AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1997
REGISTRATION NO. 333-24937
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MEDLEY CREDIT ACCEPTANCE CORP.
(Name of Small Business Issuer in Its Charter)
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DELAWARE 6153 13-3571419
(State Or Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Identification
Organization) Classification Code No.)
Number)
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10910 N.W. SOUTH RIVER DRIVE
MIAMI, FL 33178
(305) 889-1900
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
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ROBERT D. PRESS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND TREASURER
MEDLEY CREDIT ACCEPTANCE CORP.
10910 N.W. SOUTH RIVER DRIVE
MIAMI, FL 33178
(305) 889-1900
(Name, Address and Telephone Number of Agent For Service)
-------------------
COPIES TO:
DAVID R. HARDY, ESQ. JONATHAN L. SHEPARD, ESQ.
REID & PRIEST LLP SIEGEL, LIPMAN, DUNAY & SHEPARD, LLP
40 WEST 57TH STREET THE PLAZA SUITE 801
NEW YORK, NEW YORK 10019 5355 TOWN CENTER ROAD
(212) 603-2000 BOCA RATON, FL 33486
(561) 368-7700
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<PAGE>
CALCULATION OF REGISTRATION FEE
==========================================================================
PROPOSED PROPOSED
DOLLAR MAXIMUM MAXIMUM
TITLE OF EACH AMOUNT TO OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
--------------------------------------------------------------------------
Common Stock, $.01 1,600,000 $5.50 $8,800,000 $2,666.67
par value shares
--------------------------------------------------------------------------
Redeemable Common 1,600,000 $0.15 $ 240,000 $72.73
Stock Purchase Warrants(2)
Warrants
--------------------------------------------------------------------------
Common Stock, $.01 1,600,000 $5.75 $9,200,000 $2,787.88
par value shares(2)
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Total $18,240,000 $5,527.28(3)
==========================================================================
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 promulgated under the Securities
Act of 1933, as amended.
(2) Together with such indeterminate number of additional Redeemable
Common Stock Purchase Warrants and shares of Common Stock as may be
issued pursuant to the anti-dilution provisions of the Redeemable
Common Stock Purchase Warrants pursuant to Rule 416(a) promulgated
under the Securities Act of 1933, as amended.
(3) Of this amount, $5,163.64 has previously been paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===========================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS DATED JUNE 11, 1997
SUBJECT TO COMPLETION
1,600,000 SHARES OF COMMON STOCK AND
REDEEMABLE WARRANTS TO PURCHASE 1,600,000 SHARES OF COMMON STOCK
MEDLEY CREDIT ACCEPTANCE CORP.
Medley Credit Acceptance Corp., a Delaware corporation (the
"Company"), is offering hereby, subject to the immediately following
paragraph, a minimum of 1,200,000 shares of common stock, $.01 par value
per share (the "Common Stock"), and redeemable warrants to purchase a
minimum of 1,200,000 shares of Common Stock (the "Warrants"), on a best
efforts, all or none basis (the "Minimum Offering"), and a maximum of
1,600,000 shares of Common Stock and Warrants to purchase 1,600,000 shares
of Common Stock (the "Maximum Offering"), at an offering price of $5.50 per
share of Common Stock and $0.15 per Warrant. The shares of Common Stock
and Warrants in excess of the Minimum Offering will be offered on a "best
efforts" basis. Pending the sale of 1,200,000 shares of Common Stock and
1,200,000 Warrants, all proceeds will be held in an escrow account. If
1,200,000 shares of Common Stock and 1,200,000 Warrants are not sold within
30 days from the date hereof (which may be extended an additional 30 days
by mutual agreement of the Company and the Underwriter), all monies
received will be refunded to subscribers in full. If subscriptions for
1,200,000 shares of Common Stock and 1,200,000 Warrants have been received,
the offering will continue on a "best efforts" basis, up to a maximum of
1,600,000 shares of Common Stock and 1,600,000 Warrants, but without any
escrow or refund provisions.
Of the shares of Common Stock being offered hereby, 1,000,000 shares
(in the event of the Minimum Offering and 1,400,000 shares in the event of
the Maximum Offering) are being offered directly by the Company and 200,000
shares are being offered directly by Medley Group, Inc., the Company's
parent ("Group" or the "Selling Stockholder"). The Company will not
receive directly any of the proceeds from the sale of the Common Stock by
Group. The 200,000 shares of Common Stock being offered by Group will be
included among the 1,200,000 shares being offered in the Minimum Offering.
Group and the Company are parties to an agreement pursuant to which, among
other things, Group, on behalf of Medley Refrigeration, Inc., Group's
majority owned subsidiary and an affiliate of the Company ("Medley
Refrigeration"), will remit to the Company, at the closing of the Minimum
Offering, the $990,000 in net proceeds generated from Group's sale of its
200,000 shares of Common Stock in the Minimum Offering. This $990,000 will
be paid to the Company to satisfy, in their entirety, all receivables then
outstanding from Medley Refrigeration to the Company. Group, pursuant to
the Escrow Agreement controlling the disbursement of subscription proceeds
at the closing of the Minimum Offering, has authorized the Escrow Agent (as
defined below) to remit directly to the Company, concurrently with the
closing of the Minimum Offering, the $990,000 in net proceeds then held in
escrow attributable to Group's sale of its 200,000 shares of Common Stock
in the Minimum Offering.
The shares of Common Stock and the Warrants may be purchased
separately and will be separately transferable immediately upon issuance.
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock at a price of $5.75 at any time commencing one year from
the date of this Prospectus until ( ), 2002 (five years after the date of
this Prospectus). The Warrants are redeemable by the Company, with the
consent of the Underwriter, at any time after ( ), 1998 (one year after the
date of this Prospectus), upon notice of not less than 30 days, at a price
of $.15 per Warrant, provided that the closing bid quotation of the Common
Stock on all 25 of the trading days ending on the third day prior to the
day on which the Company gives notice of redemption has been at least 150%
(currently $8.25, subject to adjustment) of the offering price of the
Common Stock being offered hereby. The holders of the Warrants are granted
exercise rights until the close of business on the date fixed for
redemption. See "Description of Securities."
Prior to this offering, there has been no public market for the Common
Stock or the Warrants. No assurance can be given that public markets for
the Common Stock or Warrants will develop following the completion of this
offering or that, if any such markets do develop, they will be sustained.
It is anticipated that the Common Stock and the Warrants will be quoted on
the NASDAQ Small-Cap Market system ("NASDAQ") under the proposed symbols
"MCAC" and "MCACW", respectively. Such listing will be effective upon the
closing of the Minimum Offering. For a discussion of the factors
considered in determining the offering prices, see "Underwriting."
The Company has a limited operating history and limited or no
experience in some of the businesses it anticipates pursuing. In addition,
the Company will rely heavily on the management services of affiliates who,
in turn, have limited operating histories and limited capital. See
"Business."
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THESE ARE SPECULATIVE SECURITIES. THE SECURITIES OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD
NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" AND "DILUTION."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
==========================================================================
UNDERWRITING PROCEEDS
DISCOUNTS PROCEEDS TO
AND TO SELLING
PRICE TO COMMISSIONS COMPANY SHAREHOLDERS
PUBLIC (1)(2) (1)(3) (1)(3)(4)
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Per Share $ 5.50 $ 0.550 $ 4.950 $ 4.950
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Per Warrant $ 0.15 $ 0.015 $ 0.135 --
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Total Minimum $6,780,000 $ 678,000 $5,112,000 $990,000
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Total Maximum $9,040,000 $ 904,000 $7,146,000 $990,000
==========================================================================
(1) The shares of Common Stock and Warrants are offered on a best efforts
basis. This offering terminates on ( ), 1997, provided the Company
and the Underwriter may agree to extend the offering until ( ), 1997.
Subscriptions will be placed in escrow in a non-interest bearing
account with SunTrust Bank, South Florida, N.A., as agent for the
Company (the "Escrow Agent"), pending attainment of the Minimum
Offering. See "Underwriting."
(2) In addition, the Company has agreed to pay to the Underwriter a 1.9%
nonaccountable expense allowance. The Company has also agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses, including the nonaccountable expense
allowance in the amount of $171,760 the event of the Maximum Offering
and $128,820 in the event of the Minimum Offering, estimated at
$306,760 in the event of the Maximum Offering and $263,820 in the
event of the Minimum Offering, payable by the Company. The Company
has agreed to pay all expenses attributable to the sale of the Selling
Stockholder's shares.
(4) The 200,000 shares of Common Stock being sold directly by the Selling
Stockholder will be included among the 1,200,000 shares being offered
in the Minimum Offering. The Selling Stockholder is not selling any
Warrants in this offering.
The Common Stock and the Warrants are being offered by PCM Securities
Limited, L.P. (the "Underwriter") and by other members of the National
Association of Securities Dealers, Inc. (the "NASD") authorized as selling
agents (collectively, the "Broker-Dealers"). As a consequence of Steven L.
Edelson, President and Chairman of the Board of the Company, also serving
as one of the licensed principals responsible for the day to day operations
of the Underwriter, the Company and the Underwriter may be deemed to be
affiliates. Each investor must purchase a minimum of 100 shares of Common
Stock and/or 100 Warrants in this offering. Any larger number of shares
and/or Warrants must be purchased in 100 share and/or Warrant increments.
The Common Stock and Warrants are offered when, as and if delivered to and
accepted by the Underwriter and subject to the approval of certain legal
matters by counsel and to certain other conditions. The Underwriter
reserves the right to withdraw, cancel or modify the offering and to reject
any order in whole or in part. It is expected that delivery of the
certificates representing the shares of Common Stock and the Warrants
offered hereby will be made upon transfer of the funds in escrow by the
Escrow Agent to the Company's account upon completion of the Minimum
Offering and from time to time thereafter as subscriptions are received.
-------------------
PCM SECURITIES LIMITED, L.P.
The date of this Prospectus is June ( ), 1997
-ii-
<PAGE>
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to
the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, will file
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information can be inspected and
copied at the principal office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at 7 World Trade Center, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with
the Commission. The Company intends to furnish its stockholders with
annual reports containing audited financial statements and such other
reports as the Company deems appropriate or as may be required by law.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AND WARRANTS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
NASDAQ, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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<PAGE>
PROSPECTUS SUMMARY
The follow summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Each prospective investor
is urged to read this Prospectus in its entirety. All share and per share
data and information in this Prospectus relating to the number of shares of
Common Stock outstanding have been adjusted to give effect to the 1,120:1
stock split effected on June 30, 1996 and the 3:2 stock split effected on
December 31, 1996.
THE COMPANY
Medley Credit Acceptance Corp. (the "Company") is a specialty finance
company which has been engaged primarily in the financing of (i) dry
cleaning equipment to small dry cleaning businesses throughout the eastern
United States and (ii) refrigeration equipment sold or leased by Medley
Refrigeration, an affiliate of the Company. Medley Refrigeration is
engaged in the provision of refrigeration equipment and services to the
food service and hospitality industries and other businesses throughout
central and southeastern Florida. Since 1993 and 1994, respectively, each
of the Company and Medley Refrigeration has operated as a majority-
controlled subsidiary of Group, a Delaware holding company.
Prior to September 1, 1993, the Company (then called Premier Lease
Concepts, Inc., a Delaware corporation) was engaged primarily in the
financing of dry cleaning equipment to small dry cleaning businesses
throughout the eastern United States. In September 1993, Premier Lease
Concepts, Inc. was merged into a subsidiary of Group. As part of this
Merger, the Company's name was changed to Medley Credit Acceptance Corp.
Commencing with its affiliation with Group and continuing through 1995, the
Company focused its marketing efforts primarily on providing financing to
creditworthy purchasers of dry cleaning equipment. Commencing in 1996, the
Company began de-emphasizing its dry cleaning equipment business and began
concentrating marketing efforts to creditworthy customers of Medley
Refrigeration. Such purchasers tend to be small entities whose asset bases
may not be significant enough to attract traditional institutional lenders.
Such purchasers are typically willing to pay a premium in terms of interest
rates for convenience and availability of financing.
During December 1996, Medley Refrigeration assigned to the Company all
of Medley Refrigeration's rights to receive revenues from, and rights of
collection with respect to, a majority of the refrigeration equipment
leases entered into by Medley Refrigeration with its customers. Prior to
this assignment, the Company historically would lend Medley Refrigeration
the capital necessary for Medley Refrigeration to either purchase or
manufacture refrigeration equipment for its customers. Medley
Refrigeration, in turn, would lease this refrigeration equipment to its
customers who, as a condition to the lease, would grant the Company a
security interest in the leased equipment to collateralize the customer's
payment obligations under the equipment lease. As a result of the
aforementioned assignment, lease payments with respect to a majority of the
equipment leases extended to Medley Refrigeration's customers began, and
continue, to be payable directly to the Company. In addition, commencing
in January 1997, the Company began, and continues, to finance refrigeration
equipment leases directly with Medley Refrigeration's customers. The
Company, through the date of this Prospectus, has continued to focus its
marketing efforts primarily to customers of Medley Refrigeration.
Following the consummation of this offering, the Company anticipates
broadening its leasing efforts to expand to entities unaffiliated with the
Company.
The Company's experience in the specialty finance business has
historically been conducted with a smaller capital base than will be
available to the Company following the consummation of this offering. In
order to increase its capital base for further financing, the Company
traditionally has resorted to obtaining lines of credit secured by leased
equipment, to procuring unsecured borrowings from individual investors and
to selling or borrowing against its leases. In this regard, the Company
has established relationships with principal sources of financing and has
learned the particular focus and requirements of such sources. The Company
believes that with the proceeds from this offering, it will be positioned
to secure additional lines of credit and traditional bank financings for
the purpose of expanding and developing its business. The Company further
believes that its expanded business will enable it to pursue service
oriented financing activities such as factoring and locating potential
equipment lessees and referring them to the Company's financing sources on
a fee basis. In addition to such factoring and lease brokering activities,
the Company anticipates expanding into more traditional loan origination
business segments, including the provision of credit review services,
documentation services and loan servicing activities. There can be no
assurance, however, that the Company will successfully implement all or a
portion of this anticipated expansion.
