
Purchase Warrants issued in conjunction with the issuance of shares of Series B
Convertible Preferred Stock, would exceed 19.9% of the number of shares of the
Corporation's Common Stock which were issued and outstanding on the Original
Issuance Date. The right to convert shares of Series B Convertible Preferred
Stock shall be pro rated among the original purchasers of such shares and their
respective subsequent transferees, if any, in order to comply with the aforesaid
overall limitation. In the event
- ------------------
* Includes cash, marketable securities, bonafide accounts receivables not
more than 45 days old and is subject to each Holder's right to investigate and
verify the Company's representation as to their Cash and Cash Equivalents at any
time upon two (2) days written notice. In addition, the amount of cash and cash
equivalents shall be adjusted upwards by $1,000,000 increments for every
additional 1,000,000 shares of Common Stock issued and outstanding after the
date hereof (including the Conversion Shares issued pursuant to the Purchase
Agreement).
4
<PAGE> 33
that the Corporation has not obtained stockholder approval of such issuance
prior to receipt of a Conversion Notice which would otherwise violate this
provision, the Corporation shall honor such conversion request (resulting in an
issuance in excess of 19.9%) in cash in an amount equal to the greater of (i)
one hundred and twenty percent (120%) of Stated Value, plus accrued interest or
(ii) the closing ask price on the Conversion Date multiplied by the number of
shares of Common Stock as would have been issued at the Conversion Price upon
such Conversion.
(b) CONVERSION DATE. (i) The holder of any shares of
Series B Convertible Preferred Stock may convert the shares of Series B
Convertible Preferred Stock purchased by such holder from the Corporation at any
time on or after the date on which payment for the sale of the first share of
Series B Convertible Preferred Stock is received by the Corporation, unless
otherwise agreed to in writing by the Corporation and the affected holder (the
"Original Issuance Date").
(ii) In no event shall a holder be permitted to
convert any shares of Series B Convertible Preferred Stock in excess of the
number of such shares upon the conversion of which, (x) the number of shares of
Common Stock owned by such holder (other than shares of Common Stock issuable
upon conversion of shares of Series B Convertible Preferred Stock) plus (y) the
number of shares of Common Stock issuable upon such conversion of those shares
of Series B Convertible Preferred Stock sought to be converted, would be equal
to or exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including those shares issuable upon conversion of the Series B
Convertible Preferred Stock held by such holder after application of this
Section 5(b)(ii). As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder. To the extent that the
limitation contained in this Section 5(b)(ii) applies, the determination of
whether shares of Series B Convertible Preferred Stock are convertible (in
relation to other securities owned by holder) and of which shares of Series B
Convertible Preferred Stock are convertible shall be in the sole discretion of
such holder, and the submission of shares of Series B Convertible Preferred
Stock for conversion shall be deemed to be such holder's determination of
whether such shares of Series B Convertible Preferred Stock are convertible (in
relation to other securities owned by such holder) and of which shares of Series
B Convertible Preferred Stock are convertible, in each case subject to such
aggregate percentage limitation, and the Corporation shall have no obligation or
right to verify or confirm the accuracy of such determination. Nothing contained
herein shall be deemed to restrict the right of a holder to convert such shares
of Series B Convertible Preferred Stock at such time as such conversion will not
violate the provisions of this paragraph. The provisions of this Section
5(b)(ii) may be waived by a holder of Series B Convertible Preferred Stock as to
itself (and solely as to itself) upon not less than 75 days' prior notice to the
Corporation, and the provisions of this Section 5(b)(ii) shall continue to apply
until such 75th day (or such later date as may be specified in such notice of
waiver). No conversion in violation of this paragraph but otherwise in
accordance with this Certificate of Designation shall affect the status of the
Common Stock issued upon such conversion as validly issued, fully-paid and
nonassessable.
(c) NOTICE OF CONVERSION. The right of conversion shall
be exercised by the holder thereof by giving written notice (the "Conversion
Notice") to the Corporation, by facsimile or by registered mail or overnight
delivery service. The Corporation shall then provide notice to the Corporation's
then transfer agent for its Common Stock that the holder elects to convert a
specified
5
<PAGE> 34
number of shares of Series B Convertible Preferred Stock representing a
specified Stated Value thereof into Common Stock and, if such conversion will
result in the conversion of all of such holder's shares of Series B Convertible
Preferred Stock, by surrender of a certificate or certificates for the shares so
to be converted to the Corporation at its principal office (or such other office
or agency of the Corporation as the Corporation may designate by notice in
writing to the holders of the Series B Convertible Preferred Stock) at any time
during its usual business hours on the date set forth in the Conversion Notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued. The
Conversion Notice shall include therein the Stated Value of shares of Series B
Convertible Preferred Stock to be converted, and a calculation (i) of the Market
Price, (ii) the Conversion Price, and (iii) the number of shares of Common Stock
to be issued in connection with such conversion. Such calculations by the holder
shall be conclusive except for manifest error.
(d) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED.
(i) Promptly, but in no event more than three (3) Trading Days, after the
receipt of the Conversion Notice referred to in Section 5(c) and surrender of
the certificate or certificates for the share or shares of Series B Convertible
Preferred Stock to be converted (if required), the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock into which such shares of Series B
Convertible Preferred Stock have been converted. Such conversion shall be deemed
to have been effected on the date on which such Conversion Notice shall have
been received by the Corporation and at the time specified stated in such
Conversion Notice, which must be during the calendar day of such notice, and at
such time the rights of the holder of such share or shares of Series B
Convertible Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby. Issuance of shares of
Common Stock issuable upon conversion which are requested to be registered in a
name other than that of the registered holder shall be subject to compliance
with all applicable federal and state securities laws.
(ii) The Corporation understands that a delay in
the issuance of the shares of Common Stock beyond three (3) Trading Days could
result in economic loss to the holder. As compensation to the holder for such
loss, the Corporation agrees to pay late payments to the holder for late
issuance of shares of Common Stock upon conversion in accordance with the
following schedule (where "No. Trading Days Late" is defined as the number of
Trading Days beyond three (3) Trading Days from the date of receipt by the
Corporation of the Conversion Notice):
<TABLE>
<CAPTION>
Late Payment For Each
$5,000 of Stated Value
No. Trading Days Late Amount Being Converted
- -------------------------------- -------------------------------------------
<S> <C>
1 $100
2 $200
3 $300
</TABLE>
6
<PAGE> 35
<TABLE>
<CAPTION>
Late Payment For Each
$5,000 of Stated Value
No. Trading Days Late Amount Being Converted
- -------------------------------- -------------------------------------------
<S> <C>
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Trading Day
Late beyond 10 days
</TABLE>
The Corporation shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit holder's
right to pursue injunctive relief and/or actual damages for the Corporation's
failure to issue and deliver Common Stock to the holder, including, without
limitation, the holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any other
remedies which may be available to the holder, in the event that the Corporation
fails for any reason to effect delivery of such shares of Common Stock within
five (5) Trading Days the date of receipt of the Conversion Notice, the holder
will be entitled to revoke the relevant Conversion Notice by delivering a notice
to such effect to the Corporation whereupon the Corporation and the holder shall
each be restored to their respective positions immediately prior to delivery of
such Conversion Notice except that holder shall retain the right to receive both
the late payment amounts set forth above plus the actual cost of any "buy-in."
(iii) If, at any time (a) the Corporation
challenges, disputes or denies the right of the holder to effect the conversion
of the Series B Convertible Preferred Stock into Common Stock or otherwise
dishonors or rejects any Conversion Notice properly delivered in accordance with
this Section 5 or (b) any third party who is not and has never been an Affiliate
(as defined in Rule 405 under the Securities Act of 1933, as amended) of the
holder obtains a judgment or order from any court or public or governmental
authority which denies, enjoins, limits, modifies, or delays the right of the
holder hereof to effect the conversion of the Series B Convertible Preferred
Stock into Common Shares, then the holder shall have the right, by written
notice to the Corporation, to require the Corporation to promptly redeem the
Series B Convertible Preferred Stock for cash at a redemption price equal to one
hundred twenty percent (120%) of the Stated Value thereof (the "Mandatory
Purchase Amount"). Under any of the circumstances set forth above, the
Corporation shall indemnify and hold harmless the holder and be responsible for
the payment of all costs and expenses of the holder, including its reasonable
legal fees and expenses, as and when incurred in disputing any such action or
pursuing its rights hereunder (in addition to any other rights of the holder).
The Corporation shall not refuse to honor any Conversion Notice unless its has
actually been enjoined by a court of competent jurisdiction from doing so, and
if so enjoined, the Corporation shall post with such court a performance bond
equal to 150% of the Stated Value of the shares sought to be converted by the
holder which are the subject of such injunction.
7
<PAGE> 36
(iv) The holder shall be entitled to exercise its
conversion privilege notwithstanding the commencement of any case under 11
U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). In the event the Corporation is
a debtor under the Bankruptcy Code, the Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. ss. 362 in
respect of the holder's conversion privilege. The Corporation agrees, without
cost or expense the holder, to take or consent to any and all action necessary
to effectuate relief under 11 U.S.C. ss. 362.
(e) FRACTIONAL SHARES. No fractional shares shall be
issued upon conversion of Series B Convertible Preferred Stock into Common
Stock. All fractional shares shall be rounded up to the nearest whole share.