-3-
<PAGE>
One of the principal focuses of the Company's business expansion
following the consummation of this offering will be the Company's
anticipated entrance into the factoring business, i.e., providing small-to-
medium sized, high risk growth companies with capital through the
discounted purchase of their accounts receivable. Management of the
Company perceives the Company de-emphasizing its refrigeration and dry
cleaning equipment financing businesses as the Company's factoring business
grows. The Company also anticipates making advances to its factoring
clients collateralized by inventory, equipment, real estate and other
assets (collectively, "Collateralized Advances"), and, on occasion,
providing other specialized financing structures which will be designed to
satisfy the unique requirements of the Company's clients.
The Company believes that its factoring business typically will
consist of the Company entering into an accounts receivable factoring and
security agreement with a client which will (i) obligate the client to sell
the Company a minimum amount of accounts receivable each month (or a
minimum amount of receivables during the term of the agreement); (ii)
usually have a term of not less than six months and, more likely, one year
and (iii) be automatically renewable. When making a Collateralized
Advance, the Company will enter into such additional agreements with the
client and, if appropriate, third parties, as the Company deems necessary
or desirable, based on the type(s) of collateral securing the
Collateralized Advance. The Company will purchase accounts receivable from
its factoring clients at a discount from face value and usually require the
client's customers to make payment on the receivables directly to the
Company. The Company will almost always reserve the right to seek payment
from the client in the event the client's customers fail to make the
required payment. To secure all of a client's obligations to the Company,
the Company will also take a lien on all accounts receivable of the client
(to the extent not purchased by the Company) and, whenever available,
blanket liens on all of the client's other assets (some or all of which
liens may be subordinate to other liens). When making a Collateralized
Advance, the Company will almost always take a first lien on the specific
collateral securing the Collateralized Advance. The Company may, on
occasion, make Collateralized Advances secured by a subordinate lien
position, but only if management of the Company determines that the equity
available to the Company in a subordinate position would be adequate to
secure the Collateralized Advance. The Company will almost always require
personal guaranties (either unlimited or limited to the validity and
collectibility of purchased accounts receivable) from each client's
principals. Although the Company will obtain as much collateral as
possible and usually retain full recourse rights against its clients,
clients (and account debtors) may fail and accordingly, there can be no
assurance that the collateral obtained and the recourse rights retained
(together with any personal guaranties) will be sufficient to protect the
Company against loss. Moreover, since the Company has very limited prior
experience as a factor, there can be no assurance that the Company's
expansion into the factoring business will be a profitable, or economically
prudent, venture.
The Company was incorporated under the laws of the State of Delaware
on May 2, 1990 under the name Premier Lease Concepts, Inc. The Company's
principal executive offices are located at 10910 N.W. South River Drive,
Miami, Florida 33178, and its telephone number is (305) 889-1900.
-4-
<PAGE>
THE OFFERING
SECURITIES OFFERED . . . . . A minimum of 1,200,000 shares of Common
Stock (of which the Company is offering
1,000,000 shares and the Selling
Stockholder is offering 200,000 shares)
and 1,200,000 Warrants and a maximum of
1,600,000 shares of Common Stock (of
which the Company is offering 1,400,000
shares and the Selling Stockholder is
offering 200,000 shares) and 1,600,000
Warrants. See "Description of
Securities" and "Underwriting."
INVESTMENT PER INVESTOR . . . Minimum of 100 shares of Common Stock
and/or 100 Warrants and greater
purchases in 100 shares and Warrant
increments. See "Underwriting."
COMMON STOCK OUTSTANDING
PRIOR TO THE OFFERING(1) . . 1,680,000 shares.
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING(1) . . . . 2,650,000 shares in the event the
Minimum Offering is sold and 3,050,000
shares if the Maximum Offering is sold.
See "Use of Proceeds."
WARRANTS
NUMBER TO BE OUTSTANDING
AFTER THE OFFERING(1) . . . 1,200,000 Warrants if the Minimum
Offering is sold and 1,600,000 Warrants
if the Maximum Offering is sold.
EXERCISE TERMS . . . . . . Exercisable at $5.75 per share, subject
to adjustment in certain circumstances,
commencing one year from the date of
this Prospectus. See "Description of
Securities--Redeemable Warrants."
EXPIRATION DATE . . . . . . ( ), 2002 (five years after the date of
this Prospectus).
REDEMPTION . . . . . . . . Redeemable by the Company, with the
consent of the Underwriter, at any time
after ( ), 1998 (one year after the date
of this Prospectus), upon notice of not
less than 30 days, at a price of $.15
per Warrant, provided that the closing
bid quotation of the Common Stock on all
25 of the trading days ending on the
third day prior to the day on which the
Company gives notice of redemption has
been at least 150% (currently $8.25,
subject to adjustment) of the initial
offering price of the Common Stock
offered hereby. The Warrants will be
exercisable until the close of business
on the date fixed for redemption. See
"Description of Securities--Redeemable
Warrants."
USE OF PROCEEDS . . . . . . . The Company intends to apply the net
proceeds from this offering, generally,
to expand into the factoring business,
to enhance its capital based financing
activities, to fund, staff and market
its anticipated service-based financing
activities, to satisfy outstanding
indebtedness and declared but unpaid
dividends and for working capital and
general corporate purposes. See "Use of
Proceeds."
------------------
(1) Does not include (i) 1,200,000 shares of Common Stock reserved for
issuance upon the exercise of Warrants in the event the Minimum
Offering is sold or 1,600,000 shares of Common Stock reserved for
issuance upon the exercise of Warrants in the event the Maximum
Offering is sold, (ii) 500,000 shares of Common Stock reserved for
issuance upon exercise of options available for future grant under the
Company's 1997 Stock Option Plan, (iii) 1,300,000 shares of Common
Stock reserved for issuance upon the exercise of other outstanding
warrants and (iv) approximately 632,902 shares of Common Stock
reserved for issuance upon the conversion of 2,958,817 outstanding
shares of Series A 10% Convertible Preferred Stock of the Company (the
"Convertible Preferred Stock"). See "Management," "Description of
Securities Preferred Stock" and "Underwriting."
-5-
<PAGE>
OFFERING TERMINATION . . . . The offering will terminate on ( ),
1997, provided that the Company and
the Underwriter may agree to extend
the offering from time to time until
( ), 1997. See "Underwriting."
RISK FACTORS . . . . . . . . The securities offered hereby are
speculative and involve a high degree of
risk and immediate substantial dilution
and should not be purchased by investors
who cannot afford the loss of their
entire investment. See "Risk Factors"
and "Dilution."
PROPOSED NASDAQ SYMBOLS . . . Common Stock--MCAC
Warrants--MCACW
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<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from and
should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
----------------------- -------------
1996 1995 1997 1996
------ ------ ------ -------
Operating Revenues . . . . . . $356,235 $388,008 $94,158 $118,812
Income (Loss) from Continuing
Operations Before Other Income
(Expense) . . . . . . . . . . (369,704) (296,807) 1,664 6,387
Other Income (Expense) . . . . 693,064 (600,000) 38,349 43,464
Preferred Dividend . . . . . . (232,722) (205,447) (73,970) (53,421)
Net Income (Loss) Applicable to
Common Stockholders . . . . . 90,638 (1,102,064) (33,957) (3,570)
Net Income (Loss) Per Common
Share . . . . . . . . . . . . .05 (.98) (.02) --
BALANCE SHEET DATA:
MARCH 31, 1997
(UNAUDITED)
---------------------------------------
AS ADJUSTED(1)
--------------------
Actual Minimum Maximum
-------- -------- --------
Working capital (deficit) . . . $ (77,306) $3,555,598 $4,771,798
Total assets . . . . . . . . . 1,839,752 5,638,854 7,605,054
Total liabilities . . . . . . . 1,311,688 622,650 622,650
Stockholders' equity . . . . . 528,064 5,016,204 6,982,404
---------------------
(1) Gives effect to the sale of a minimum of 1,200,000 shares of Common
Stock (1,000,000 of which are being offered by the Company and 200,000
of which are being offered by the Selling Stockholder) and 1,200,000
Warrants offered hereby and a maximum of 1,600,000 shares of Common
Stock (1,400,000 of which are being offered by the Company and 200,000
of which are being offered by the Selling Stockholder) and 1,600,000
Warrants offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
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<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high
degree of risk, including, but not necessarily limited to, the risk factors
described below. Each prospective investor should carefully consider the
following risk factors inherent in and affecting the business of the
Company and this offering before making an investment decision.
1. Limited Operating History. The Company has been engaged in the
specialty financing business for a limited period. From June 1990 to
September 1993, the Company, then called Premier Lease Concepts, Inc., was
engaged principally in the financing of dry cleaning equipment to small dry
cleaning businesses throughout the eastern United States. Commencing in
December 1996, the Company allocated most of its available capital to
financing the acquisition of refrigeration equipment sold by the Company's
affiliate, Medley Refrigeration, to customers in the food service and
hospitality businesses in southeast and central Florida. Upon the
consummation of this offering, the Company plans to broaden its leasing
efforts to expand to entities unaffiliated with the Company and to expand
its specialty financing business into the factoring marketplace, an area in
which the Company has very limited prior operating experience.
Accordingly, the Company's prior limited business performance in the
refrigeration and dry cleaning equipment financing businesses may not
provide sufficient basis from which to judge the Company's future as
augmented by the proceeds of this offering. Moreover, given the Company's
lack of prior experience in the factoring business, there can be no
assurance that the Company's entry into this marketplace will be profitable
or economically prudent. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
2. Significant Capital Requirements; Dependence on Proceeds of
Offering; Possible Need for Additional Financing. The Company's capital
requirements in connection with its operational activities have been, and
continue to be, significant. The Company is dependent on the proceeds of
this offering to finance and expand its ongoing specialty finance business,
to commence its anticipated factoring business and to finance its other
working capital requirements. The Company anticipates, based on its
current proposed plans and assumptions relating to its operations and
expansion, that the proceeds of this offering will be sufficient to satisfy
the contemplated cash requirements of the Company for approximately 12
months following the consummation of this offering. In the event that the
Company's plans change or its assumptions prove to be inaccurate or the
proceeds of this offering prove to be insufficient to fund the Company's
operations or its expansion (due to unanticipated expenses, delays,
problems or otherwise), the Company would be required to seek additional
funding. Depending upon the Company's financial strength and the state of
the capital markets, the Company may also determine that it is advisable to
raise additional equity capital. The Company has no current arrangements
with respect to, or sources of, any additional capital, and there can be no
assurance that such additional capital will be available to the Company, if
needed, on commercially reasonable terms or at all. The inability of the
Company to obtain additional capital would have a material adverse effect
on the Company and could cause the Company to be unable to implement its
business strategy or proposed expansion or to otherwise significantly
curtail or cease its operations. It is not anticipated that any of the
officers, directors or stockholders of the Company will provide any portion
of the Company's future financing requirements. To the extent that any
such financing involves the sale of the Company's equity securities, the
interests of the Company's then existing stockholders could be
substantially diluted. See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Business"
and Financial Statements.
3. Explanatory Paragraph in Report of Independent Public Accountants.
The Company's independent public accountants have included an explanatory
paragraph in their report on the Company's financial statements stating
that certain factors raise a substantial doubt about the ability of the
Company to continue as a going concern. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business"
and Financial Statements.
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4. Expansion into New Business Areas. The Company's strategic plan
contemplates increasing the amount of lease brokering it conducts, which
activity could generate profits without utilizing the Company's capital.
This activity would consist of locating opportunities to lease finance and
transferring such opportunities to other financing sources, such as
unaffiliated lessors, banks and lenders, for fee income. The Company's
prior experience in such lease brokering activities is limited and there
can be no assurance that the Company will generate any profits from these
proposed lease brokering activities. In addition, the Company plans to
enter into the factoring business, an area which will involve different
types of credit underwriting than the Company is presently familiar with.
Accordingly, there can be no assurance that the Company will generate any
profits from its proposed factoring business. See "Business."
5. Dependence on Affiliates and Others; Related Party Transactions.
The Company historically has principally relied, and following this
offering may continue to rely, on the customer relationships generated by
its affiliates as a significant source of its business. While the Company,
following the consummation of this offering, anticipates broadening its
leasing efforts to expand to entities unaffiliated with the Company, it
will nonetheless continue to endeavor to provide lease financing or
purchase financing for customers of its affiliates and to treat such
customers as potential customers for other financial services. As such,
the Company may be regarded as dependent upon its affiliates in this
respect. Similarly, to the extent that the Company enters into the
factoring or lease brokering businesses, the Company will also pursue
initially the customer relationships established by its affiliates. In
each of the foregoing cases, the success of the Company will in part be
dependent upon the customer relationships of others.
The Company also may be affected by the financial performance of those
persons the Company is relying upon. In purchasing equipment leased to
Medley Refrigeration customers, the Company may have residual liability
exposure to Medley Refrigeration itself if a lessee defaults on the lease
alleging a defense attributable to a breach of Medley Refrigeration's
obligations. In addition, the Company may endeavor to facilitate sales of
Medley Refrigeration equipment as a result of the Company's equipment
financing business. While it is the Company's intention that all credit
decisions with respect to lessees will be made on a purely arm's length
basis, the Company might be encouraged, with respect to Medley
Refrigeration's customers (arising strictly from the affiliation between
the Company and Medley Refrigeration), to incur greater risk than would be
prudent for a Company not affiliated with an entity it is doing business
with. Group, which is controlled by Messrs. Robert D. Press and Steven L.
Edelson, the President and Chairman of the Board, respectively, of the
Company, is the principal stockholder of Medley Refrigeration.
Consequently, to the extent Medley Refrigeration benefits, directly or
indirectly, from transactions with or involving the Company (sales or
financings by the Company of Medley Refrigeration's equipment to Medley
Refrigeration's customers), Messrs. Press and Edelson (as the control
persons of Group) will indirectly be benefitted.
In addition, Performance Capital Management, Inc. ("Performance
Capital Management"), a company controlled by Messrs. Press and Edelson, is
party to a management contract with the Underwriter of this offering.
Pursuant to the management contract, among other things, Performance
Capital Management is paid $200,000 per annum for making available Mr.
Edelson to serve as the licensed securities principal responsible for
supervising the day to day affairs and operations of the Underwriter. As
such, the Company and the Underwriter may be deemed to be affiliates. In
addition, Mr. Press serves as a licensed registered representative of the
Underwriter. Performance Capital Management and the Company are also
parties to a management agreement pursuant to which, among other things,
Performance Capital Management is paid $90,000 per annum for making
available Messrs. Press and Edelson to render business and financial
counsel, guidance and managerial assistance to the Company. Accordingly,
all payments and other remuneration made or paid by the Company to
Performance Capital Management or the Underwriter (or from and among these
three entities) may be deemed to indirectly benefit Messrs. Press and
Edelson. Neither the Company nor Messrs. Press or Edelson are parties to
any other related party contract or arrangement involving the Company and
its affiliates.
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Moreover, the Company intends to apply, from the proceeds from this
offering, the following amounts to the following directors and executive
officers of the Company except as set forth herein, (except as set forth
herein, no other director or executive officer, or any of their respective
affiliates, will receive, directly or indirectly, any proceeds from this
offering): Robert D. Press, President and a director of the Company, will
receive (i) $82,500 in consideration for the Company's repurchase of 15,000
shares of Common Stock owned by Mr. Press, (ii) $76,000 in consideration
for complete satisfaction of all indebtedness owing by the Company to Mr.
Press (Mr. Press has waived all interest payments) and (iii) $60,471.69 in
satisfaction of all declared but unpaid and accrued preferred stock
dividends owing to Mr. Press (aggregating $218,971.69, or approximately
4.5% of the net proceeds from the Minimum Offering or approximately 3.2% of
the net proceeds from the Maximum Offering); Steven L. Edelson, Chairman
of the Board of the Company, will receive (i) $82,500 in consideration for
the Company's repurchase of 15,000 shares of Common Stock owned by Mr.
Edelson, (ii) $45,000 in consideration for complete satisfaction of all
indebtedness owing by the Company to Mr. Edelson (Mr. Edelson has waived
all interest payments) and (iii) $153,212.72 in satisfaction of all
declared but unpaid and accrued preferred stock dividends owing to Mr.
Edelson (aggregating $280,712.72, or approximately 5.8% of the net proceeds
from the Minimum Offering or approximately 4.1% of the net proceeds from
the Maximum Offering); and Steven Dreyer, a director of the Company, will
receive (i) $14,333.10 in partial satisfaction of certain indebtedness
owing by the Company to an affiliate of Mr. Dreyer and (ii) $5,493.80 in
satisfaction of all declared but unpaid and accrued preferred stock
dividends owing to Mr. Dreyer (aggregating $19,8262.90, or less than 1% of
the net proceeds from the Minimum or Maximum Offerings).
Following the consummation of this offering, the Company will require
all agreements and arrangements involving it and the Underwriter,
Performance Capital Management or any other related party, including the
Company's officers, directors and 5% or greater stockholders, to be (i)
negotiated, to the extent possible, on an arm's-length basis, (ii) on terms
no more favorable to the party other than the Company thereto than
otherwise could be obtained from an unaffiliated party and (iii) approved
by a majority of the disinterested directors of the Company. In addition,
the Company has agreed that following the closing of the Minimum Offering
and the concurrent satisfaction by Group, on behalf of Medley
Refrigeration, of all receivables then outstanding from Medley
Refrigeration to the Company, the Company will not permit receivables from
affiliates to exceed, at any time, the lesser of 10% of all of the
------
Company's assets or $500,000 in the aggregate and that any loans to the
Company's officers, directors, 5% or greater stockholders or affiliates
will be for bona fide business purposes only and approved by a majority of
the Company's disinterested directors. See "Use of Proceeds,"
"Management," "Certain Transactions," and "Underwriting."
6. Customer Credit Risks; Risk of Defaults in Factoring Business. As
in any finance business, the Company's overall success will be governed
heavily by the level of defaults it incurs. The Company believes that its
credit evaluation procedures are adequate to limit its default rate to a
manageable amount. Although the Company attempts to mitigate its credit
risk through the use of a variety of commercial credit reporting agencies
when processing the equipment lease applications of its customers and
through various forms of nonrecourse financing, failure of the Company's
customers to make scheduled payments under their equipment finance
contracts could require the Company to make payments in connection with the
recourse portion of its borrowings, if any, and forfeit cash collateral
pledged as security in connection with those borrowings. In addition, any
increase in such loss or in the rate of payment defaults under any of the
equipment finance contracts originated by the Company (whether maintained
by the Company in its own portfolio or assigned by the Company to its
lenders) could adversely affect the Company's ability to obtain additional
funding.
The Company maintains an allowance for doubtful accounts in connection
with payments due under equipment lease contracts held in the Company's
portfolio. (The Company's portfolio currently is comprised of those
contracts which the Company has purchased with working capital funds or
under the revolving credit lines and not yet assigned to a nonrecourse
lender or transferred in connection with an asset securitization
transaction.) The allowance is maintained at a level which the Company
deems sufficient to meet future estimated uncollectible contract
receivables, based on its analysis of the delinquencies, problem accounts,
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and overall risks and probable losses associated with such contracts.
There can be no assurance, however, that the amount of the Company's
allowance will prove to be adequate.
With respect to the Company's proposed new factoring business, the
financial failure of a client or its customers or the failure of the
Company to recover under personal guarantees from the client's principals
or from other forms of security may adversely affect the Company's ability
to fully recover amounts due. While the Company intends to purchase
receivables on a full recourse basis, a client of the Company may be unable
to meet its obligations. Losses may result if the Company is unable to
recover under personal guarantees from the client's principals or from
other forms of security. Accordingly, the Company intends to make
provision for possible credit losses. There can be no assurance, however,
that the amount of such provision will prove to be adequate. See
"Business."
7. Legal and Regulatory Limitations. Depending upon the form of
financing engaged in by the Company, the Company's rates of return may be
limited by various state laws limiting the permissible amounts of interest.
Noncompliance with such laws or rules may result in substantial penalties
or liabilities to the Company. The Company believes that its current
practices comply with such laws and will continue to comply with applicable
laws.
The Company intends to use a portion of the proceeds of this offering
to expand into the factoring business. Certain loans made in connection
with this business may be considered "securities" under applicable federal
and state securities laws. If the portion of the Company's assets invested
in "securities" exceeds certain thresholds, the Company could be considered
an "investment company" within the meaning of the Investment Company Act of
1940. Classification as an investment company could have a material
adverse effect on the Company. The Company intends to limit its
investments in any instruments which might be considered securities to an
amount which would not cause it to be considered an investment company.
8. Dependence on Key Personnel. The success of the Company will be
largely dependent on the personal efforts of Mr. Robert Press, the
Company's President. Although the Company and Mr. Press are parties to a
one-year employment agreement (which renews automatically for successive
one-year periods in the absence of action to the contrary), the loss of the
services of Mr. Press would have a material adverse effect on the Company's
business and prospects. Mr. Press devotes substantially all of his
business time and efforts to the affairs of the Company. Steven L.
Edelson, the Company's Chairman of the Board, devotes only such time to the
affairs of the Company as is necessary for Mr. Edelson to satisfy his
fiduciary obligations as Chairman of the Company. In addition, competition
for qualified employees, including personnel skilled in the leasing,
factoring and specialty financing business, is intense, and the loss of key
personnel or the inability to attract and retain, if necessary, additional
skilled personnel for the Company's activities, could adversely affect the
Company's business and prospects. There can be no assurance that the
Company will be able to hire or retain such personnel. The Company does
not currently maintain nor, in the foreseeable future, does it anticipate
maintaining, key-man life insurance covering the lives of its significant
employees. See "Business" and "Management."
9. Dependence on Funding Sources. Equipment leasing and factoring
are capital intensive businesses. The Company's revenues and profitability
have traditionally been related directly to the volume of equipment
financings the Company originates. To increase its equipment financing
business, and to enter into the factoring marketplace, the Company will
require access to substantial short and long-term credit and be required to
continue to sell its loans and leases to third party discounters. To date,
the Company's principal source of funding has been borrowings from private
lenders. There can be no assurance that the Company will be able to obtain
additional recourse or nonrecourse financing when needed or, to the extent
such financing is available, on acceptable terms. The Company would be
adversely affected if it were unable to continue to secure sufficient and
timely funding on acceptable terms. See "Business."
10. Collateral Value Risks. Loans and leases held by the Company will
be secured, in part, by the collateral value of the underlying leased
equipment. Refrigeration and dry cleaning equipment are not generally
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subject to the rapid deterioration in value. Nonetheless, to the extent
the Company finances higher technology equipment (which currently is not
contemplated), deterioration in the value of such equipment could undermine
the security of the Company's financings and the Company's financial
performance.
11. Interest Rate Risk. Substantially all of the Company's equipment
financing contracts require the Company's customers to make payments at
fixed rates for specified terms. A small portion of these transactions are
currently funded by the Company with fixed rate borrowings which are
arranged at the time, or shortly after, the finance contract is recorded.
This matching process mitigates interest rate risk for these transactions.
However, from time to time, a portion of such contracts are originally
financed by the Company from funds derived from working capital borrowed
under its revolving credit line, which borrowings are subject to a variable
interest rate. Consequently, if interest rates increase prior to the time
the Company is able to secure fixed-rate, long-term financing for such
contracts, the Company's profit margin with respect to such equipment
financing contracts could be affected adversely. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
12. Competition. The factoring and financing of equipment businesses
are highly fragmented. The Company competes, and in the future, will
compete for customers with a number of national, regional and local finance
and factoring companies, including those which, like the Company,
specialize in particular segments of the overall market. In addition, the
Company's competitors include, and will include, those equipment
manufacturers which finance the sale or lease of their products themselves,
other traditional types of financial services companies, such as commercial
banks and savings and loan associations, and conventional leasing and
factoring companies. Although the Company believes that it currently
maintains a competitive advantage on the basis of its convenience-oriented
financing and value-added services, many of the Company's competitors and
potential competitors possess substantially greater financial, marketing,
and operational resources. Moreover, the Company's future profitability
will be directly related to the Company's ability to access capital funding
and to obtain favorable funding rates as compared to the capital and costs
of capital available to its competitors. Accordingly, there can be no
assurance that the Company will be able to continue to compete successfully
in its targeted markets. See "Business Competition."
13. Broad Discretion in Application of Proceeds. Management of the
Company has broad discretion to adjust the application and allocation of
the net proceeds of this offering in order to address changed circumstances
and opportunities. The Company intends to utilize approximately $3,145,038
(or approximately 65%) of the net proceeds from the Minimum Offering, or
approximately $4,654,038 (or approximately 68%) of the net proceeds from
the Maximum Offering to repay certain indebtedness, satisfy certain
declared but unpaid dividends, expand its equipment leasing business,
implement its factoring business and redeem certain shares of Common Stock.
The remaining approximate $1,694,142 (or approximately 35%) of the net
proceeds from the Minimum Offering, or approximate $2,185,202 (or
approximately 32%) of the net proceeds from the Maximum Offering, have been
allocated to working capital and general corporate purposes. As a result
of the foregoing, the success of the Company will be substantially
dependent upon the discretion and judgment of the management of the Company
with respect to the application and allocation of the net proceeds of this
offering. See "Use of Proceeds."
14. Lack of Dividends. Since becoming a "C Corporation" for federal
income tax purposes, the Company has not paid any dividends with respect to
its Common Stock. Moreover, the Company does not intend to pay any
dividends on its Common Stock in the foreseeable future. The holders of
the Company's outstanding Convertible Preferred Stock are entitled to
receive cumulative dividends, payable quarterly out of funds legally
available therefor, at the annual rate of 10%. The Company currently
intends to reinvest earnings, if any, in the development and expansion of
its business, except to the extent required to satisfy its obligations
under the terms of the Convertible Preferred Stock. See "Dividend Policy"
and "Description of Securities Preferred Stock."
15. Immediate and Substantial Dilution. This offering involves an
immediate and substantial dilution of $3.58 per share or approximately
65.1% if the Minimum Offering is sold or $3.18 per share or approximately
57.8% if the Maximum Offering is sold between the pro forma net tangible
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book value per share after the offering and the public offering price of
$5.50 per share of Common Stock. In addition, investors in this offering
will have contributed approximately 96.5% of the total consideration
paid for shares of Common Stock if the Minimum Offering is sold and
approximately 97.5% of the total consideration paid for shares if the
Maximum Offering is sold. See "Dilution."
16. Shares Eligible for Future Sale. Upon the consummation of this
offering, the Company will have 2,650,000 shares of Common Stock
outstanding if the Minimum Offering is sold and 3,050,000 shares of Common
Stock outstanding if the Maximum Offering is sold, assuming no exercise of
the Warrants or any other outstanding warrant or the issuance of any shares
of Common Stock underlying shares of the Company's Convertible Preferred
Stock. At that time, only the 1,200,000 shares being offered hereby by the
Company and the Selling Stockholder in the event the Minimum Offering is
sold, and the 1,600,000 shares being offered hereby by the Company and the
Selling Stockholder in the event the Maximum Offering is sold, will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
1,450,000 shares, in either instance will be deemed to be "restricted
securities," as that term is defined under Rule 144 promulgated under the
Securities Act and may, in certain circumstances, subject to the
contractual restrictions described below, be sold without registration
pursuant to such rule, except for any shares purchased by an "affiliate" of
the Company (in general, a person who has a control relationship with the
Company), which shares will be subject to the resale limitations of Rule
144 promulgated under the Securities Act. 150,000 of these restricted
shares will become eligible for sale under Rule 144 in December 1997
(subject to certain recurring three-month volume limitations prescribed by
Rule 144).