(f) REORGANIZATION OR RECLASSIFICATION. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, or, in the case of any consolidation or merger or mandatory share
exchange of the Corporation with any other corporation in which such other
corporation is the surviving entity then, as a condition of such reorganization,
reclassification or exchange, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Series B Convertible Preferred Stock
shall thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Series B Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization, reclassification or exchange not taken place, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the conversion rights and the
fixing of the Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights. For clarity, it is the
intention of the Corporation that the conversion rights of the holders of the
Series B Convertible Preferred Stock shall survive any consolidation or merger
or mandatory share exchange and that the conversion rights granted hereunder
shall be exercisable against any such successor corporation, and shall not be
terminated or fixed as to amount upon the consummation of any such transaction.
(g) ADJUSTMENTS FOR SPLITS, COMBINATIONS, ETC. The
ceiling Conversion Price and the number of shares of Common Stock into which the
Series B Convertible Preferred Stock shall be convertible shall be adjusted for
stock splits, stock dividends, combinations or other similar events. No
adjustment to the Conversion Price will be made for dividends (other than stock
dividends), if any, paid on the Common Stock or for securities issued pursuant
to exercise for fair value of options or warrants.
6. REQUIRED ADJUSTMENTS. Notwithstanding anything to the contrary
contained in Section 5 herein and except as to (i) sales of shares of Common
Stock by the Company upon conversion or exercise of any convertible securities,
options or warrants outstanding prior to the date
8
<PAGE> 37
hereof or, (ii) sales of shares of the Company's common stock ("Common Stock")
by the Company pursuant to the provisions of any shareholder-approved option or
similar plan heretofore adopted by the Company, if during any period a holder of
Series B Convertible Preferred Stock holds any Convertible Preferred Stock or is
entitled to any accrued but unpaid dividends (the "MFN Period"), the Company
sells any shares of its Common Stock at a per share selling price ("Per Share
Selling Price") lower than the ceiling Conversion Price, then the ceiling
Conversion Price shall be adjusted downward to equal such lower Per Share
Selling Price. The Company shall give to each holder of Series B Convertible
Preferred Stock written notice of any such sale within 24 hours of the closing
of any such sale.
(a) For the purpose of this Section 6, the term
"Per Share Selling Price" shall mean the amount actually paid by third parties
for each share of Common Stock. A sale of shares of Common Stock shall include
the sale or issuance of rights, options, warrants or convertible securities
("derivative securities") under which the Company is or may become obligated to
issue shares of Common Stock, and in such circumstances the sale of Common Stock
shall be deemed to have occurred at the time of the issuance of the derivative
securities and the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise or conversion price thereof (in addition to the
consideration per underlying share of Common Stock received by the Company upon
such sale or issuance of the derivative security). In the case of any such
security issued within the MFN Period in a "Variable Rate Transaction" or an
"MFN Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised or might have been converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction. If shares are issued for a consideration other than cash, the
per share selling price shall be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company.
(b) For the purpose of Section 6(a), the term
"Variable Rate Transaction" shall mean a transaction in which the Company issues
or sells (a) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (x) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Common Stock at any time after the initial issuance of such
debt or equity securities, or (y) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock (but excluding standard stock split
anti-dilution provisions), or (b) any securities of the Company pursuant to an
"equity line" structure which provides for the sale, from time to time, of
securities of the Company which are registered for resale pursuant to the
Securities Act.
(c) For the purposes of Section 6(a), the term
"MFN Transaction" shall mean a transaction in which the Company issues or sells
any securities in a capital raising transaction or series of related
transactions (the "New Offering") which grants to an holder of Series B
Convertible Preferred Stock (the "New Holder of Series B Convertible Preferred
Stock") the right to receive additional shares based upon future transactions of
the Company on terms more favorable
9
<PAGE> 38
than those granted to the New Holder of Series B Convertible Preferred Stock in
the New Offering.
7. REDEMPTION OF SERIES B CONVERTIBLE PREFERRED STOCK.
(a) RIGHT TO REDEEM SERIES B CONVERTIBLE PREFERRED STOCK.
Upon a thirty (30) day written notice any time after the Original Issuance Date
the Corporation may, in its sole discretion, but shall not be obligated to,
redeem, in whole but not in part, the then issued and outstanding shares of
Series B Convertible Preferred Stock, at a price equal to the greater of (i) one
hundred and twenty percent (120%) of Stated Value, plus accrued interest or (ii)
the closing ask price on the Redemption Date multiplied by the number of shares
of Common Stock as would have been issued on the Redemption Date if such Series
B Convertible Preferred Stock had been converted by the holder on the Redemption
Date, plus all accrued but unpaid dividends; provided, however, that a
registration statement permitting resale of any shares of Common Stock issuable
upon conversion by the holder is then effective. Each holder shall have until
the close of business on the Redemption Date to elect instead to convert such
shares pursuant to Section 5 hereof, notwithstanding that the shares of Series B
Convertible Preferred Stock are not otherwise convertible at such time. Any such
conversions made pursuant to this Section 7(a) shall be made at the Conversion
Price established pursuant to Section 5(a).
(b) MANDATORY REDEMPTION OF SERIES B CONVERTIBLE
PREFERRED STOCK. Upon the closing of a consolidation, merger or mandatory share
exchange in which the Corporation is not the surviving entity and in which the
only consideration to be received by the holders of the Corporation's Common
Stock is cash, the Corporation shall be obligated to, redeem, in whole but not
in part, the then issued and outstanding shares of Series B Convertible
Preferred Stock, at a price equal to the greater of (i) one hundred and twenty
percent (120%) of Stated Value, plus accrued interest or (ii) the closing ask
price on the Redemption Date multiplied by the number of shares of Common Stock
as would have been issued on the Redemption Date if such Series B Convertible
Preferred Stock had been converted by the holder on the Redemption Date, plus
all accrued but unpaid dividends; provided, however, that a registration
statement permitting resale of any shares of Common Stock issuable upon
conversion by the holder is then effective. Each holder shall have until the
close of business on the Redemption Date to elect instead to convert such shares
pursuant to Section 5 hereof, notwithstanding that the shares of Series B
Convertible Preferred Stock are not otherwise convertible at such time. Any such
conversions made pursuant to this Section 7(b) shall be made at the Conversion
Price established pursuant to Section 5(a).
(c) NOTICE OF REDEMPTION. The Corporation shall provide
each holder of record of the Series B Convertible Preferred Stock being redeemed
with written notice of redemption (the "Redemption Notice") not less than thirty
(30) days prior to any date stipulated by the Corporation for the redemption of
the Series B Convertible Preferred Stock (the "Redemption Date"). The Redemption
Notice shall contain (i) the Redemption Date, (ii) the number of shares of
Series B Convertible Preferred Stock to be redeemed from the holder to whom the
Redemption Notice is delivered, and (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
B Convertible Preferred Stock to be redeemed.
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(d) SURRENDER OF CERTIFICATES; PAYMENT OF REDEMPTION
PRICE. On or before the Redemption Date, each holder of the shares of Series B
Convertible Preferred Stock to be redeemed shall surrender the required
certificate or certificates representing such shares to the Corporation (or an
affidavit of lost certificate in form and content reasonably satisfactory to the
Corporation, but which shall not require the posting of any bond), in the manner
and at the place designated in the Redemption Notice, and upon payment to the
holder of the Redemption Price, each such surrendered certificate shall be
cancelled and retired. If payment of such redemption price is not made in full
by the Redemption Date the Holder shall again have the right to convert the
Series B Convertible Preferred Stock as provided in Section 5 hereof, and the
Corporation shall thereafter be precluded from exercising its rights under this
Section 7. If a certificate is surrendered and all the shares evidenced thereby
are not being redeemed with the consent of the holder, the Corporation shall
issue new certificates to be registered in the names of the person(s) whose
name(s) appear(s) as the owners on the respective surrendered certificates and
deliver such certificate to such person(s).
8. NOTICES. In case at any time:
(a) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other pro rata distribution to
the holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights; or
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile or by recognized overnight delivery
service to non-U.S. residents, addressed to each holder of any shares of Series
B Convertible Preferred Stock at the address of such holder as shown on the
books of the Corporation, (i) at least twenty (20) Trading Days' prior written
notice of the date on which the books of the Corporation shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) Trading Days' prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto and (ii)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
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9. STOCK TO BE RESERVED. The Corporation, upon the effective date
of this Certificate of Designations, has a sufficient number of shares of Common
Stock available to reserve for issuance upon the conversion of all outstanding
shares of Series B Convertible Preferred Stock, assuming immediate conversion.
In the event that the Corporation has not reserved a sufficient number of shares
for issuance upon conversion of all of the outstanding shares of Series B
Convertible Preferred Stock, the shares of Series B Convertible Preferred Stock
reserved shall be pro rated among the original purchasers of such shares and
their respective subsequent transferees. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series B Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series B Convertible
Preferred. The Corporation covenants that all shares of Common Stock which shall
be so issued shall be duly and validly issued, fully paid and non-assessable.
The Corporation will take all such action as may be so taken without violation
of any applicable law or regulation to have a sufficient number of authorized
but unissued shares of Common Stock to issue upon conversion of the Series B
Convertible Preferred Stock. The Corporation will not take any action which
results in any adjustment of the conversion rights if the total number of shares
of Common Stock issued and issuable after such action upon conversion of the
Series B Convertible Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Corporation's Articles of Incorporation.
10. NO REISSUANCE OF SERIES B CONVERTIBLE PREFERRED STOCK. Shares
of Series B Convertible Preferred Stock which are converted into shares of
Common Stock as provided herein shall not be reissued.
11. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon conversion of Series B Convertible Preferred Stock shall be made
without charge to the holder for any United States issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series B Convertible Preferred Stock which is being converted.
12. CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of any Series B Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Series B Convertible Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
13. DEFINITIONS. As used in this Certificate of Designations, the
term "Common Stock" shall mean and include the Corporation's authorized Common
Stock, no par value, as constituted on the date of filing of this Certificate of
Designations, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall neither be limited to a fixed sum
or percentage of par value in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Series B Convertible Preferred Stock shall include only
shares
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designated as Common Stock of the Corporation on the date of filing of this
instrument, or in case of any reorganization, reclassification, or stock split
of the outstanding shares thereof, the stock, securities or assets provided for
in Subparagraph 5(f) and (g). Any capitalized terms used in this Certificate of
Designations but not defined herein shall have the meanings set forth in that
certain Convertible Preferred Stock and Warrants Purchase Agreement dated as of
April 28, 2000 among the Corporation and the other persons signatory thereto, a
copy of which will be provided to any stockholder of the Corporation upon
request to the Secretary of the Corporation, without charge.
14. LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of certificates representing shares of Series B Convertible Preferred
Stock and, in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (which shall not include
the posting of any bond), or, in the case of any such mutilation, upon surrender
and cancellation of the Series B Convertible Preferred Stock certificate, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated certificates for Series B Convertible Preferred Stock,
new certificates for Series B Convertible Preferred Stock of like tenor. The
Series B Convertible Preferred Stock shall be held and owned upon the express
condition that the provisions of this Section 14 are exclusive with respect to
the replacement of mutilated, destroyed, lost or stolen shares of Series B
Preferred Stock and shall preclude any and all other rights and remedies
notwithstanding any law or statue existing or hereafter enacted to the contrary
with respect to the replacement of negotiable instruments or other securities
without the surrender thereof.
15. WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the person
in whose name the Series B Convertible Preferred Stock shall be registered upon
the registry books of the Corporation to be, and may treat it as, the absolute
owner of the Series B Convertible Preferred Stock for the purpose of conversion
of the Series B Convertible Preferred Stock and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary. All such
payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series B Convertible Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
16. REGISTER. The Corporation shall maintain a transfer agent,
which may be the transfer agent for the Common Stock or the Corporation itself,
for the registration of the Series B Convertible Preferred Stock. Upon any
transfer of the Series B Convertible Preferred Stock in accordance with the
provisions hereof, the Corporation shall register or cause the transfer agent to
register such transfer on the Series B Convertible Preferred Stock register.
17. WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
B Convertible Preferred Stock.
18. HEADINGS. The headings of the Sections of this Certificate of
Designations are inserted for convenience only and do not constitute a part of
this Certificate of Designations.
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IN WITNESS WHEREOF, Dennis A. Bakal, President and Chief Executive
Officer of the Corporation, under penalties of perjury, does hereby declare and
certify that this is the act and deed of the Corporation and the facts stated
herein are true and accordingly has signed this Certificate of Designations as
of this 8th day of May l, 2000.
PROFESSIONAL TRANSPORTATION
GROUP LTD., INC.
By: /s/ Dennis A. Bakal
-----------------------------------
Dennis A. Bakal, President and CEO
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EXHIBIT B
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER LAWS. NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED,
TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND SUCH STATE LAWS OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT AND SUCH LAWS.
STOCK PURCHASE WARRANT
To Purchase _________ Shares of Common Stock of
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
THIS CERTIFIES that, for value received,
[_____________________] (the "Holder"), is entitled, upon the terms and subject
to the conditions hereinafter set forth, at any time on or after April ___, 2000
(the "Initial Exercise Date") and on or prior to the close of business on April
___, 2003 (the "Termination Date") but not thereafter, to subscribe for and
purchase from Professional Transportation Group Ltd., Inc., a corporation
incorporated in Georgia (the "Company"), up to ___________ (_______) shares (the
"Warrant Shares") of Common Stock, no par value, of the Company (the "Common
Stock"). The purchase price of one share of Common Stock (the "Exercise Price")
under this Warrant shall be Four Dollars ($4.00). The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms of
this Warrant and the Convertible Preferred Stock and Warrants Purchase Agreement
dated April 28, 2000 (the "Purchase Agreement"), the Purchase Agreement shall
control. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.
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1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise Price and
all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to
the issuance of such shares, have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant. If there is no registration in effect
permitting the resale by the Holder of the Warrant Shares at any time from and
after one year from the issuance date of this Warrant, then the Holder shall
have the right to a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrant; and
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<PAGE> 45
(X) = the number of shares issuable upon exercise of the Warrant in accordance
with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of shares of Common Stock without having a new
Warrant issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 7(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
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(c) The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number
of Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the holder of this Warrant shall thereafter be entitled
to purchase the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment
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<PAGE> 47
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
12. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts
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<PAGE> 48
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
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15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors
or assigns of the Company. This Warrant shall constitute a contract under the
laws of New York
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<PAGE> 50
without regard to its conflict of law, principles or rules, and be subject to
arbitration pursuant to the terms set forth in the Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to comply with any provision of this Warrant, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or
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<PAGE> 51
disbursements are found in a final non-appealable judgment by a court to have
resulted from Holder's negligence, bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: April _____, 2000
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
By:
-----------------------------------------
Dennis A. Bakal, President and CEO
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NOTICE OF EXERCISE
To: PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of Professional Transportation Group Ltd., Inc.
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
----------------------------------------
Dated:
---------------------------
Signature
<PAGE> 53
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 54
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 28, 2000, between
the investor or investors signatory hereto (each an "Investor" and together the
"Investors"), and Professional Transportation Group Ltd., Inc., a Georgia
corporation (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Investor is purchasing from the Company, pursuant to a
Convertible Preferred Stock and Warrants Purchase Agreement dated the date
hereof (the "Purchase Agreement"), $4,300,000 Stated Value of Convertible
Preferred Stock and Warrants to purchase up to 266,666 shares of the Company's
Common Stock (terms not defined herein shall have the meanings ascribed to them
in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Investors the registration
rights set forth herein with respect to the Conversion Shares of Common Stock
issuable upon conversion of or as dividends upon the Convertible Preferred Stock
purchased pursuant to the Purchase Agreement and shares of Common Stock issuable
upon exercise of the Warrants (hereinafter referred to as the "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means the Securities until (i) the Registration Statement has been
declared effective by the Commission, and all Securities have been disposed of
pursuant to the Registration Statement, (ii) all Securities have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Securities have been otherwise transferred to holders who may trade
such Securities without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
Securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act. The term "Registrable Securities" means any
and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be deemed to be made in the definition
of "Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. Each Investor acknowledges and
understands that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. Each Investor understands that no disposition or transfer of the
Securities may be made by Investor in the absence of (i) an opinion of counsel
to the Investor, in form and substance reasonably
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<PAGE> 55
satisfactory to the Company, that such transfer may be made without
registration under the Securities Act or (ii) such registration.
With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required to be filed with the Commission pursuant to Section 13
or 15(d) under the Exchange Act by companies subject to either of such sections,
irrespective of whether the Company is then subject to such reporting
requirements; and
(c) Upon request by the Transfer Agent, the Company shall provide
the Transfer Agent an opinion of counsel, which opinion shall be reasonably
acceptable to the Transfer Agent, that the Investor has complied with the
applicable conditions of Rule 144 ( or any similar provision then in force)
under the Securities Act.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), within sixty (60) days after
the Closing Date a registration statement (on Form S-3, or other appropriate
registration statement form) under the Securities Act (the "Registration
Statement"), at the sole expense of the Company (except as provided in Section
3(c) hereof), in respect of the Investors, so as to permit a public offering and
resale of the Securities under the Act by the Investors as selling stockholders
and not as underwriters.
The Company shall use its best efforts to cause such Registration
Statement to become effective within one hundred (100) days from the Closing
Date, or, if earlier, within five (5) days of SEC clearance to request
acceleration of effectiveness. The number of shares designated in the
Registration Statement to be registered shall include all the Warrant Shares, at
least 4,300,000 shares issuable upon the conversion of Series B Convertible
Preferred Stock at the Minimum Conversion Price (as set forth in the Company's
Series B Certificate of Designations) and such number of shares as the Company
deems prudent for the purpose of issuing shares of Common Stock as dividends on
the Convertible Preferred Stock, and shall include appropriate language
regarding reliance upon Rule 416 to the extent permitted by the Commission. The
Company will notify the Investors of the effectiveness of the Registration
Statement within one Trading Day of such event. In the event that the number of
shares so registered shall prove to be insufficient to register the resale of
all of the Securities, then the Company shall be obligated to file, within
fifteen (15) days after the day on which the number of Securities registered for
public offering and resale by the Investors is less than 125% of the number of
Securities (calculated at the Conversion Price on such date) held by the
Investors on such date, a further Registration Statement registering such
remaining shares and
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<PAGE> 56
shall use diligent best efforts to prosecute such additional Registration
Statement to effectiveness within sixty (60) days of the date of such notice.