Group, which is controlled by Messrs. Press and Edelson, the President
and Chairman of the Board, respectively, of the Company, beneficially owns,
as of the date of this Prospectus, 1,500,000 shares of Common Stock of the
Company. Group and the Company are parties to an agreement pursuant to
which, among other things, Group, on behalf of Medley Refrigeration, will
remit to the Company, at the closing of the Minimum Offering, the $990,000
in net proceeds generated from Group's sale of its 200,000 shares of Common
Stock in the Minimum Offering. This $990,000 will be paid to the Company
to satisfy, in their entirety, all receivables then outstanding from Medley
Refrigeration to the Company. Group, pursuant to the Escrow Agreement
controlling the disbursement of subscription proceeds at the closing of the
Minimum Offering, has authorized the Escrow Agent to remit directly to the
Company, concurrently with the closing of the Minimum Offering, the
$990,000 in net proceeds then held in escrow attributable to Group's sale
of its 200,000 shares of Common Stock in the Minimum Offering. Group has
otherwise agreed not to sell or dispose of any of its shares for a period
of six months from the date of this Prospectus without the prior written
consent of the Underwriter. In addition, each holder of Convertible
Preferred Stock has agreed not to sell or otherwise dispose of any shares
of Common Stock issuable upon conversion of such Convertible Preferred
Stock for a period of six months from the date of this Prospectus without
the prior written consent of the Underwriter. The Underwriter and Group
have also agreed that Group, under certain circumstances, may not
sell, during the 36-month period following the consummation of this
offering, all or any portion of up to 800,000 shares of Common Stock owned
by Group unless the closing bid price for shares of the Company's Common
Stock over a period of time exceeds certain minimum target levels.
Nevertheless, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market
prices for the Common Stock and the Warrants and could impair the Company's
ability in the future to raise additional capital through the sale of its
equity securities. See "Principal Stockholders," "Description of
Securities," "Shares Eligible for Future Sale" and "Underwriting."
17. Control by Management. Upon the consummation of this offering,
Group, which is controlled by Messrs. Press and Edelson, will beneficially
own approximately 49.0% in the event the Minimum Offering is sold, and
42.6% in the event the Maximum Offering is sold, of the issued and
outstanding shares of Common Stock (assuming no exercise of the Warrants or
any other outstanding warrant or the issuance of any shares of Common Stock
underlying shares of the Company's Convertible Preferred Stock).
Accordingly, Messrs. Press and Edelson, through their control of Group,
will continue to be in a position to decide the outcome of any matters
requiring a vote of stockholders, including the election of directors,
changes in the Company's authorized capital and the dissolution, merger or
sale of the assets of the Company, and generally, will be in a position to
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control the affairs of the Company. Moreover, Messrs. Press and Edelson
will be in a position to determine the amount of executive compensation to
be paid and whether dividends will be declared with respect to shares of
the Company's capital stock. Purchasers of the shares of Common Stock and
Warrants (to the extent exercised) offered hereby will be minority
stockholders of the Company and, although entitled to vote on any matters
that require stockholder approval, will not influence the outcome of such
votes. See "Principal Stockholders" and "Description of Securities."
18. No Assurance of Public Market; Determination of Offering Price;
Possible Volatility of Market Price of Common Stock and Warrants. Prior to
this offering, there has been no public trading market for the Common Stock
or Warrants. Consequently, the initial public offering prices have been
determined by negotiations between the Company and the Underwriter, with
the guidance of Lew Lieberbaum & Co., Inc., the qualified independent
underwriter associated with this offering, and do not bear any relationship
to the Company's book value, assets, past operating results or financial
condition or to any other established criteria of value. In addition,
there can be no assurance that a regular trading market for the securities
offered hereby will develop after this offering or that, if developed, that
it will be sustained. The market price of the Common Stock and Warrants
following the consummation of this offering may be highly volatile as has
been the case with the securities of other companies effecting initial
public offerings. Factors such as the Company's financial results,
quarter-to-quarter variations in operating results, press releases, trading
volumes, general market trends and various factors affecting the equipment
financing and factoring businesses generally, may have a significant impact
on the market price of the Company's securities. Additionally, in recent
years, the stock market itself has experienced a high level of price and
volume volatility and market prices for the stock of many companies have
experienced wide price fluctuations which have not necessarily been related
to the operating performance of such companies. See "Underwriting."
19. Underwriter's Influence on the Market. A significant number of
the securities offered hereby may be sold to customers of the Underwriter.
Such customers may subsequently engage in transactions for the sale or
purchase of such securities through or with the Underwriter. Although it
has no obligation to do so, the Underwriter intends to make a market in the
Company's securities and may otherwise effect transactions in such
securities. As a result, the Underwriter may exert a dominating influence
on the market for the Company's securities, if such a market is developed,
and such market activity by the Underwriter may be discontinued at any
time. The price and liquidity of the Company's securities may be
significantly affected by the degree, if any, of the Underwriter's
participation in the market for the Company's securities. See
"Underwriting."
20. Limited Offering Experience of the Underwriter. The Underwriter
has been in business for approximately six years, and as of March 31, 1997,
employed approximately 55 brokers in two offices. The Underwriter has
managed, on a "firm commitment" basis, two public offerings prior to this
underwriting. Since the Underwriter has acted as underwriter in only a
limited number of public offerings, no assurance can be given that the
Underwriter's lack of experience and its comparatively small size in
relation to other broker-dealers in the industry, may not adversely affect
the offering of the Company's securities and the subsequent development, if
any, of a trading market for the Company's securities. See "Underwriting."
21. Best Efforts Offering; Escrow of Investor Funds. This offering
is being made on a "best efforts, all-or-none" basis. With respect to the
first 1,200,000 shares of Common Stock and 1,200,000 Warrants, all or none
of them will be sold. The remaining 400,000 shares of Common Stock and
400,000 Warrants offered will be made on a "best efforts" basis. There can
be no assurance that any of the shares of Common Stock or Warrants will be
sold. Under the terms of this offering, the Underwriter is offering the
Company's shares of Common Stock and Warrants for an initial period of 30
days which may be extended up to an additional 30 days by mutual agreement
of the Company and the Underwriter. Pending the sale of 1,200,000 shares
of Common Stock and 1,200,000 Warrants, all proceeds will be held in an
escrow account with SunTrust Bank, South Florida, N.A., as Escrow Agent.
No commitment exists by anyone to purchase all or any of the shares of
Common Stock or Warrants offered hereby. Consequently, subscribers' funds
may be escrowed for as long as 60 days and, if held for less than 60 days,
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returned without interest thereon or deduction therefrom in the event
1,200,000 shares of Common Stock and 1,200,000 Warrants are not sold within
the offering period. Investors, therefore, will not have the use of any
subscription funds during the subscription period. See "Underwriting."
22. Anti-Takeover Provisions; Authorization of Preferred Stock.
Delaware has enacted legislation that may deter or frustrate takeovers of
the Company. In certain circumstances, Delaware law requires the approval
of two-thirds of all shares eligible to vote for certain business
combinations involving a stockholder owning 15% or more of the Company's
voting securities (other than stockholders currently meeting such
description), excluding the voting power held by such stockholder. In
addition to the potential impact on future takeover attempts and the
possible perpetuation of management, the existence of such provision could
have an adverse effect on the market price of the Company's Common Stock.
The Company's Certificate of Incorporation authorizes the issuance of
10 million shares of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board
of Directors. To date, the Board of Directors has authorized the issue of
a series of up to 2,958,817 shares of Convertible Preferred Stock.
Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue additional series of preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect
the voting power or other rights of the holders of Common Stock. In the
event of issuance, such preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change
in control of the Company. Although the Company has no present intention
to issue any additional shares of preferred stock, there can be no
assurance that the Company will not make such an issuance in the future.
See "Description of Securities--Anti-Takeover Provisions" and "--Preferred
Stock."
23. Possible Delisting of Securities from NASDAQ; Disclosure Relating
to Low-Priced "Penny" Stocks. It is currently anticipated that the
Company's Common Stock and Warrants will be eligible for listing on NASDAQ
upon completion of the Minimum Offering. However, in order to continue to
be listed on NASDAQ, a company must maintain either (i) $2,000,000 in net
tangible assets (total assets less total liabilities and goodwill), (ii)
$35,000,000 in market capitalization or (iii) $500,000 of net income in two
of the last three years and 500,000 shares of Common Stock in the public
float and a $1,000,000 market value of the public float. In addition,
continued inclusion requires two market makers and a minimum bid price of
$1.00 per share. The failure to meet these maintenance criteria in the
future may result in the delisting of the Company's securities from NASDAQ
and trading, if any, in the Company's securities would thereafter be
conducted in the non-NASDAQ over-the-counter market. As a result of such
delisting, an investor may find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, the Company's
securities.
In addition, if the Common Stock were delisted from trading on NASDAQ
and the trading price of the Common Stock were to fall below $5.00 per
share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Exchange Act, which
require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a "penny stock" (generally, any non-
NASDAQ equity security that has a market price of less than $5.00 per
share, subject to certain exceptions). Such rules require the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining
the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks
to persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the broker-
dealer must make a special suitability determination for the purchaser and
have received the purchaser's written consent to the transaction prior to
sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in
the Common Stock, which could severely limit the market liquidity of the
Common Stock and the ability of purchasers in this offering to sell the
Common Stock in the secondary market.
24. Inability to Exercise Warrants. The Company intends to qualify
the sale of the Common Stock and the Warrants offered hereby in a limited
number of states. Although certain exemptions in the securities laws of
certain states might permit Warrants to be transferred to purchasers in
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<PAGE>
states other than those in which the Warrants were initially qualified, the
Company will be prevented from issuing Common Stock in such states upon
exercise of the Warrants unless an exemption from qualification is
available or unless the issuance of Common Stock upon exercise of the
Warrants is qualified. The Company may decide not to seek or may not be
able to obtain qualification of the issuance of such Common Stock in all of
the states in which the ultimate purchasers of the Warrants reside. In such
a case, the Warrants held by purchasers will expire and have no value if
such Warrants cannot be sold. Accordingly, the market for the Warrants may
be limited because of these restrictions. Further, a current prospectus
covering the Common Stock issuable upon exercise of the Warrants must be in
effect before the Company may accept Warrant exercises. There can be no
assurance that the Company will be able to have a prospectus in effect when
this Prospectus is no longer current, notwithstanding the Company's
commitment to use its best efforts to do so. See "Description of
Securities--Redeemable Warrants."
25. Potential Adverse Effects of Redemption of Warrants. The
Warrants may be redeemed by the Company, with the consent of the
Underwriter, at any time following ( ), 1998 (one year from the date of
this Prospectus), upon notice of not less than 30 days, at a price of
$.15 per Warrant, provided that the closing bid quotation of the Common
Stock on all 25 of the trading days ending on the third day prior to the
day on which the Company gives notice of redemption has been at least 150%
(currently $8.25, subject to adjustment) of the initial public offering
price of the Common Stock offered hereby. Redemption of the Warrants
could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so,
to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price,
which is likely to be substantially less than the market value of the
Warrants at the time of redemption. See "Description of Securities--
Redeemable Warrants."
USE OF PROCEEDS
Of the shares of Common Stock being offered hereby, 200,000 shares are
being offered by the Selling Stockholder and 1,000,000 shares, in the event
of the Minimum Offering, and 1,400,000 shares, in the event of the Maximum
Offering, are being offered by the Company. Group and the Company are
parties to an agreement pursuant to which, among other things, Group, on
behalf of Medley Refrigeration, will remit to the Company, at the closing
of the Minimum Offering, the $990,000 in net proceeds generated from
Group's sale of its 200,000 shares of Common Stock in the Minimum Offering.
This $990,000 will be paid to the Company to satisfy, in their entirety,
all receivables then outstanding from Medley Refrigeration to the Company.
Group, pursuant to the Escrow Agreement controlling the disbursement of
subscription proceeds at the closing of the Minimum Offering, has
authorized the Escrow Agent to remit directly to the Company, concurrently
with the closing of the Minimum Offering, the $990,000 in net proceeds then
held in escrow attributable to Group's sale of its 200,000 shares of Common
Stock in the Minimum Offering. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Financial Statements.