Additionally, in the event the number of shares registered initially shall prove
to be insufficient to register the resale of all of the Securities until such
further registration, then the shares registered initially shall apply pro-rata
among all of the Investors.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 effective under the
Securities Act until the earlier of (i) the date that none of the Securities
covered by such Registration Statement are or may become issued and outstanding,
(ii) the date that all of the Securities have been sold pursuant to such
Registration Statement, (iii) the date the Investors receive an opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Investors, that the Securities may be sold under the provisions of Rule 144
without limitation as to volume, (iv) all Securities have been otherwise
transferred to persons who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend, (v)
all Securities may be sold without any time, volume or manner limitations
pursuant to Rule 144(k) or any similar provision then in effect under the
Securities Act in the opinion of counsel to the Company, which counsel shall be
reasonably acceptable to the Investor (the "Effectiveness Period"), or (vi)
three (3) years from the Effective Date.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement under subparagraph 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys' fees
of the Company) shall be borne by the Company. The Investors shall bear the cost
of underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Securities being registered and the fees and expenses of their
counsel. The Investors and their counsel shall have a reasonable period, not to
exceed five (5) Trading Days, to review the proposed Registration Statement or
any amendment thereto, prior to filing with the Commission, and the Company
shall provide each Investor with copies of any comment letters received from the
Commission with respect thereto within two (2) Trading Days of receipt thereof.
The Company shall qualify any of the securities for sale in such states as any
Investor reasonably designates and shall furnish indemnification in the manner
provided in Section 6 hereof. However, the Company shall not be required to
qualify in any state which will require an escrow or other restriction relating
to the Company and/or the sellers, or which will require the Company to qualify
to do business in such state or require the Company to file therein any general
consent to service of process. The Company at its expense will supply the
Investors with copies of the applicable Registration Statement and the
prospectus included therein and other related documents in such quantities as
may be reasonably requested by the Investors.
(d) The Company shall not be required by this Section 3 to include
an Investor's Securities in any Registration Statement which is to be filed if,
in the opinion of counsel for both the Investor and the Company (or, should they
not agree, in the opinion of another counsel experienced in securities law
matters acceptable to counsel for the Investor and the Company) the proposed
offering or other transfer as to which such registration is requested is
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<PAGE> 57
exempt from applicable federal and state securities laws and would result in all
purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) In the event that (i) the Registration Statement to be filed by
the Company pursuant to Section 3(a) above is not filed with the Commission
within sixty (60) days from the Closing Date, (ii) such Registration Statement
is not declared effective by the Commission within one hundred (100) days from
the Closing Date or five (5) days of clearance by the Commission to request
effectiveness, (iii) such Registration Statement is not maintained as effective
by the Company for the period set forth in Section 3(b) above or (iv) the
additional Registration Statement referred to in Section 3(a) is not filed
within thirty (30) days or declared effective within ninety (90) days as set
forth therein (each a "Registration Default") then the Company will pay Investor
(pro rated on a daily basis) in cash or, at the option of the Investor, in
shares of Common Stock at the Conversion Price (as defined in the Certificate of
Designations) on the Trading Day prior to the date of payment, as liquidated
damages for such failure and not as a penalty two percent (2%) of the aggregate
market value of shares of Common Stock purchased from the Company (including the
Conversion Shares which would be issuable upon conversion of the Convertible
Preferred Stock on any date of determination, and whether or not the Convertible
Preferred Shares are then Convertible pursuant to their terms) and held by the
Investor for each month thereafter until such Registration Statement has been
filed, and in the event of late effectiveness (in case of clause (ii) above) or
lapsed effectiveness (in the case of clause (iii) above), two percent (2%) of
the aggregate market value of shares of Common Stock purchased from the Company
and held by the Investor (including the Conversion Shares which would be
issuable upon conversion of the Convertible Preferred Stock on any date of
determination, and whether or not the Convertible Preferred Stock are then
convertible pursuant to their terms) for each month thereafter (regardless of
whether one or more such Registration Defaults are then in existence) until such
Registration Statement has been declared effective. Such payment of the
liquidated damages shall be made to the Investors in cash, within five (5)
calendar days of demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Securities pursuant to this Section. The market value of the Common Stock for
this purpose shall be the closing price (or last trade, if so reported) on the
Principal Market for each day during such Registration Default. Notwithstanding
anything to the contrary contained herein, a failure to maintain the
effectiveness of an filed Registration Statement or the ability of an Investor
to use an otherwise effective Registration Statement to effect resales of
Securities during the period after forty-five (45) days and within ninety (90)
days from the end of the Company's fiscal year resulting solely from the need to
update the Company's financial statements contained or incorporated by reference
in such Registration Statement shall not constitute a Registration Default and
shall not trigger the accrual of liquidated damages hereunder.
If the Company does not remit the payment to the Investors as set
forth above, the Company will pay the Investors reasonable costs of collection,
including attorneys' fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit the Investors' other rights or remedies as set forth in this Agreement.
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(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any Registration Statement in which it is
required to include Securities pursuant to this Section 3.
(g) If at any time or from time to time after the effective date of
any Registration Statement, the Company notifies the Investors in writing of the
existence of a Potential Material Event (as defined in Section 3(h) below), the
Investors shall not offer or sell any Securities or engage in any other
transaction involving or relating to Securities, from the time of the giving of
notice with respect to a Potential Material Event until the Investors receive
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend the right to such
holders of Securities for more than twenty (20) days in the aggregate during any
twelve month period, during the period the Registration Statement is required to
be in effect, and if such period is exceeded, such event shall be a Registration
Default and subject to liquidated damages as set forth in Section 3(e) hereof.
If a Potential Material Event shall occur prior to the date a Registration
Statement is required to be filed, then the Company's obligation to file such
Registration Statement shall be delayed without penalty for not more than twenty
(20) days, and such delay or delays shall not constitute a Registration Default.
Such twenty (20) day period shall not be in addition to the twenty (20) day
period allowed during the period the Registration Statement is required to be in
effect. The Company must, if lawful, give the Investors notice in writing at
least two (2) Trading Days prior to the first day of the blackout period.
(h) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company that disclosure of such
information in a Registration Statement would be detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Chief Executive Officer or
the Board of Directors of the Company that the applicable Registration Statement
would be materially misleading absent the inclusion of such information.
Section 4. Cooperation with Company. The Investors will cooperate with
the Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Investors and proposed manner of sale of
the Registrable Securities required to be disclosed in any Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing their obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. Nothing
in this Agreement shall obligate any Investor to consent to be named as an
underwriter in any Registration Statement. The obligation of the Company to
register the Registrable Securities shall be absolute and unconditional as to
those Securities
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<PAGE> 59
which the Commission will permit to be registered without naming the Investors
as underwriters. Any delay or delays caused by the Investors by failure to
cooperate as required hereunder shall not constitute a Registration Default.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible, subject to
the Investors' assistance and cooperation as reasonably required with respect to
each Registration Statement:
(a) (i) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Investors shall desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities from time to time
in connection with a registration statement pursuant to Rule 415 promulgated
under the Act) and (ii) take all lawful action such that each of (A) the
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (B) the prospectus forming part of the Registration Statement,
and any amendment or supplement thereto, does not at any time during the
Registration Period include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(b) (i) prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any prospectus (including any supplements thereto), provide draft copies thereof
to the Investors as required by Section 3(c) and reflect in such documents all
such comments as the Investors (and their counsel) reasonably may propose
respecting the Selling Shareholders and Plan of Distribution sections (or
equivalents) and (ii) furnish to each Investor such numbers of copies of a
prospectus including a preliminary prospectus or any amendment or supplement to
any prospectus, as applicable, in conformity with the requirements of the Act,
and such other documents, as such Investor may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by such
Investor;
(c) register and qualify the Registrable Securities covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Investors shall reasonably request (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts and
things which may be necessary or advisable to enable each Investor to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by such Investor;
(d) list such Registrable Securities on the Principal Market,
if the listing of such Registrable Securities is then permitted under the rules
of such Principal Market;
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(e) notify each Investor at any time when a prospectus relating
thereto covered by the Registration Statement is required to be delivered under
the Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
(f) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts, as the case
may be, as the Investors reasonably may request and registered in such names as
the Investors may request; and, within three (3) Trading Days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Investors) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
prospectus which are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include
or incorporate in a prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment; and
(j) maintain a transfer agent and registrar for its Common
Stock.
Section 6. Indemnification.
(a) To the maximum extent permitted by law, the Company agrees to
indemnify and hold harmless the Investors and each person, if any, who controls
an Investor within the meaning of the Securities Act (each a "Distributing
Investor") against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement,
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<PAGE> 61
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees and expenses), to which the
Distributing Investor may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, or any
related final prospectus or amendment or supplement thereto, 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 to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent, and only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Investor, its counsel, affiliates or any
underwriter, specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) To the maximum extent permitted by law, each Distributing
Investor agrees that it will indemnify and hold harmless the Company, and each
officer and director of the Company or person, if any, who controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees and expenses) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, or any related final prospectus or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Distributing Investor, its counsel, affiliates or any
underwriter, specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which the Distributing Investor
may otherwise have. Notwithstanding anything to the contrary herein, the
Distributing Investor shall be liable under this Section 6(b) for only that
amount as does not exceed the net proceeds to such Distributing Investor as a
result of the sale of Registrable Securities pursuant to the Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action against such indemnified
party, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 6, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which it may have to any indemnified party except to the extent the failure of
the indemnified party to provide such written notification actually prejudices
the ability of the indemnifying party to defend such action. In case any such
action is brought against any
8
<PAGE> 62
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified parties as a group shall have the right to employ one 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
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party unless (i)
the employment of such counsel has been specifically authorized in writing by
the indemnifying party, or (ii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party and the indemnified party shall have been advised by its counsel that
there may be one or more legal defenses available to the indemnifying party
different from or in conflict with any legal defenses which may be available to
the indemnified party or any other indemnified party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld so long as such settlement includes a full release of
claims against the indemnified party.
All fees and expenses of the indemnified party (including reasonable
costs of defense and investigation in a manner not inconsistent with this
Section and all reasonable attorneys' fees and expenses) shall be paid to the
indemnified party, as incurred, within ten (10) Trading Days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the indemnifying party may require such indemnified
party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such indemnified party is not entitled to
indemnification hereunder).
Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Investor shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject
9
<PAGE> 63
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees and expenses), in either such case (after contribution from
others) on the basis of relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the applicable
Distributing Investor on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Investor agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall any (i)
Investor be required to undertake liability to any person under this Section 7
for any amounts in excess of the dollar amount of the proceeds received by such
Investor from the sale of such Investor's Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such Registrable Securities are
registered under the Securities Act and (ii) underwriter be required to
undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to such Registration Statement.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) hand delivered,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth in the
Purchase Agreement or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the first business day following the date of sending
by reputable courier service, fully prepaid, addressed to such address, or (c)
upon actual receipt of such mailing, if mailed. Either party hereto may from
time to time change its address or facsimile number for notices under this
Section 8 by giving at least ten (10) days' prior written notice of such changed
address or facsimile number to the other party hereto.
10
<PAGE> 64
Section 9. Assignment. This Agreement is binding upon and inures to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. The rights granted the Investors under this Agreement may be
assigned to any purchaser of substantially all of the Registrable Securities (or
the rights thereto) from an Investor, as otherwise permitted by the Purchase
Agreement.
Section 10. Additional Covenants of the Company. The Company agrees
that at such time as it otherwise meets the requirements for the use of
Securities Act Registration Statement on Form S-3 for the purpose of registering
the Registrable Securities, it shall file all reports and information required
to be filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
Section 11. Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
Section 12. Remedies. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.
Section 13. Conflicting Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.
Section 14. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 15. Governing Law, Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority
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<PAGE> 65
of the members of the Board of Arbitration) with respect to the amount, if any,
which the losing party is required to pay to the other party in respect of a
claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party, including reasonable attorneys' fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available, and the non-prevailing party
in any such injunctive proceeding shall pay the expenses of the prevailing
party, including reasonable attorneys' fees, in connection with such injunctive
proceeding.
12
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on this __ day of May, 2000.
PROFESSIONAL TRANSPORTATION
GROUP, LTD., INC.
By:
-----------------------------------------
Dennis A. Bakal, President and CEO
INVESTORS:
AMRO INTERNATIONAL, S.A.
By:
-----------------------------------------
H.U. Bachofen, Director
-----------------------------------------
John P. O'Shea
The Endeavour Capital Fund, S.A.
By: Endeavour Management, Inc.
By:
-----------------------------------------
Shmuli Margulies, President
CELESTE TRUST REG
By:
-----------------------------------------
Thomas Hakl, Authorized Signatory
BALMORE S.A.
By:
-----------------------------------------
Francois Moras, Authorized Signatory
13
<PAGE> 67
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of April 28, 2000,
by and among Professional Transportation Group Ltd., Inc., a corporation
incorporated under the laws of the State of Georgia (the "Company"), the
investors signatory hereto (each an "Investor" and together the "Investors"),
and Epstein Becker & Green, P.C., (the "Escrow Agent"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Convertible
Preferred Stock and Warrants Purchase Agreement referred to in the first
recital.
W I T N E S S E T H:
WHEREAS, the Investors will be purchasing from the Company 4,300 shares
of Convertible Preferred Stock (the "Convertible Preferred Stock") and Warrants
to purchase, in the aggregate, up to 266,666 shares of Common Stock, at the
purchase price set forth in the Convertible Preferred Stock and Warrants
Purchase Agreement (the "Purchase Agreement") dated the date hereof between the
Investors and the Company, which will be issued as per the terms contained
herein and in the Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth by Sections 4(2)
and/or 4(6) and/or Regulation D promulgated under the Securities Act of 1933, as
amended; and
WHEREAS, the Company and the Investors have requested that the Escrow
Agent hold the Purchase Price with respect to the Closing in escrow until the
Escrow Agent has received the certificates representing the Convertible
Preferred Stock, the Warrants and certain other closing documents specified
herein;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1. The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase of
the 4,300 shares of Convertible Preferred Stock and the Warrants at the Closing
as contemplated by the Purchase Agreement.
1.2. (a) At the Closing, upon Escrow Agent's receipt of the Purchase
Price for the Closing into its attorney trustee account from the Investors,
together with executed counterparts of this Agreement, the Purchase Agreement
and the Registration Rights Agreement,
1
<PAGE> 68
it shall telephonically advise the Company, or the Company's designated attorney
or agent, of the amount of funds it has received into its account.
(b) Wire transfers to the Escrow Agent shall be made as follows:
Epstein Becker & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1411 Broadway - Fifth Floor
New York, New York 10018
ABA No. 021000021
Account No. 035-1-346036
Attention: L. Borneo
1.3. The Company, upon receipt of said notice, shall deliver to the
Escrow Agent the certificates representing the Convertible Preferred Stock and
the Warrants to be issued to each Investor together with:
(i) the original executed Registration Rights Agreement
in the form of Exhibit C to the Purchase Agreement;
(ii) Instructions to Transfer Agent in the form of Exhibit
F to the Purchase Agreement;
(iii) the original executed opinion of Smith, Gambrell &
Russell, LLP, in the form of Exhibit E to the
Purchase Agreement; and
(iv) an original counterpart of this Escrow Agreement; and
(v) the voting agreements set forth in Section 2.1(b)(xi)
of the Purchase Agreement.
In the event that the foregoing items are not in the Escrow Agent's
possession within three (3) Trading Days of the Escrow Agent notifying the
Company that the Escrow Agent has custody of the Purchase Price, then each
Investor shall have the right to demand the return of said sum.
1.4. At the Closing, once Escrow Agent confirms the validity of the
issuance of the Convertible Preferred Shares and the Warrants by means of its
receipt of a Release Notice in the form attached hereto as Exhibit X executed by
the Company and each Investor, it shall enter the Commencement Date and
Termination Date of each Warrant on the face of each Warrant, insert the
Original Issuance Date on the face of the certificates representing the
Convertible Preferred Stock, and then wire that amount of funds necessary to
purchase the Convertible Preferred Stock and the Warrants per the written
instructions of the Company net of legal and escrow administrative costs of ten
thousand dollars ($10,000) to Epstein Becker & Green, P.C. ("EB&G"), 250 Park
Avenue, New York, NY 10177, and $125,000 to Andrew Worden, as payment of a
finder's fee.
Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Convertible
Preferred Stock certificates, the Warrants, the Registration Rights Agreement
and the opinion of counsel
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<PAGE> 69
delivered as per instructions from the Investors and to deliver the Instructions
to Transfer Agent to the Transfer Agent.
ARTICLE 2
MISCELLANEOUS
2.1. No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2. All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent as set forth in the Purchase
Agreement.
2.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
2.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
2.6. The parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, arising out of,
or relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City.
2.7. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each Investor and
the Escrow Agent.
2.8. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith, and any act done or omitted by the Escrow Agent
pursuant to
3
<PAGE> 70
the advice of the Escrow Agent's attorneys-at-law shall be conclusive evidence
of such good faith.
2.9. The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
2.10. The Escrow Agent shall not be liable in any respect on account of
the identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
2.11. The Escrow Agent shall be entitled to employ such legal counsel
and other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. THE ESCROW AGENT HAS ACTED AS LEGAL COUNSEL FOR THE
INVESTORS, AND MAY CONTINUE TO ACT AS LEGAL COUNSEL FOR THE INVESTORS, FROM TIME
TO TIME, NOTWITHSTANDING ITS DUTIES AS THE ESCROW AGENT HEREUNDER. THE COMPANY
CONSENTS TO THE ESCROW AGENT IN SUCH CAPACITY AS LEGAL COUNSEL FOR THE INVESTORS
AND WAIVES ANY CLAIM THAT SUCH REPRESENTATION REPRESENTS A CONFLICT OF INTEREST
ON THE PART OF THE ESCROW AGENT. THE COMPANY UNDERSTANDS THAT THE INVESTORS AND
THE ESCROW AGENT ARE RELYING EXPLICITLY ON THE FOREGOING PROVISION IN ENTERING
INTO THIS ESCROW AGREEMENT.