After deducting underwriting discounts and commissions ($806,820 if
the Minimum Offering is sold and $1,075,760 if the Maximum Offering is
sold) and other expenses of the offering estimated to be approximately
$135,000, the Company will receive (exclusive of amounts to be paid to the
Company at the closing of the Minimum Offering to satisfy all receivables
then outstanding from Medley Refrigeration to the Company) net proceeds
from this offering of approximately $4,848,180 if the Minimum Offering is
sold and $6,839,240 if the Maximum Offering is sold. The Company intends
to utilize the net proceeds from this offering (excluding any amounts
received upon the exercise of any Warrants) during the next 12 months
approximately as follows:
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MINIMUM OFFERING MAXIMUM OFFERING
------------------ -------------------
NET NET
APPLICATION OF PROCEEDS PROCEEDS % PROCEEDS %
----------------------- ---------- ------- ---------- ------
Repayment of indebtedness(1) $ 411,739 8.50% $ 411,739 6.02%
Satisfaction of declared but
unpaid dividends(2) . . . 277,299 5.71 277,299 4.05
Expansion of equipment
leasing business (3) . . 1,000,000 20.64 1,750,000 25.59
Implementation of factoring
business(4) . . . . . . . 1,300,000 26.81 2,050,000 29.97
Redemption of Common Stock(5) 165,000 3.40 165,000 2.42
Working capital and general
corporate purposes(6) . . . . 1,694,142 34.94 2,185,202 31.95
---------- ------ ---------- ------
$4,848,180 100.00% $6,839,240 100.00%
========== ======= ========== =======
______________________________________
(1) The Company will satisfy a portion of its outstanding short term
indebtedness and a portion of its long-term indebtedness with a portion of
the proceeds from this offering. Loans from Messrs. Press, Edelson and
Steven Dreyer, directors of the Company, will be repaid with a portion of
these proceeds. Specifically, Mr. Press will receive $76,000 in complete
satisfaction of all indebtedness of the Company owing to him (Mr. Press has
waived all interest payments), Mr. Edelson will receive $45,000 in complete
satisfaction of all indebtedness of the Company owing to him (Mr. Edelson
waived all interest payments) and an affiliate of Mr. Dreyer will receive
$14,333.10 in partial satisfaction of certain indebtedness of the Company
owing to it. The $121,000 in loans being repaid with the proceeds from
this offering to Messrs. Press and Edelson were incurred to finance the
Company's operating expenses in connection with, and in anticipation of,
this Offering. See "Principal Stockholders" and "Certain Transactions."
(2) On each of August 20, 1996, November 20, 1996 and February 20, 1997,
the Company declared its regular quarterly cash dividend with respect to
shares of its Convertible Preferred Stock. At the time of each of the
aforementioned dividend declarations, the Company had sufficient cash
available to pay the dividend to all holders of the Convertible Preferred
Stock other than Messrs. Press, Edelson and Dreyer and holders affiliated
or related to them. The Company will utilize a portion of the proceeds
from this offering to satisfy all declared, but unpaid dividends. See
"Principal Stockholders," "Description of Securities--Preferred Stock" and
Financial Statements.
(3) The Company intends to utilize a portion of the proceeds from this
offering to expand its refrigeration equipment leasing business.
Specifically, the Company anticipates broadening and intensifying its
marketing efforts to attract equipment lessees unaffiliated with Medley
Refrigeration. In addition, the Company intends to expand its geographic
positioning and business plan by entering into geographic marketplaces in
which Medley Refrigeration does not currently do business and by marketing
to other refrigeration companies that do not compete directly with Medley
Refrigeration. To date, the Company has lacked the capital necessary to
expand its business as presently contemplated.
(4) The Company intends to utilize a portion of the proceeds from this
offering to establish a factoring business which will provide small to
medium sized companies with capital through the discounted purchase of such
companies' accounts receivable. The expansion into the factoring business
will require the Company to hire additional marketing and administrative
personnel. The Company intends to implement a direct marketing campaign to
introduce the Company's factoring services to entities in the Miami, Ft.
Lauderdale and Palm Beach, Florida markets.
(5) The Company will utilize $165,000 from this offering to redeem, at a
price of $5.50 per share, an aggregate of 30,000 shares of Common Stock
owned by Messrs. Robert D. Press and Steven L. Edelson, the President and
Chairman of the Board of the Company, respectively. These shares were
transferred and assigned by Group to Messrs. Press and Edelson in January
1996 in consideration for services performed by them on behalf of the
Company. See "Certain Transactions."
(6) Working capital will be utilized by the Company to enhance, and
otherwise stabilize, cash flow during the initial 12 months following the
consummation of this offering, such that any shortfalls between operating
revenues and costs will be covered by working capital. Although the
Company prefers to retain its working capital in reserve, the Company may
be required to expend part or all of these proceeds as financial demands
dictate.
Although it is uncertain whether the Company's shares of Common Stock
will rise to a level at which the Warrants would be exercised, in the event
subscribers in this offering elect to exercise all of the Warrants offered
herein, the Company will realize gross proceeds of approximately $6,900,000
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<PAGE>
if the Minimum Offering is sold and $9,200,000 if the Maximum Offering is
sold. Management anticipates that the proceeds from the exercise of the
Warrants would be contributed to working capital of the Company.
Nonetheless, the Company may, at the time of exercise, allocate a portion
of the proceeds to any other corporate purpose. Accordingly, investors who
exercise their Warrants will entrust their funds to management, whose
specific intentions regarding the use of such funds are not presently and
specifically known.
The amounts set forth in the above use of proceeds table merely
indicate the proposed use of proceeds and actual expenditures may vary
substantially from these estimates depending upon economic conditions and
the success, if any, of the Company's existing and proposed new businesses.
The Company is unable to predict the precise period for which this offering
will provide financing, although management believes that the Company
should have sufficient working capital to meet its cash requirements for
approximately 12 months from the date of this Prospectus. Accordingly, the
Company may need to seek additional funds through loans or other financing
arrangements during this period of time. No such arrangements exist or are
currently contemplated and there can be no assurance that they may be
obtained on terms acceptable to the Company in the future should the need
arise.
Pending utilization, management intends to make temporary investment
of the proceeds in bank certificates of deposit, interest bearing savings
accounts, prime commercial paper or federal government securities.
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<PAGE>
DIVIDEND POLICY
Prior to the Company's merger with a subsidiary of Group in September
1993, the Company operated as an "S corporation" for federal income tax
purposes. During such time, the Company's net income was taxed for federal
income tax purposes directly to the Company's stockholders. The Company,
in turn, paid dividends to enable its stockholders to pay their tax on the
Company's income. Following the merger, the Company has been included as a
member of the consolidated tax return filed by Group and its affiliates.
The Company historically has declared (and paid to the extent surplus cash
was available) regular quarterly dividends with respect to shares of its
Convertible Preferred Stock. The Company intends to continue to declare
and pay regular quarterly dividends with respect to shares of its
Convertible Preferred Stock following this offering. See "Description of
Securities--Preferred Stock."
Subsequent to the merger, the Company has not declared or paid any
dividends with respect to shares of its Common Stock. The payment of
dividends, if any, is within the discretion of the Board of Directors and
will depend upon the Company's earnings, capital requirements, financial
condition and other relevant factors. The Company's Board does not intend
to declare any dividends in the foreseeable future with respect to shares
of the Company's Common Stock, but instead intends to retain all future
earnings, if any, for the development and expansion of the Company's
operations.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 and as adjusted to give effect to the sale by the Company of
a minimum of 1,000,000 shares of Common Stock (the Selling Stockholder is
selling 200,000 shares in the Minimum Offering) and 1,200,000 Warrants
offered hereby and a maximum of 1,400,000 shares of Common Stock (the
Selling Stockholder is selling 200,000 shares in the Maximum Offering) and
1,600,000 Warrants offered hereby:
AT MARCH 31, 1997
(UNAUDITED)
-------------------------------------
AS ADJUSTED
-----------------------
ACTUAL MINIMUM(1) MAXIMUM(1)
-------- ---------- ----------
Long-term Debt . . . . . . . . .$ 489,447 $ 384,211 $ 384,211
Short-term Debt . . . . . . . . .$ 445,528 $ 139,025 $ 139,025
Stockholders' Equity (Deficit)
Convertible Preferred Stock,
$.01 par value, 5,000,000
shares authorized; 2,958,817
shares issued and outstanding,
respectively . . . . . . . . . $ 29,588 $ 29,588 $ 29,588
Common Stock, $.01 par value,
10,000,000 shares authorized;
3,050,000, 2,650,000 and
3,050,000 shares issued and
outstanding, respectively . . $ 16,800 $ 26,500 $ 30,500
Additional Paid-in Capital . . $ 2,322,899 $ 6,867,891 $ 8,854,951
Accumulated Deficit . . . . . . $(1,841,223) $(1,841,223) $(1,841,223)
----------- ----------- -----------
Total Stockholders' Equity . $ 528,064 $ 5,082,756 $ 7,073,816
----------- ----------- -----------
Total Capitalization . . . . $ 1,463,039 $ 5,605,992 $ 7,597,052
=========== =========== ===========
__________________________
(1) Assumes no exercise of the Warrants or any other outstanding warrant
or the issuance of any shares of Common Stock underlying shares of the
Company's Convertible Preferred Stock. As of the date of this
Prospectus, there were no outstanding stock options to purchase shares
of the Company's Common Stock granted under the Company's stock option
plan or otherwise. See "Management -- Stock Option Plan" and
"Description of Securities--Preferred Stock."
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<PAGE>
DILUTION
The difference between the public offering price per share of Common
Stock and the pro forma net tangible book value per share after this
offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing the net tangible
book value of the Company (total tangible assets less total liabilities) by
the number of outstanding shares of Common Stock. At March 31, 1997, the
net tangible book value of the Company was $399,576, or approximately $.24
per share of Common Stock.
After giving effect to the sale by the Company of a minimum of
1,000,000 shares of Common Stock (the Selling Stockholder is selling
200,000 shares) and 1,200,000 Warrants offered hereby (less underwriting
discounts and commissions and estimated expenses of this offering, and
assuming no exercise of the Warrants or any other outstanding warrant or
the issuance of any shares of Common Stock underlying shares of the
Company's Convertible Preferred Stock), the pro forma net tangible book
value of the Company at March 31, 1997 would have been $5,082,756, or
approximately $1.92 per share of Common Stock. This represents an
immediate increase in net tangible book value of approximately $1.68 per
share of Common Stock to existing stockholders and an immediate dilution of
approximately $3.58 per share of Common Stock to new investors.
After giving effect to the sale of a maximum of 1,400,000 shares of
Common Stock (the Selling Stockholder is selling 200,000 shares) and
1,600,000 Warrants offered hereby (less underwriting discounts and
commissions and estimated expenses of this offering, and assuming no
exercise of the Warrants or any other outstanding warrant or the issuance
of any shares of Common Stock underlying shares of the Company's
Convertible Preferred Stock), the pro forma net tangible book value of the
Company at March 31, 1997 would have been $7,073,816, or approximately
$2.32 per share of Common Stock. This represents an immediate increase in
net tangible book value of approximately $2.08 per share of Common Stock to
existing stockholders and an immediate dilution of approximately $3.18 per
share of Common Stock to new investors.
The following table illustrates this dilution to new investors on a
per share basis:
MINIMUM MAXIMUM
OFFERING OFFERING
-------- --------
Public offering price of the Common
Stock offered hereby . . . . . . . $ 5.50 $ 5.50
Net tangible book value before
the offering $ .24 $ .24
Increase attributable to the
sale by the Company of the
Common Stock offered hereby. $ 1.68 $ 2.08
Adjusted net tangible book value $ 1.92 $ 2.32
after the offering . . . . . . . -------- --------
$ 3.58 $ 3.18
Dilution to new investors . . . . . ======== ========
The following table sets forth with respect to existing stockholders
and new investors, a comparison of the number of shares of Common Stock
acquired from the Company, the percentage of ownership of such shares, the
total consideration paid, the percentage of total consideration paid and
the average price per share.
SHARES PURCHASED
-----------------------
MINIMUM OFFERING NUMBER PERCENT
---------------- -------- --------
Existing stockholders . . . . 1,680,000 62.7%
1,000,000 37.3%
New investors . . . . . . . . --------- --------
2,680,000 100.0%
Total . . . . . . . . . ========= ========
MAXIMUM OFFERING
----------------
Existing stockholders . . . . 1,680,000 54.5%
1,400,000 45.5
New investors . . . . . . . . --------- --------
3,080,000 100.0%
========= ========
TOTAL AVERAGE PRICE
CONSIDERATION PAID PER SHARE
------------------------ -------------
MINIMUM OFFERING AMOUNT PERCENT
---------------- -------- --------
Existing stockholders . . . . $ 200,000 3.5% $.14
5,500,000 96.5
New investors . . . . . . . ---------- -------- $5.50
$5,700,000 100.0%
Total . . . . . . . . . ========== ========
MAXIMUM OFFERING
----------------
Existing stockholders . . . . $ 200,000 2.5% $.14
7,700,000 97.5
New investors . . . . . . . . ---------- -------- $5.50
$7,900,000 100.0%
========== ========
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The above table assumes no exercise of the Warrants or any other
outstanding warrant or the issuance of any shares of Common Stock
underlying shares of the Company's Convertible Preferred Stock. As of the
date of this Prospectus, there were no outstanding stock options to
purchase shares of the Company's Common Stock granted under the Company's
stock option plan or otherwise. See "Management--Stock Option Plan" and
"Description of Securities--Preferred Stock."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a specialty finance company which, historically, has
been engaged primarily in the financing of (i) dry cleaning equipment to
small dry cleaning businesses throughout the eastern United States and (ii)
refrigeration equipment sold or leased by Medley Refrigeration, an
affiliate of the Company. Medley Refrigeration is engaged in the provision
of refrigeration equipment and services to the food service and hospitality
industries and other businesses throughout central and southeastern
Florida.
Prior to the fiscal year ended December 31, 1996 ("Fiscal 1996"), the
Company focused its marketing efforts primarily on providing financing to
creditworthy purchasers of dry cleaning equipment. Commencing in Fiscal
1996, the Company began de-emphasizing its dry cleaning equipment business
and began concentrating marketing efforts to creditworthy customers of
Medley Refrigeration. Such customers tended to be small entities with
reliable cash flow but without access to sophisticated financing
arrangements. Such customers were typically willing to pay a premium in
terms of interest rates for convenience and availability of financing.