2.12. The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Investors. In the event of any such resignation, the Investors
and the Company shall appoint a successor Escrow Agent.
2.13 If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
2.14 It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York in accordance with the
applicable procedure therefor.
4
<PAGE> 71
2.15 The Company and each Investor agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
5
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of this __ day of April, 2000. Professional Transportation
Group Ltd., Inc.
BY:
-----------------------------------------
Dennis A. Bakal, President and CEO
INVESTORS:
AMRO INTERNATIONAL, S.A.
BY:
-----------------------------------------
H.U. Bachofen, Director
--------------------------------------------
John P. O'Shea
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
BY:
-----------------------------------------
6
<PAGE> 73
EXHIBIT X TO
ESCROW AGREEMENT
RELEASE NOTICE
THE UNDERSIGNED, pursuant to the Escrow Agreement, dated as of April
28, 2000 among Professional Transportation Group Ltd., Inc., the Investors
signatory thereto and Epstein Becker & Green, P.C., as Escrow Agent (the "Escrow
Agreement"; capitalized terms used herein and not defined shall have the meaning
ascribed to such terms in the Escrow Agreement), hereby notify the Escrow Agent
that each of the conditions precedent to the purchase and sale of the
Convertible Preferred Stock and Warrants set forth in the Convertible Preferred
Stock and Warrants Purchase Agreement have been satisfied. The Company and the
undersigned Investor hereby confirm that all of their respective representations
and warranties contained in the Purchase Agreement remain true and correct and
authorize the release by the Escrow Agent of the funds and documents to be
released at the Closing as described in the Escrow Agreement. This Release
Notice shall not be effective until executed by the Company and the Investor.
This release notice may be signed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to
be duly executed and delivered as of this __ day of April, 2000.
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
By:
--------------------------------------------------
Dennis A. Bakal, President and CEO
INVESTORS:
AMRO International, S.A.
By:
--------------------------------------------------
H.U. Bachofen, Director
7
<PAGE> 74
[RELEASE SIG PAGE CONTINUED - PTGI]
--------------------------------------------------
John P. O'Shea
The Endeavour Capital Fund, S.A.
By: Endeavour Management, Inc.
By:
--------------------------------------------------
Shmuli Margulies, President
CELESTE TRUST REG
By:
--------------------------------------------------
Thomas Hakl, Authorized Signatory
BALMORE S.A.
By:
--------------------------------------------------
Francois Moras, Authorized Signatory
8
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$2,325,000.00 MAY 17, 2000
FOR VALUE RECEIVED, Serra/Martin Living Trust (the "Debtor"), hereby
promises to pay to PROFESSIONAL TRANSPORTATION GROUP LTD., INC. (hereinafter
referred to as the "Payee"), or assigns the principal sum of Two Million, Three
Hundred Twenty-Five Dollars ($2,325,000.00) together with interest on the
unpaid principal balance at a rate of six and one-half percent (6.5%) per
annum, with interest only payable on the first and second anniversaries of this
Promissory Note, and with all remaining principal and interest payable on the
third anniversary of this Promissory Note. Debtor may prepay this Note at any
time. All payments shall be made in United States dollars, except at the
election of the Debtor, all or a portion of the Collateral as described below
may be used as payment in the Debtor's sole discretion, and in the event that
the Debtor so elects, each share of stock constituting the Collateral shall be
deemed to have a value of $5.00 per share, which amount shall be adjusted for
any stock split, recapitalization, etc.
If any deficiency in the payment of any installment under this note is
not made good prior to ten business days after same becomes due and payable,
the entire balance and accrued interest shall at once become due and payable
without notice at the option of the holder of this Note. Failure to exercise
this option shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this note and all notices of every kind are hereby waived.
No single or partial exercise of any power hereunder shall preclude
the other or further exercise thereof or the exercise of any other power. No
delay or omission on the part of the holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
If any amount owing under this Note is not paid when due, the
undersigned promises to pay all costs of collection including, but not limited
to, reasonable attorneys' fees and court costs incurred by the holder hereof on
account of such collection, whether or not suit is filed hereon.
Notwithstanding anything to the contrary in this Note or the Stock
Pledge Agreement of even date herewith (which together with this Promissory
Note is collectively called "the Loan Documents"), the liability and obligation
of the Debtor to perform the obligations contained in the Loan Documents, shall
not be enforced by any action or proceeding pursuant to which damages or any
money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against the Debtor. The Payee for itself and its successors and
assigns, irrevocably waives any and all right to sue for, seek or demand any
such damages, money judgment, deficiency judgment or personal judgment against
the Debtor, on account of any obligation to the Payee under the Loan Documents,
and agrees to look solely to the property held by it as collateral pursuant to
the Loan Documents (the collateral being
<PAGE> 2
called the "Collateral") for the enforcement of such obligation of the Debtor
under the Loan Documents. Nothing contained in this Section shall be construed
(i) as preventing the Payee from naming the Debtor in any action or proceeding
brought by the Payee to enforce and to realize upon the Collateral (or any part
thereof or interest therein) so long as no judgment, order, decree or other
relief in the nature of a personal or deficiency judgment or otherwise
establishing any personal obligation shall be asked for, taken, entered or
enforced against the Debtor, in any such action or proceeding, (ii) as
modifying, qualifying or affecting in any manner whatsoever the lien and
security interests created by the Loan Documents or the enforcement thereof by
the Payee; (iii) as modifying, qualifying or affecting in any manner whatsoever
the personal recourse undertakings, obligations and liabilities of the Debtor;
or (iv) as modifying, qualifying or affecting in any manner whatsoever the
personal recourse liability of the Debtor, or any other person, party or
entity, for fraud or willful misrepresentation or any wrongful misappropriation
or diversion of the Collateral (or any part thereof or interest therein).
This Promissory Note shall be deemed to be a contract made under the
laws of the State of Georgia and shall be governed by and construed in
accordance with the internal laws thereof.
SERRA/MARTIN LIVING TRUST
By: /s/ Robert Serra
---------------------------------------
Its: Robert Serra, Trustee
By: /s/ Susan Martin
---------------------------------------
Its: Susan Martin, Trustee
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
$2,325,000.00 MAY 17, 2000
FOR VALUE RECEIVED, Mark Kapper (the "Debtor"), hereby promises to pay
to PROFESSIONAL TRANSPORTATION GROUP LTD., INC. (hereinafter referred to as the
"Payee"), or assigns the principal sum of Two Million, Three Hundred
Twenty-Five Dollars ($2,325,000.00) together with interest on the unpaid
principal balance at a rate of six and one-half percent (6.5%) per annum, with
interest only payable on the first and second anniversaries of this Promissory
Note, and with all remaining principal and interest payable on the third
anniversary of this Promissory Note. Debtor may prepay this Note at any time.
All payments shall be made in United States dollars, except at the election of
the Debtor, all or a portion of the Collateral as described below may be used
as payment in the Debtor's sole discretion, and in the event that the Debtor so
elects, each share of stock constituting the Collateral shall be deemed to have
a value of $5.00 per share, which amount shall be adjusted for any stock split,
recapitalization, etc.
If any deficiency in the payment of any installment under this note is
not made good prior to ten business days after same becomes due and payable,
the entire balance and accrued interest shall at once become due and payable
without notice at the option of the holder of this Note. Failure to exercise
this option shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this note and all notices of every kind are hereby waived.
No single or partial exercise of any power hereunder shall preclude
the other or further exercise thereof or the exercise of any other power. No
delay or omission on the part of the holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
If any amount owing under this Note is not paid when due, the
undersigned promises to pay all costs of collection including, but not limited
to, reasonable attorneys' fees and court costs incurred by the holder hereof on
account of such collection, whether or not suit is filed hereon.
Notwithstanding anything to the contrary in this Note or the Stock
Pledge Agreement of even date herewith (which together with this Promissory
Note is collectively called "the Loan Documents"), the liability and obligation
of the Debtor to perform the obligations contained in the Loan Documents, shall
not be enforced by any action or proceeding pursuant to which damages or any
money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against the Debtor. The Payee for itself and its successors and
assigns, irrevocably waives any and all right to sue for, seek or demand any
such damages, money judgment, deficiency judgment or personal judgment against
the Debtor, on account of any obligation to the Payee under the Loan Documents,
and agrees to look solely to the property held by it as collateral pursuant to
the Loan Documents (the collateral being
<PAGE> 2
called the "Collateral") for the enforcement of such obligation of the Debtor
under the Loan Documents. Nothing contained in this Section shall be construed
(i) as preventing the Payee from naming the Debtor in any action or proceeding
brought by the Payee to enforce and to realize upon the Collateral (or any part
thereof or interest therein) so long as no judgment, order, decree or other
relief in the nature of a personal or deficiency judgment or otherwise
establishing any personal obligation shall be asked for, taken, entered or
enforced against the Debtor, in any such action or proceeding, (ii) as
modifying, qualifying or affecting in any manner whatsoever the lien and
security interests created by the Loan Documents or the enforcement thereof by
the Payee; (iii) as modifying, qualifying or affecting in any manner whatsoever
the personal recourse undertakings, obligations and liabilities of the Debtor;
or (iv) as modifying, qualifying or affecting in any manner whatsoever the
personal recourse liability of the Debtor, or any other person, party or
entity, for fraud or willful misrepresentation or any wrongful misappropriation
or diversion of the Collateral (or any part thereof or interest therein).