During December 1996, Medley Refrigeration assigned to the Company all
of Medley Refrigeration's rights to receive revenues from, and rights of
collection with respect to, refrigeration equipment leases entered into by
Medley Refrigeration with its customers (the "Assignment"). Excluded from
the Assignment, however, were those equipment leases, the revenues from
which, were previously assigned to collateralize the Company's line of
credit facility with an independent third party lender. Prior to the
Assignment, the Company historically would lend Medley Refrigeration the
capital necessary for Medley Refrigeration to either purchase or
manufacture refrigeration equipment for its customers. Medley
Refrigeration, in turn, would lease this refrigeration equipment to its
customers who, as a condition to the lease, would grant the Company a
security interest in the leased equipment to collateralize the customer's
payment obligations under the equipment lease. As a result of the
Assignment, lease payments with respect to a majority of the equipment
leases extended to Medley Refrigeration's customers began, and continue, to
be payable directly to the Company. In addition, commencing in January
1997, the Company began, and continues, to finance refrigeration equipment
leases directly with Medley Refrigeration's customers. The Company,
through the date of this Prospectus, has continued to focus its marketing
efforts primarily to customers of Medley Refrigeration. Following the
consummation of this offering, however, the Company anticipates broadening
its leasing efforts to expand to entities unaffiliated with the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1996
For the three months ended March 31, 1997, the Company generated net
income of $40,013, as compared to net income of $49,851 for the comparable
period during 1996. This decrease was primarily attributable to increases
in general and administrative expenses associated with this Offering. This
increase in general and administrative expenses also had the effect of
nullifying the approximate $20,000 decrease in total costs and expenses
incurred by the Company during the three months ended March 31, 1997 as
compared to the comparable period during 1996.
During the three months ended March 31, 1997, the Company generated
leasing revenues of $94,158. This represents a decrease of $24,654 from
leasing revenues of $118,812 for the three months ended March 31, 1996.
This decrease in revenues was partially offset, however, by the $14,369
increase in interest income realized during the three months ended March
31, 1997. This increase in interest income reflects the continuing shift
in the Company's assets from maturing leases of dry cleaning equipment to
financed refrigeration equipment. All of the Company's equipment leases
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<PAGE>
are non-cancellable and since March 31, 1997, there has been no material
change in the amount or value of the Company's leased equipment.
FISCAL 1996 COMPARED TO FISCAL 1995
For Fiscal 1996, the Company generated revenues of $356,235, an
approximate 8% reduction from revenues of $388,008 for the fiscal year
ended December 31, 1995 ("Fiscal 1995"). Revenues for Fiscal 1996 and
Fiscal 1995 represented, principally, payments received against dry
cleaning equipment leases financed by the Company. During Fiscal 1996,
however, the Company began de-emphasizing its dry cleaning equipment
financing business and primarily concentrated its marketing efforts in the
refrigeration equipment financing area. Consequently, during Fiscal 1996,
the Company entered into approximately 41 new financing agreements with
customers of Medley Refrigeration while it did not enter into any new dry
cleaning equipment financing agreements. The Company expects revenues from
these new refrigeration equipment financing agreements to be realized over
the next five years.
For Fiscal 1996, the Company generated net income of $323,360, as
compared to a net loss of $(896,607) for Fiscal 1995. This significant
change in operating results is primarily due to the reversal, during Fiscal
1996, of a $600,000 provision for uncollectible advances to an affiliate
(Medley Refrigeration) recorded during Fiscal 1995. This $600,000
provision was taken essentially because at December 31, 1995, total
advances by the Company to Medley Refrigeration approximated $1.3 million.
This intercompany receivable was generated and had grown as a result of
the Company's advancing monies to Medley Refrigeration to enable Medley
Refrigeration to manufacture or otherwise acquire refrigeration equipment
which Medley Refrigeration would then lease to its customers. Medley
Refrigeration historically would then receive the lease payments relating
to this equipment directly from its customers, but, in lieu of remitting
these payments to the Company to reduce the outstanding intercompany
balance, Medley Refrigeration contributed these amounts to operate and
expand its business. Since Medley Refrigeration had not, prior to the
September 1996 audit date for the Company's Fiscal 1995 financial
statements, satisfied any meaningful portion of the outstanding advances
made to it by the Company, the independent public accountants auditing
the Company's Fiscal 1995 financial statements, determined that recording
the $600,000 provision was appropriate.
A reversal of the $600,000 provision was taken during Fiscal 1996
essentially because the Company was able to adequately demonstrate
that the uncollectible advances in question were, in fact, collectible. In
this regard, during December 1996, the Company and Medley Refrigeration
consummated the Assignment, pursuant to which, Medley Refrigeration's
rights to receive revenues from, and rights of collection with respect to,
a majority of Medley Refrigeration's equipment leases with its customers
were assigned to the Company. The present value of the revenue stream
underlying the Assignment was approximately $652,000 at the time of the
Assignment. In addition, Medley Refrigeration sold various leases to the
Company totalling approximately $55,000 (which was Medley Refrigeration's
cost basis) in January 1997. The transaction was recorded as a further
reduction of the intercompany balance. Moreover, Medley Refrigeration
paid $200,000 cash, subsequent to December 31, 1996, to the Company to
further reduce the outstanding receivable balance. The leases assigned
to the Company as part of the Assignment are performing within the lease
agreements and the residual value of the equipment, net of reconditioning
costs, plus the future payment, exceed the total receivable balance as
of December 31, 1996. It was therefore management's belief that the
payment of the receivable was assured by a third party and therefore
the allowance was no longer warranted.
As discussed above, during January 1997, the Medley Refrigeration
intercompany receivable was further reduced as a result of Medley
Refrigeration paying the Company $200,000 in cash and transferring
to the Company $37,000 of refrigeration equipment. The Company used this
refrigeration equipment to directly enter into new refrigeration equipment
leases with customers of Medley Refrigeration. The Company continues, on
a regular basis, to finance refrigeration equipment leases directly with
Medley Refrigeration's customers. The equipment underlying these leases
has been, and will continue to be, provided by Medley Refrigeration. The
intercompany receivable due the Company from Medley Refrigeration has
been, and will continue to be, reduced by the direct cost of the equipment
underlying these equipment leases. At March 31, 1997, the uncollectible
advance, which is now presented as due from affiliates in both the current
and other asset sections of the Company's financial statements, was
approximately $1,000,000. Group and the Company are parties to an
agreement pursuant to which, among other things, Group, on behalf of
Medley Refrigeration, will remit to the Company, at the closing of the
Minimum Offering, the $990,000 in net proceeds generated from Group's
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<PAGE>
sale of its 200,000 shares of Common Stock in the Minimum Offering. This
$990,000 will be paid to the Company to satisfy, in their entirety, all
receivables then outstanding from Medley Refrigeration to the Company.
Group, pursuant to the Escrow Agreement controlling the disbursement of
subscription proceeds at the closing of the Minimum Offering, has
authorized the Escrow Agent to remit directly to the Company, concurrently
with the closing of the Minimum Offering, the $990,000 in net proceeds
then held in escrow attributable to Group's sale of its 200,000 shares
of Common Stock in the Minimum Offering.
Management of the Company believes that the Company is not at risk of
accumulating such a significant receivable in the future. Management's
belief is based upon, among other things, (i) the fact that all receivables
outstanding from Medley Refrigeration will be satisfied in their entirety
at the closing of the Minimum Offering, (ii) management's intention of
expanding operations to unaffiliated parties following the consummation of
this offering, (iii) management's confidence in evaluating the credit-
worthiness of potential customers and lessees, (iv) the Company's stated
policy that following the consummation of this offering, it will not
permit receivables from affiliates to exceed, at any time, the lesser of
10% of all of the Company's total assets or $500,000 in the aggregate
and (v) the Company's stated policy that following the consummation of
this offering, all related party transactions must be on terms no more
favorable than otherwise could have been obtained from unrelated parties
and approved by a majority of the Company's disinterested directors. See
"Certain Transactions."
For Fiscal 1996, the Company generated net income per common share of
$.05 as compared to a net loss per common share of $(.98) for Fiscal 1995.
This change in net income per share is primarily the result of the reversal
of the $600,000 provision for uncollectible advances to an affiliate
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had total assets of $1,839,752 as
compared to total assets of $1,794,820 at December 31, 1996. This increase
in total assets is primarily attributable to a significant increase in
accounts receivable relating to new equipment leases entered into.
At December 31, 1996, the Company had total assets of $1,794,820, as
compared to total assets of $1,258,950 at December 31, 1995. This increase
in total assets was primarily due to (i) the Assignment, which resulted in
the reversal of the $600,000 estimate for uncollectible advances from an
affiliate (Medley Refrigeration) taken during Fiscal 1995 and (ii) the
Company's recording approximately $73,000 of additional prepaid expenses
directly attributable to this offering.
At March 31, 1997, the Company had total liabilities of $1,311,688 as
compared to total liabilities of $1,232,799 at December 31, 1996. This
increase in liabilities was primarily due to increases in declared but
unpaid and accrued Convertible Preferred Stock dividends.
At December 31, 1996, the Company had total liabilities of $1,232,799,
an approximate 33% reduction from total liabilities of $1,856,411 at
December 31, 1995. This decrease in liabilities is primarily the result of
the exchange, during June 1996, by holders of approximately $765,657
principal amount of long term debt of the Company, of this debt into
811,973 shares of Convertible Preferred Stock of the Company. The overall
decrease in total liabilities at December 31, 1996 was offset, however, by
an approximate $175,000 increase in accounts payable and accrued expenses
primarily attributable to $192,675 of accrued but unpaid dividends payable
with respect to shares of the Company's Convertible Preferred Stock due to
three of the Company's directors and their affiliates and relatives.
At March 31, 1997, the Company had total stockholder's equity of
$528,064 as compared to total stockholder's equity of $562,021 at December
31, 1996.
At December 31, 1996, the Company had total stockholder's equity of
$562,021, an approximate 195% increase from total stockholder's deficit of
$(597,461) at December 31, 1995. This significant change in stockholder's
equity was primarily the result of the aforementioned exchange, during June
1996, of approximately $765,657 principal amount of long term debt into
811,973 shares of Convertible Preferred Stock.
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The Company's experience in the specialty finance business has
historically been conducted with a smaller capital base than will be
available to the Company following the consummation of this offering. In
order to increase its capital base for further financing, the Company
traditionally has resorted to obtaining lines of credit secured by leased
equipment, to procuring unsecured borrowings from individual investors and
to selling or borrowing against its leases. In this regard, the Company
has established relationships with principal sources of financing and has
learned the particular focus and requirements of such sources. The Company
believes that with the proceeds from this offering, it will be positioned
to secure additional lines of credit and traditional bank financings for
the purpose of expanding and developing its business. The Company further
believes that its expanded business will enable it to pursue service
oriented financing activities such as factoring and locating potential
equipment lessees and referring them to the Company's financing sources on
a fee basis. In addition to such factoring and lease brokering activities,
the Company anticipates expanding into more traditional loan origination
business segments, including the provision of credit review services,
documentation services and loan servicing activities. There can be no
assurance, however, that the Company will successfully implement all or a
portion of this anticipated expansion.
The Company is dependent on the proceeds of this offering to finance
its ongoing specialty finance business, to commence its anticipated
factoring business and to finance its other working capital requirements.
The Company anticipates, based on its current proposed plans and
assumptions relating to its operations and expansion, that the proceeds of
this offering will be sufficient to satisfy the contemplated cash
requirements of the Company for approximately 12 months following the
consummation of this offering. In the event that the Company's plans
change or its assumptions prove to be inaccurate or the proceeds of this
offering prove to be insufficient to fund the Company's operations or its
expansion (due to unanticipated expenses, delays, problems or otherwise),
the Company would be required to seek additional funding. Depending upon
the Company's financial strength and the state of the capital markets, the
Company may also determine that it is advisable to raise additional equity
capital. The Company has no current arrangements with respect to, or
sources of, any additional capital, and there can be no assurance that such
additional capital will be available to the Company, if needed, on
commercially reasonable terms or at all. The inability of the Company to
obtain additional capital would have a material adverse effect on the
Company and could cause the Company to be unable to implement its business
strategy or proposed expansion or to otherwise significantly curtail or
cease its operations.
BUSINESS
GENERAL
The Company is a specialty finance company which, historically, has
been engaged primarily in the financing of (i) dry cleaning equipment to
smaller dry cleaning businesses throughout the eastern United States and
(ii) refrigeration equipment sold or leased by Medley Refrigeration. The
Company commenced operations by providing the cost of dry cleaning
equipment to new businesses. The Company, typically, would provide capital
to acquire the equipment which was then leased to the dry cleaning
businesses for amounts which would amortize the loan, repay any interest
expense and generate a profit. Since becoming affiliated with Group in
September 1993, the Company has also been involved in providing similar
lease financing to Medley Refrigeration's customers. Medley Refrigeration
is engaged in the provision of refrigeration equipment and services to the
food service and hospitality industries and other businesses throughout
central and southeastern Florida. The Company has historically utilized
its own equity capital for these purposes, as well as loan capital from
private investors. More recently, the Company has entered into
relationships with banks and institutional lenders to provide the credit
necessary to fund such financing operations.
Prior to Fiscal 1996, the Company focused its marketing efforts
primarily on providing financing to creditworthy customers of dry cleaning
equipment. Commencing in Fiscal 1996, the Company began de-emphasizing its
dry cleaning equipment business and began concentrating marketing efforts
to creditworthy customers of Medley Refrigeration. Such customers tend to
be small entities whose asset bases may not be significant enough to
attract traditional institutional lenders. Such customers are typically
willing to pay a premium in terms of interest rates for convenience and
availability of financing.
During December 1996, Medley Refrigeration and the Company consummated
the Assignment, pursuant to which, Medley Refrigeration assigned to the
Company all of Medley Refrigeration's rights to receive revenues from, and
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rights of collection with respect to, a majority of the refrigeration
equipment leases entered into by Medley Refrigeration with its customers.
Prior to the Assignment, the Company historically would lend Medley
Refrigeration the capital necessary for Medley Refrigeration to either
purchase or manufacture refrigeration equipment for its customers. Medley
Refrigeration, in turn, would lease this refrigeration equipment to its
customers who, as a condition to the lease, would grant the Company a
security interest in the leased equipment to collateralize the customer's
payment obligations under the equipment lease. As a result of the
Assignment, lease payments with respect to a majority of the equipment
leases extended to Medley Refrigeration's customers began, and continue, to
be payable directly to the Company. In addition, commencing in January
1997, the Company began, and continues, to finance refrigeration equipment
leases directly with Medley Refrigeration's customers. This direct
financing is essentially accomplished by the Company purchasing the
equipment to be leased from Medley Refrigeration. The Company, in turn,
then leases this equipment to creditworthy Medley Refrigeration's customers
who make lease payments with respect to such equipment directly to the
Company. The Company, through the date of this Prospectus, has continued
to focus its marketing efforts primarily to customers of Medley
Refrigeration. Following the consummation of this offering, however, the
Company anticipates broadening its leasing efforts to expand to entities
unaffiliated with the Company.
The Company believes that with the proceeds from this offering, it
will be positioned to secure additional lines of credit and traditional
bank financings for the purpose of expanding and developing its business.
The Company further believes that its expanded business will enable it to
pursue service oriented financing activities such as factoring and locating
potential equipment lessees and referring them to the Company's financing
sources on a fee basis. In addition to such factoring and lease brokering
activities, the Company anticipates expanding into more traditional loan
origination business segments, including the provision of credit review
services, documentation services and loan servicing activities. The
Company believes that its current and proposed expanded business activities
do not subject it to any existing or proposed lending or licensing
regulations or requirements.
The Company was incorporated under the laws of the State of Delaware
on May 2, 1990 under the name Premier Lease Concepts, Inc. In September
1993, Premier Lease Concepts, Inc. was merged into a subsidiary of Group.
As part of this Merger, the Company's name was changed to Medley Credit
Acceptance Corp.
EXISTING BUSINESSES
Financing of Dry Cleaning Equipment
The Company's principal initial business was the investment of capital
in dry cleaning equipment leased to small dry cleaning businesses
throughout the eastern United States. Such dry cleaning equipment would
typically involve a total cost of between $60,000 to $70,000 and be leased
out for a five-year term with the lessee having the option to buy the
equipment at the end of the lease term for the fair market value thereof.
The internal rate of return of such leases was generally attractive to the
Company. Such leases could be refinanced or sold at discount rates
substantially less than the return implicit in the lease itself. Such
finance discounting was, in most instances, accomplished on a full
nonrecourse basis. Due to the decrease, commencing in Fiscal 1995, of dry
cleaning equipment financing opportunities, and the general reduction in
risk associated with the financing of refrigeration equipment as compared
to dry cleaning equipment (primarily due to the significantly reduced cost
of refrigeration equipment as compared to dry cleaning equipment), the
Company, during Fiscal 1996, began de-emphasizing its dry cleaning
equipment business and began concentrating marketing efforts to Medley
Refrigeration's customers.
Refrigeration Equipment Financing
The Company's financing activities with respect to refrigeration
equipment are similar to that employed in its dry cleaning equipment
financing business. The cost of refrigeration equipment (generally $6,000
to $10,000), however, is much less than dry cleaning equipment. In
addition, the Company's lease terms for refrigeration equipment generally
range between 36 to 60 months, without, in many instances, any buy-out
option at the end of the lease term. The Company, historically, has
financed refrigeration equipment to creditworthy customers of Medley
Refrigeration. Following the consummation of this offering, the Company
anticipates broadening its leasing efforts to expand to entities
unaffiliated with the Company.
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The Company generally performs its own credit checks on potential
lessees, including a review of a standard credit application, the
verification of bank references and three trade creditor references, the
confirmation of business history and the lessee's existence, as well as
performing an independent credit check of the potential lessee (TRW,
Equifax or CBI).
PROPOSED MATERIAL NEW BUSINESSES
Factoring
One of the principal focuses of the Company's business expansion
following the consummation of this offering will be the Company's
anticipated entrance into the factoring business, i.e., providing small-to-
medium sized, high risk growth companies with capital through the
discounted purchase of their accounts receivable. The Company also
anticipates making Collateralized Advances to its factoring clients secured
by inventory, equipment, real estate and other assets and, on occasion,
providing other specialized financing structures which will be designed to
satisfy the unique requirements of the Company's clients.
The Company believes that its factoring business typically will
consist of the Company entering into an accounts receivable factoring and
security agreement with a client which will (i) obligate the client to sell
the Company a minimum amount of accounts receivable each month (or a
minimum amount of receivables during the term of the agreement); (ii)
usually have a term of not less than six months and, more likely, one year
and (iii) be automatically renewable. When making a Collateralized
Advance, the Company will enter into such additional agreements with the
client and, if appropriate, third parties, as the Company deems necessary
or desirable, based on the type(s) of collateral securing the
Collateralized Advance. The Company will purchase accounts receivable from
its factoring clients at a discount from face value and usually require the
client's customers to make payment on the receivables directly to the
Company. The Company will almost always reserve the right to seek payment
from the client in the event the client's customers fail to make the
required payment. To secure all of a client's obligations to the Company,
the Company will also take a lien on all accounts receivable of the client
(to the extent not purchased by the Company) and, whenever available,
blanket liens on all of the client's other assets (some or all of which
liens may be subordinate to other liens). When making a Collateralized
Advance, the Company will almost always take a first lien on the specific
collateral securing the Collateralized Advance. The Company may, on
occasion, make Collateralized Advances secured by a subordinate lien
position, but only if management of the Company determines that the equity
available to the Company in a subordinate position would be adequate to
secure the Collateralized Advance. The Company will almost always require
personal guaranties (either unlimited or limited to the validity and
collectibility of purchased accounts receivable) from each client's
principals. Although the Company will obtain as much collateral as
possible and usually retain full recourse rights against its clients,
clients (and account debtors) may fail and accordingly, there can be no
assurance that the collateral obtained and the recourse rights retained
(together with personal guaranties) will be sufficient to protect the
Company against loss. Moreover, since the Company has very limited prior
experience as a factor, there can be no assurance that the Company's
expansion into the factoring business will be a profitable, or economically
prudent, venture.
Lease Brokering Activities
Following the consummation of this offering, the Company also intends
to consider expanding its operations to include lease brokering. At this
date, however, the Company has no specific plans, arrangements or
agreements relating to future lease brokering activities. In this regard,
the Company believes that the customer base of the Company, Medley
Refrigeration and their affiliates may be receptive to other types of
financing in addition to those utilized in the acquisition of refrigeration
equipment. These types of specialty financing arrangements may include
leases for equipment in which other lessors (unaffiliated with the Company)
or banks and finance companies known to the Company specialize. The
Company believes, based upon what it believes to be generally accepted
market terms, that these other lessors, banks and finance companies would
be willing to pay the Company between two to four percentage points of the
total loan in consideration for the Company's referring such financing
opportunity to such lender. The Company is not presently a party to any
agreement or understanding with respect to any proposed lease brokering
activities. Nonetheless, lease brokering activities are attractive to the
Company because they may be pursued with limited to no involvement of
capital. In addition, such referrals generally do not include customary
credit analysis procedures and normally do not involve residual liability.
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COMPETITION
The factoring and financing of equipment businesses are highly
fragmented. The Company competes, and in the future, will compete for
customers with a number of national, regional and local finance and
factoring companies, including those which, like the Company, specialize in
particular segments of the overall market. In addition, the Company's
competitors include, and will include, those equipment manufacturers which
finance the sale or lease of their products themselves, other traditional
types of financial services companies, such as commercial banks and savings
and loan associations, and conventional leasing and factoring companies.
Although the Company believes that it currently maintains a competitive
advantage on the basis of its convenience-oriented financing and value-
added services, many of the Company's competitors and potential competitors
possess substantially greater financial, marketing, and operational
resources. Moreover, the Company's future profitability will be directly
related to the Company's ability to access capital funding and to obtain
favorable funding rates as compared to the capital and costs of capital
available to its competitors. Accordingly, there can be no assurance that
the Company will be able to continue to compete successfully in its
targeted markets.
EMPLOYEES
The Company plans to operate with as few employees as possible. The
Company currently engages four full-time employees and anticipates hiring
three additional full-time employees following the consummation of this
offering. The Company believes that these three new employees will be
necessary as a result of the Company's anticipated expansion into the
factoring business.
PROPERTIES
The Company currently owns no real property and conducts its business
from facilities leased by Medley Refrigeration. The Company pays Medley
Refrigeration $15,000 per year to cover the Company's allocated rental and
common expense charges with respect to the facility encompassing the
Company's offices. The Company believes this facility is well maintained
and adequate to meet the Company's needs for the foreseeable future.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Robert D. Press 33 President, Chief Executive
Officer, Treasurer
Steven L. Edelson 49 Chairman of the Board and
Secretary
Steven Dreyer 54 Director
Maynard Hellman 52 Director
Robert D. Press has served as the President, Chief Executive Officer,
Treasurer and a Director of the Company since its inception in September
1993. Mr. Press devotes substantially all of his business time and efforts
to the affairs of the Company. From June 1990 to August 1993, Mr. Press
served as President of Premier Lease Concepts, Inc., the Company's
predecessor. In addition, since 1989, Mr. Press has served as President of
Performance Capital Management, a holding company with interests in
brokerage and investment management, and as President of Group since
October 1992. Mr. Press has also served as a licensed registered
representative of the Underwriter since 1991. Mr. Press holds a B.A.
degree in Economics from Brandeis University. From 1984 to 1986, Mr. Press
worked as a full-time trading systems consultant to several major Wall
Street firms, including The Longview Group. In 1986, Mr. Press joined
Chemical Bank, N.A. ("Chemical Bank") as an internal consultant in trading
and capital markets, and later in 1986, Mr. Press joined in the formation
of Chemical Bank's Interest Rate Arbitrage trading group, of which Mr.
Press became the principal trader responsible for the global trading and
investment decisions of a multi-billion dollar portfolio. Mr. Press holds
the Series 7 and 63 professional securities licenses.
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<PAGE>
Steven L. Edelson has served as the Chairman of the Board and
Secretary of the Company since its inception. Mr. Edelson devotes only
such business time and efforts to the affairs of the Company as is
necessary for Mr. Edelson to fulfill his fiduciary duties as Chairman of
the Board of the Company. From June 1990 to August 1993, Mr. Edelson
served as Chairman of the Board of Premier Lease Concepts, Inc. In
addition, Mr. Edelson has served as Chairman of the Board of Performance
Capital Management and of Group since 1991 and 1992, respectively.
Pursuant to a management agreement between Performance Capital Management
and the Underwriter, Mr. Edelson serves as a licensed securities principal
of the Underwriter, responsible for supervising the day to day operations
and affairs of the Underwriter. Mr. Edelson holds an M.B.A. degree in
Finance from the University of Chicago and a B.A. degree in Economics from
the Wharton School of the University of Pennsylvania. Mr. Edelson has
extensive Wall Street experience including serving as a Bond Trader at
Goldman Sachs and Co. and at Salomon Brothers from 1973 to 1975 and 1975 to
1977, respectively. Mr. Edelson also served as Vice President of Bond
Trading at The Chase Manhattan Bank, N.A. from 1977 to October 1979 and as
Managing Director and Department Head for Trading and Distribution of
several major areas, including Bond Trading, at Chemical Bank from October
1979 to October 1989. Mr. Edelson holds the Series 7 and 63 professional
securities licenses and the Series 24 securities principal's license.
Maynard J. Hellman has served as a Director of the Company since
January 1997. Since January 1988, Mr. Hellman has served as managing
partner of the Coral Gables, Florida based law firm of Hellman & Maas.
From 1983 until 1988, Mr. Hellman was engaged in the private practice of
law and prior thereto, Mr. Hellman served as a partner in the Miami,
Florida law firm of Gilbert, Silverstein and Hellman. Mr. Hellman holds a
J.D. degree from the University of Miami School of Law and a B.B.A. degree
in Accounting from the University of Miami School of Business
Administration.
Steven Dreyer has served as a Director of the Company since January
1997. Since 1989, Mr. Dreyer has served as President of Cryntel
Enterprises Ltd., a Florida based company engaged in the manufacture and
marketing of Far Eastern made floor tiles and other home improvement
products. From 1981 to 1988, Mr. Dreyer served as Chief Executive Officer
of Cyntec Trading Company, a London, England based company engaged in the
manufacture and marketing of Asian made floor covering products. Mr.
Dreyer holds a B.A. degree from the University of California at Northridge.
The Company's Directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. Directors currently receive no compensation for serving on the
Board of Directors or any committee thereof other than reimbursement of
reasonable expenses incurred in attending meetings. In the future, it is
intended that non-employee Directors will receive a fee of $500 for
attendance at each Board of Directors (or committee) meeting. The
Company's officers are elected annually by the Board of Directors and serve
at the discretion of the Board.
No family relationships exist among any of the Company's Directors and
officers. Moreover, no arrangement or understanding exists between any of
the Company's Directors and officers and any other person pursuant to which
any Director or officer was elected as a Director or officer of the
Company.
EXECUTIVE COMPENSATION
During Fiscal 1996, the Company did not pay any cash remuneration to
any of its executive officers. Moreover, no bonus or other form of
remuneration was paid by the Company to its executive officers during
Fiscal 1996. The Company, however, is party to employment contracts with
each of Messrs. Press and Edelson, the Company's President and Chairman of
the Board, respectively. The following table summarizes the aggregate
annual compensation to be payable by the Company to its President and
Chairman of the Board effective upon the consummation of this offering:
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CAPACITY IN
NAME OF INDIVIDUAL WHICH SERVED AGGREGATE COMPENSATION
------------------ ------------ ----------------------
Robert D. Press President $60,000 (1)
Steven L. Edelson Chairman of the Board $30,000 (1)
--------------
(1) Pursuant to the terms of Messrs. Press' and Edelson's employment
agreements with the Company, this compensation will not begin to
accrue until the Company consummates this offering. During Fiscal
1996, Messrs. Press and Edelson did not, nor were they entitled to,
receive any remuneration from the Company. In addition, the Company
and Performance Capital Management are parties to a Management
Agreement pursuant to which, among other things, Performance Capital
Management provides the Company with certain financial and managerial
assistance in consideration for a management fee (the "Management
Fee") of $15,000 per annum for Fiscal 1996, increasing to $90,000 per
annum effective upon the consummation of this offering. Messrs. Press
and Edelson, the President and Chairman of the Board of the Company,
respectively, control Performance Capital Management. The aggregate
compensation set forth in the above table does not include any portion
of the Management Fee that may be attributable to Mr. Press or Mr.