This Promissory Note shall be deemed to be a contract made under the
laws of the State of Georgia and shall be governed by and construed in
accordance with the internal laws thereof.
/s/ Mark Kapper
----------------------------------
Mark Kapper
<PAGE> 1
EXHIBIT 10.4
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is dated as of May 17,
2000 by and between Mark Kapper (the "Pledgor") and Professional Transportation
Group Ltd., Inc. (the "Pledgee").
WHEREAS, contemporaneously with the execution of this Agreement,
Pledgor has executed a promissory note (the "Note") in the amount of
$2,325,000.00 and entered into the Proceeds Agreement pursuant to which Pledgor
may have an obligation to make certain other payments to Pledgee (the "Excess
Payment Obligations"); and
WHEREAS, the Pledgor has agreed to pledge 465,000 shares of the common
stock of Pledgee titled in Pledgor's name (the "Pledged Shares") as security
for the repayment of the Note and Pledgee's obligations pursuant to the
Proceeds Agreement dated as of the date hereof (collectively, the
"Obligations") and subject to the terms of this Pledge Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:
1. PLEDGE OF SHARES. As collateral security for the payment of
the Obligations, Pledgor hereby pledges unto Pledgee the Pledged Shares and
grants a security interest therein together with any proceeds therefrom and all
securities and other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares and/or such additional shares. Pledgor hereby appoints Pledgee
as its attorney to arrange for the transfer of the Pledged Shares on the books
of the Pledgee to the name of Pledgee and will, upon request of Pledgee,
deliver to Pledgee a duly executed stock power relating to the Pledged Shares;
provided, however, that the record ownership of the Pledged Shares shall remain
in Pledgor until the Pledgee exercises its rights pursuant to this Agreement.
Pledgee shall hold the Pledged Shares as security for repayment of the
Obligations and shall not encumber or dispose of the Pledged Shares except in
accordance with the provisions of this Agreement.
2. VOTING RIGHTS; STOCK ADJUSTMENTS. During the term of this
Agreement, Pledgee shall have the right to exercise all voting rights
pertaining to the Pledged Shares. In the event that, during the term of this
Agreement, any stock dividend, stock split, combination, subdivision,
reorganization, recapitalization, reclassification, readjustment, or other
change is declared or made in the capital structure of the Company, Pledgor
shall promptly deliver to the Pledgee, all new, substituted, and additional
shares, or other securities, issued by reason of any such change, to be held by
the Pledgee under the terms of this Agreement as part of the Pledged Shares. In
the event that, during the term of this Agreement, subscription warrants or any
other rights or warrants shall be issued in respect to the Pledged Shares and
exercised by Pledgor, all new stock or other securities acquired by Pledgor
shall be immediately assigned to Pledgee to be held under the terms of this
Agreement as part of the Pledged Shares.
<PAGE> 2
3. PAYMENT OF NOTE. Upon payment or satisfaction of the
Obligations, Pledgee shall transfer to Pledgor all of the Pledged Shares.
4. REMEDIES UPON DEFAULT OR BREACH. Upon the occurrence of an
Event of Default under the Note or upon a breach of Pledgor's obligations
pursuant to the Proceeds Agreement, Pledgee may, upon 15 days notice to the
Pledgor sent by registered mail, redeem the Pledged Shares in payment of the
Obligations in its sole discretion, free from any right or equity of
redemption. In addition, Pledgee shall have the following remedies available to
it:
(a) Pledgee may cause title to the Collateral then in
Pledgee's possession to be transferred to Pledgee by virtue of the blank
power(s) for the conveyance of the Collateral to Pledgee; and
(b) Subject to the requirements of applicable law, and
without limiting any rights otherwise available hereunder or under law, sell,
assign and deliver all of the Collateral at public or private sale for cash, on
credit or for other property, for immediate or future delivery, without any
assumption of credit risk, and for such price and upon such terms as are
commercially reasonable.
Any sale of the Collateral or any portion thereof shall be subject to
compliance with applicable securities laws and rules and regulations
thereunder. Pledgee shall be authorized at any such sale to restrict the
prospective bidders or Pledgor to persons who will represent and agree that
they are purchasing the Collateral for their own account, for investment and
not with a view to the distribution or sale thereof, and upon consummation of
any such sale.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by law) all rights of redemption, stay
or appraisal that Pledgor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
If notice of intended disposition of the Collateral is required by
law, such notice shall be deemed reasonable and proper if given to Pledgor at
least 15 days prior to such disposition stating Pledgee's intention to make any
such public or private sale. Any such notice, in case of public sale, shall
state the time and place for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places
as Pledgee may fix and shall state in the notice of such sale. At any such
sale, all of the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as Pledgee may (in Pledgee's sole
and absolute discretion) determine.
Pledgee shall not be obligated to make any sale of the Collateral if
Pledgee shall determine not to do so, regardless of the fact that notice of
sale of the Collateral may have been given. Pledgee may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.
<PAGE> 3
In case sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by Pledgee until
the sale price is paid by the Pledgor thereof, but Pledgee shall not incur any
liability in case any such purchaser shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be
sold again upon like notice.
(c) Notwithstanding the foregoing and without regard to the fair
market value of the Collateral and/or the purchase price offered by a third
party, the Pledgee or the Pledgor, the Pledgee acknowledges that it will treat
the value of each share of the Pledged Shares as having a value of $5.00 per
share, or such value as may be determined after taking into account any stock
dividend, stock split, combination, subdivision, reorganization,
recapitalization, reclassification, readjustment, or other change in the
capital structure of the Company.
5. SUBSTITUTION OF COLLATERAL; PARTIAL RELEASE. Pledgor may at
any time during the term of this Agreement propose that Pledgee accept as
Collateral unencumbered property of Pledgor having a fair market value and
liquidity equal to or in excess of the Pledged Shares (but not more than $5.00
per share). In the event that the Pledgee agrees to the value and liquidity of
such unencumbered property (the "Substitute Collateral") and consents to accept
the Substitute Collateral (which consent shall not be unreasonably withheld),
the Pledgee shall release to Pledgor the Pledged Shares at such time that the
Pledgee obtains a perfected first priority security interest in the Substitute
Collateral, which shall then become subject to the terms of this Agreement.
Upon the request of Pledgor, Pledgee shall release to Pledgor so much of the
Pledged Shares whose agreed value exceeds the amount of the Obligations.
6. MISCELLANEOUS. No failure or delay on the part of any party
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. No modification, amendment, termination, waiver or consent under this
Agreement, the Note or the Proceeds Agreement shall be valid unless evidenced
by a writing signed by the party against whom any of the foregoing actions is
sought to be enforced. This Agreement, the Proceeds Agreement and the Note
constitute the entire agreement between the parties and supersedes all prior
proposals and agreements, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement, the Proceeds
Agreement or the Note. The invalidity, illegality or unenforceability of any
provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision. This Agreement shall be binding upon and
inure to the benefit of the Pledgee and the Pledgor and their respective
successors and assigns. All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage paid, return
receipt requested. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under seal as of the date and year first above written.
PLEDGEE: PLEDGOR:
PROFESSIONAL TRANSPORTATION
GROUP LTD., INC.
By: /s/ Dennis A. Bakal /s/ Mark Kapper
------------------------------ -------------------------
Dennis A. Bakal, President Mark Kapper
<PAGE> 1
EXHIBIT 10.5
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is dated as of May 17,
2000 by and between Serra/Martin Living Trust (the "Pledgor") and Professional
Transportation Group Ltd., Inc. (the "Pledgee").
WHEREAS, contemporaneously with the execution of this Agreement,
Pledgor has executed a promissory note (the "Note") in the amount of
$2,325,000.00 and entered into the Proceeds Agreement pursuant to which Pledgor
may have an obligation to make certain other payments to Pledgee (the "Excess
Payment Obligations"); and
WHEREAS, the Pledgor has agreed to pledge 465,000 shares of the common
stock of Pledgee titled in Pledgor's name (the "Pledged Shares") as security
for the repayment of the Note and Pledgee's obligations pursuant to the
Proceeds Agreement dated as of the date hereof (collectively, the
"Obligations") and subject to the terms of this Pledge Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:
1. PLEDGE OF SHARES. As collateral security for the payment of the
Obligations, Pledgor hereby pledges unto Pledgee the Pledged Shares and grants
a security interest therein together with any proceeds therefrom and all
securities and other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares and/or such additional shares. Pledgor hereby appoints Pledgee
as its attorney to arrange for the transfer of the Pledged Shares on the books
of the Pledgee to the name of Pledgee and will, upon request of Pledgee,
deliver to Pledgee a duly executed stock power relating to the Pledged Shares;
provided, however, that the record ownership of the Pledged Shares shall remain
in Pledgor until the Pledgee exercises its rights pursuant to this Agreement.
Pledgee shall hold the Pledged Shares as security for repayment of the
Obligations and shall not encumber or dispose of the Pledged Shares except in
accordance with the provisions of this Agreement.
2. VOTING RIGHTS; STOCK ADJUSTMENTS. During the term of this
Agreement, Pledgee shall have the right to exercise all voting rights
pertaining to the Pledged Shares. In the event that, during the term of this
Agreement, any stock dividend, stock split, combination, subdivision,
reorganization, recapitalization, reclassification, readjustment, or other
change is declared or made in the capital structure of the Company, Pledgor
shall promptly deliver to the Pledgee, all new, substituted, and additional
shares, or other securities, issued by reason of any such change, to be held by
the Pledgee under the terms of this Agreement as part of the Pledged Shares. In
the event that, during the term of this Agreement, subscription warrants or any
other rights or warrants shall be issued in respect to the Pledged Shares and
exercised by Pledgor, all new stock or other securities acquired by Pledgor
shall be immediately assigned to Pledgee to be held under the terms of this
Agreement as part of the Pledged Shares.
<PAGE> 2
3. PAYMENT OF NOTE. Upon payment or satisfaction of the Obligations,
Pledgee shall transfer to Pledgor all of the Pledged Shares.
4. REMEDIES UPON DEFAULT OR BREACH. Upon the occurrence of an Event of
Default under the Note or upon a breach of Pledgor's obligations pursuant to
the Proceeds Agreement, Pledgee may, upon 15 days notice to the Pledgor sent by
registered mail, redeem the Pledged Shares in payment of the Obligations in its
sole discretion, free from any right or equity of redemption. In addition,
Pledgee shall have the following remedies available to it:
(a) Pledgee may cause title to the Collateral then in Pledgee's
possession to be transferred to Pledgee by virtue of the blank power(s) for the
conveyance of the Collateral to Pledgee; and
(b) Subject to the requirements of applicable law, and without
limiting any rights otherwise available hereunder or under law, sell, assign
and deliver all of the Collateral at public or private sale for cash, on credit
or for other property, for immediate or future delivery, without any assumption
of credit risk, and for such price and upon such terms as are commercially
reasonable.
Any sale of the Collateral or any portion thereof shall be subject to
compliance with applicable securities laws and rules and regulations
thereunder. Pledgee shall be authorized at any such sale to restrict the
prospective bidders or Pledgor to persons who will represent and agree that
they are purchasing the Collateral for their own account, for investment and
not with a view to the distribution or sale thereof, and upon consummation of
any such sale.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by law) all rights of redemption, stay
or appraisal that Pledgor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
If notice of intended disposition of the Collateral is required by
law, such notice shall be deemed reasonable and proper if given to Pledgor at
least 15 days prior to such disposition stating Pledgee's intention to make any
such public or private sale. Any such notice, in case of public sale, shall
state the time and place for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places
as Pledgee may fix and shall state in the notice of such sale. At any such
sale, all of the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as Pledgee may (in Pledgee's sole
and absolute discretion) determine.
Pledgee shall not be obligated to make any sale of the Collateral if
Pledgee shall determine not to do so, regardless of the fact that notice of
sale of the Collateral may have been given. Pledgee may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.
<PAGE> 3
In case sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by Pledgee until
the sale price is paid by the Pledgor thereof, but Pledgee shall not incur any
liability in case any such purchaser shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be
sold again upon like notice.
(c) Notwithstanding the foregoing and without regard to the fair
market value of the Collateral and/or the purchase price offered by a third
party, the Pledgee or the Pledgor, the Pledgee acknowledges that it will treat
the value of each share of the Pledged Shares as having a value of $5.00 per
share, or such value as may be determined after taking into account any stock
dividend, stock split, combination, subdivision, reorganization,
recapitalization, reclassification, readjustment, or other change in the
capital structure of the Company.
5. SUBSTITUTION OF COLLATERAL; PARTIAL RELEASE. Pledgor may at any
time during the term of this Agreement propose that Pledgee accept as
Collateral unencumbered property of Pledgor having a fair market value and
liquidity equal to or in excess of the Pledged Shares (but not more than $5.00
per share). In the event that the Pledgee agrees to the value and liquidity of
such unencumbered property (the "Substitute Collateral") and consents to accept
the Substitute Collateral (which consent shall not be unreasonably withheld),
the Pledgee shall release to Pledgor the Pledged Shares at such time that the
Pledgee obtains a perfected first priority security interest in the Substitute
Collateral, which shall then become subject to the terms of this Agreement.
Upon the request of Pledgor, Pledgee shall release to Pledgor so much of the
Pledged Shares whose agreed value exceeds the amount of the Obligations.
6. MISCELLANEOUS. No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. No modification, amendment, termination, waiver or consent under this
Agreement, the Note or the Proceeds Agreement shall be valid unless evidenced
by a writing signed by the party against whom any of the foregoing actions is
sought to be enforced. This Agreement, the Proceeds Agreement and the Note
constitute the entire agreement between the parties and supersedes all prior
proposals and agreements, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement, the Proceeds
Agreement or the Note. The invalidity, illegality or unenforceability of any
provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision. This Agreement shall be binding upon and
inure to the benefit of the Pledgee and the Pledgor and their respective
successors and assigns. All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage paid, return
receipt requested. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under seal as of the date and year first above written.
PLEDGEE: PLEDGOR:
PROFESSIONAL TRANSPORTATION SERRA/MARTIN LIVING TRUST
GROUP LTD., INC.
By: /s/ Dennis A. Bakal /s/ Robert Serra
------------------------------- ----------------------------------
Dennis A. Bakal, President Robert Serra, Trustee
By:/s/ Susan Martin
-------------------------------
Susan Martin, Trustee
<PAGE> 1
EXHIBIT 10.6
PROCEEDS AGREEMENT
The undersigned parties to the Merger Agreement and Plan of
Reorganization dated as of May 17, 2000 (the "Merger Agreement") hereby agree
as follows (any capitalized terms not defined herein having the meanings given
them in the Merger Agreement):
1. Guaranty. Until May 17, 2004 (the "Payoff Date"), Buyer guaranties
to Sellers the receipt of not less than an average price of $5.00 per Share
upon the sale or other disposition in an arm's length transaction of the Stock
Consideration (subject to appropriate adjustment in the event of any stock
split, reverse stock split, dividend of Shares or reclassification of the
Shares). The foregoing guaranty shall also apply to any Shares redeemed by
Buyer in satisfaction of Sellers' obligations to Buyer under certain Promissory
Notes dated the date hereof (the "Notes").
2. Deemed Sales. For purposes hereof, if Sellers fail to (I) elect to
receive cash in any merger or other event involving the Buyer in which a cash
election is offered to Sellers at $5.00 or more per Share, (II) elect to
include Shares in a registered public offering or private offering in which the
Buyer offers to include the Stock Consideration for sale at $5.00 or more per
Share and such offering is effected at $5.00 per Share (in all such cases the
amount being received being calculated before selling commissions and expenses)
(each such event or circumstance in clauses I-II being a "Sale Opportunity" and
the price which would have been received being the "Sale Opportunity Price"),
then Sellers shall have been deemed to have sold the Shares that would have
been eligible for sale in each such Sale Opportunity at the Sale Opportunity
Price, allocating such Shares among such Sale Opportunities in a manner that
yields the greatest aggregate deemed sales proceeds. In the event a Seller
delivers Shares in repayment of the Note after the Payoff Date ("Note
Payments"), such Share payments shall be included as Deemed Sales for purposes
of calculating the payments due under Sections 4 and 5, with the Shares being
valued for purposes thereof as provided in Section 4.
For purposes hereof, "Buyer" shall include any entity into which Buyer
is combined and "Shares" shall mean shares of stock of the combining entity
given Sellers as consideration in such combination.
3. Sales. Sellers shall give the Buyer notice of their sales as
requested by Buyer from time-to-time, and shall give Buyer no less than 15
days' prior notice of any proposed sale or series of sales of Shares in excess
of 100,000 Shares.
4. Shortfall Payment. If on the Payoff Date a Seller's average sales
price for dispositions to which the guaranteed price in Section 1 applies and
Deemed Sales (the "Average Price") are less than $5.00 per Share, the Buyer
shall pay to such Seller an amount (the "Shortfall Payment") in cash equal to
the difference between (I) the product of $5.00 times the number of Shares sold
subject to the Guaranty and (II) the product of the Average Price times the
number of such Shares. Such payment shall be made within 90 days after
determination of the Shortfall Payment.
<PAGE> 2
5. Excess Payment. If the Average Price (excluding Deemed Sales other
than Note Payments) for any Seller is greater than $5.00, then such Seller
shall pay to Buyer an amount equal to one-half of the difference between: (I)
the product of $5.00 times the number of Shares sold subject to the Guaranty,
and (II) the product of the Average Price times the number of such Shares. Such
payment shall be in cash and/or Shares (at the election of such Seller) within
90 days after determination of the Excess Payment amount.
6. Pledge of Shares. The parties shall enter into and deliver their
respective Pledge Agreements dated the date hereof to secure their obligations
hereunder.
IN WITNESS WHEREOF, Buyer and Sellers have duly executed and delivered
this Agreement as of the date first above written.
Dated: As of May 17, 2000
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
BY: /s/ Dennis A. Bakal
--------------------------------------
Dennis A. Bakal, President
- -----------------------------------------
SERRA/MARTIN LIVING TRUST
/s/ Robert Serra
- -----------------------------------------
Trustee
/s/ Susan Martin
- -----------------------------------------
Trustee
/s/ Mark Kapper
- -----------------------------------------
Mark Kapper