Edelson, as the case may be, as a result of his affiliation with
Performance Capital Management. See "--Employment Agreements" and
"Certain Transactions."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of
Messrs. Press and Edelson pursuant to which, among other things, Messrs.
Press and Edelson have agreed to serve as President and Chairman of the
Board, respectively, of the Company. Each of Messrs. Press' and Edelson's
employment agreement provides that no compensation accrues or is payable
thereunder until the Company consummates its initial public offering (as
defined therein). Upon consummation of the Company's initial public
offering, Messrs. Press and Edelson will begin earning salaries at the
rates of $60,000 and $30,000 per annum, respectively. These employment
agreements expire on December 31, 1997 (subject to early termination
provisions), provided, however, that such agreements will automatically
renew for successive one-year terms commencing on December 31 of each year
if no formal notice of termination has been provided. Messrs. Press and
Edelson are also entitled to participate in medical, stock option, pension
and other benefit plans that the Company may establish from time to time
for the benefit of its employees generally.
Messrs. Press' and Edelson's employment agreements are terminable by
the Company for cause (i.e., conviction of a felony, willful misconduct,
dishonesty or material breach of the agreement) at any time or in the event
that Messrs. Press or Messrs. Edelson, as the case may be, becomes disabled
and, as a result, is unable to perform his duties under his employment
agreement for more than three consecutive months or for more than five
months during any 12-month period. In addition, each of Messrs. Press and
Edelson has agreed that during the term of his employment with the Company,
and for a period of two years thereafter, he will not compete or engage in
a business competitive with the business of the Company.
STOCK OPTION PLAN
On January 9, 1997, the Company adopted a stock option plan (the
"Stock Option Plan"). The Stock Option Plan has 500,000 shares of Common
Stock reserved for issuance upon the exercise of options designated as
either (i) incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended, or (ii) non-qualified options. ISOs may be granted
under the Stock Option Plan to employees and officers of the Company. Non-
qualified options may be granted to consultants, directors (whether or not
they are employees), employees or officers of the Company. In certain
circumstances, the exercise of stock options may have an adverse effect on
the market price of the Company's Common Stock and/or Warrants. As of the
date of this Prospectus, no options have been granted under the Stock
Option Plan.
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The purpose of the Stock Option Plan is to encourage stock ownership
by certain directors, officers and employees of the Company and certain
other persons instrumental to the success of the Company and give them a
greater personal interest in the success of the Company. The Stock Option
Plan is administered by the Board of Directors or, at the Board's
discretion, by a committee which is appointed by the Board to perform such
function (the "Committee"). The Board or the Committee, as the case may
be, within the limitations of the Stock Option Plan, determines, among
other things, when to grant options, the persons to whom options will be
granted, the number of shares to be covered by each option, whether the
options granted are intended to be ISOs, the duration and rate of exercise
of each option, the exercise price per share and the manner of exercise,
the time, manner and form of payment upon exercise of an option, and
whether restrictions such as repurchase rights in the Company are to be
imposed on shares subject to options. ISOs granted under the Stock Option
Plan may not be granted at a price less than the fair market value of the
Common Stock on the date of grant (or 110% of fair market value in the case
of persons holding 10% or more of the voting stock of the Company). The
aggregate fair market value of shares for which ISOs granted to any
employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. Options granted under the Stock
Option Plan will expire not more than ten years from the date of grant
(five years in the case of ISOs granted to persons holding 10% or more of
the voting stock of the Company). Options granted under the Stock Option
Plan are not transferable during an optionee's lifetime but are
transferable at death by will or by the laws of descent and distribution.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of
this Prospectus and as adjusted to reflect the sale (i) by the Company of a
minimum of 1,000,000 shares of Common Stock offered hereby and a maximum of
1,400,000 shares of Common Stock offered hereby and (ii) by the Selling
Stockholder of 200,000 shares of Common Stock offered hereby, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% percent of the
outstanding shares of Common Stock, (ii) each director, (iii) each
executive officer and (iv) all directors and executive officers of the
Company as a group.
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL
NAME AND ADDRESS OF OWNERSHIP BEFORE OWNERSHIP AFTER
BENEFICIAL OWNER OFFERING(1) OFFERING(1)
---------------- ----------- -----------
Medley Group, Inc.
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 1,500,000(3) 1,300,000(3)
Robert D. Press
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 1,819,189(3)(4) 1,619,189(3)(4)
Steven L. Edelson
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 2,067,160(3)(5) 1,867,160(3)(5)
Steven Dreyer . . . . . . . . 20,154(6) 20,154(6)
Maynard Hellman . . . . . . . 150,000(7) 150,000(7)
All directors and
officers as a
group (four persons) . . . . 2,556,503(3)(4)(5) 2,356,503(3)(4)(5)
(6)(7) (6)(7)
PERCENTAGE OF
OUTSTANDING SHARES OWNED
--------------------------------------
AFTER MINIMUM AFTER MAXIMUM
NAME AND ADDRESS OF BEFORE OFFERING OFFERING
BENEFICIAL OWNER OFFERING (2) (2)
---------------- -------- ------------- -------------
Medley Group, Inc.
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 89.3% 49.1% 42.6%
Robert D. Press
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 91.7% 54.8% 48.3%
Steven L. Edelson
10910 N.W. South River Drive
Miami, Florida 33178 . . . . 92.6% 58.3% 51.8%
Steven Dreyer . . . . . . . . 1.2% * *
Maynard Hellman . . . . . . . 8.9% 5.7% 4.9%
All directors and
officers as a
group (four persons) . . . . 100.0% 66.8% 60.0%
--------------
* Represents less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days from the date of this
Prospectus upon the exercise or conversion of options, warrants or
other convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants or other
convertible securities that are held by such person (but not those
held by any other person) and that are exercisable or convertible
within 60 days from the date of this Prospectus have been exercised or
converted. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(2) Does not include (i) 1,200,000 shares of Common Stock reserved for
issuance upon the exercise of Warrants in the event the Minimum
Offering is sold or 1,600,000 shares of Common Stock reserved for
issuance upon the exercise of Warrants in the event the Maximum
Offering is sold and (ii) 500,000 shares of Common Stock reserved for
issuance upon exercise of options available for future grant under the
Company's Stock Option Plan.
(3) Messrs. Press and Edelson, the President and Chairman of the Board,
respectively, of the Company, may be deemed to be the control persons
of Medley Group, Inc., and, as such, may be deemed to beneficially own
all of the Common Stock of the Company beneficially owned by Medley
Group, Inc.
(4) 15,000 of these shares will be redeemed by the Company, at the
redemption price of $5.50 per share, concurrently with the closing of
the Minimum Offering. Includes 142,500 shares of Common Stock
issuable upon the exercise of certain warrants; these warrants are
exercisable at any time on or prior to September 30, 2000 at an
exercise price of $1.50 per share. Also includes 161,689 shares of
Common Stock issuable upon the conversion of 755,895 shares of
Convertible Preferred Stock owned by Mr. Press.
(5) 15,000 of these shares will be redeemed by the Company, at the
redemption price of $5.50 per share, concurrently with the closing of
the Minimum Offering. Includes 142,500 shares of Common Stock
issuable upon the exercise of certain warrants; these warrants are
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exercisable at any time on or prior to September 30, 2000 at an
exercise price of $1.50 per share. Also includes 409,660 shares of
Common Stock issuable upon the conversion of 1,915,160 shares of
Convertible Preferred Stock owned by Mr. Edelson.
(6) Represents (i) 5,625 shares of Common Stock issuable upon the exercise
of certain warrants owned by Tile's International, an entity
controlled by Mr. Dreyer; these warrants are exercisable at any time
on or prior to September 30, 2000 at an exercise price of $1.50 per
share and (ii) 14,529 shares of Common Stock issuable upon the
conversion of 67,925 shares of Convertible Preferred Stock owned by
Mr. Dreyer.
(7) Does not include 1,000,000 shares of Common Stock issuable upon the
exercise of certain warrants owned by Mr. Hellman. These warrants are
identical to the Warrants being offered hereby except that the
exercise price of the warrants owned by Mr. Hellman is $5.00 per
share.
CERTAIN TRANSACTIONS
Prior to December 1996, the Company, generally, provided equipment
lease financing to customers of Medley Refrigeration. Essentially, the
Company would lend Medley Refrigeration the capital necessary for Medley
Refrigeration to lease equipment owned by it to its customers. These
customers, in turn, would make lease payments to Medley Refrigeration.
These advances were historically recorded on the Company's financial
statements as an intercompany receivable due from Medley Refrigeration. As
an accommodation to the Company, Medley Refrigeration would cause its
customers to grant the Company a security interest in the equipment leased
to them to secure lease payments from customers. At December 31, 1995, the
intercompany receivable due from Medley Refrigeration was approximately
$1,350,000.
During December 1996, the Company and Medley Refrigeration consummated
the Assignment, pursuant to which, Medley Refrigeration's rights to receive
revenues from, and rights of collection with respect to, a majority of
Medley Refrigeration's equipment leases with its customers were assigned to
the Company. The present value of the revenue stream underlying the
Assignment was approximately $652,000 at the time of the Assignment.
During January 1997, the Medley Refrigeration intercompany receivable
was further reduced by $237,000 as a result of Medley Refrigeration paying
the Company $200,000 in cash and transferring to the Company $37,000 of
refrigeration equipment. The Company used this refrigeration equipment to
directly enter into new refrigeration equipment leases with customers of
Medley Refrigeration. This direct lease financing was essentially
accomplished by the Company purchasing the equipment to be leased from
Medley Refrigeration. The Company, in turn, then leased this equipment to
creditworthy Medley Refrigeration customers who are required to make lease
payments with respect to such equipment directly to the Company. The
Company continues, on a regular basis, to finance refrigeration equipment
leases directly with Medley Refrigeration's customers. The equipment
underlying these leases has been, and will continue to be, provided by
Medley Refrigeration. The intercompany receivable due the Company from
Medley Refrigeration has been, and will continue to be, reduced by the sum
of all lease payments received with respect to these equipment leases. At
March 31, 1997, the intercompany receivable due to the Company from Medley
Refrigeration was approximately $1,000,000.
Group and the Company are parties to an agreement pursuant to which,
among other things, Group, on behalf of Medley Refrigeration, will remit to
the Company, at the closing of the Minimum Offering, the $990,000 in net
proceeds generated from Group's sale of its 200,000 shares of Common Stock
in the Minimum Offering. This $990,000 will be paid to the Company to
satisfy, in their entirety, all receivables then outstanding from Medley
Refrigeration to the Company. Group, pursuant to the Escrow Agreement
controlling the disbursement of subscription proceeds at the closing of the
Minimum Offering, has authorized the Escrow Agent to remit directly to the
Company, concurrently with the closing of the Minimum Offering, the
$990,000 in net proceeds then held in escrow attributable to Group's sale
of its 200,000 shares of Common Stock in the Minimum Offering.
During June 1996, the Company offered holders of approximately
$951,590 principal amount of unsecured notes of the Company (of which
Steven Dreyer, a Director of the Company, held approximately $50,788 of
these notes) the opportunity to exchange their notes into shares of the
Company's Convertible Preferred Stock. Noteholders, including Mr. Dreyer,
converted approximately $765,657 principal amount of notes into 811,973
shares of Convertible Preferred Stock. Mr. Dreyer was issued 54,338 shares
of Convertible Preferred Stock pursuant to this exchange offer.
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Concurrently, in June 1996, the Company offered Messrs. Robert Press
and Steven Edelson, President and Chairman of the Board, respectively, of
the Company, the opportunity to exchange their shares of 13 1/2% preferred
stock of the Company then owned by them, having an aggregate liquidation
value of $1,643,726, into shares of Convertible Preferred Stock. Messrs.
Press and Edelson exchanged all of their shares of 13 1/2% preferred stock
for an aggregate of 2,136,844 shares of Convertible Preferred Stock
(604,717 shares to Mr. Press and 1,532,127 shares to Mr. Edelson).
The Company and Performance Capital Management, a company controlled
by Messrs. Press and Edelson, are parties to a Management Agreement
pursuant to which, among other things, Performance Capital Management
provides the Company with certain financial and managerial assistance in
consideration for a Management Fee of $30,000 for Fiscal 1995, $15,000 for
Fiscal 1996 and $90,000 per year following the consummation of this
offering. Under this Agreement, representatives of Performance Capital
Management (specifically, Messrs. Press and Edelson) render business and
financial counsel, guidance and managerial assistance to the Company while
also serving as directors of the Company and, in Mr. Press' case, as
President of the Company. Mr. Press devotes substantially all of his
business time and efforts to the affairs of the Company, while Mr. Edelson
devotes only such time to the business and affairs of the Company as is
necessary for Mr. Edelson to satisfy his fiduciary obligations as Chairman
of the Board of the Company. This Agreement expires on December 31, 1997
but is automatically renewable for successive one year terms if no formal
notice of termination has been provided.
From June 1, 1996 through March 31, 1997, Messrs. Press and Edelson
loaned the Company $58,218 and $47,018, respectively. These loans were
made to the Company in order to permit the Company to satisfy its operating
expenses in connection with, and in anticipation of, this offering. These
loans bear interest at the rate of 12% per annum, with a balloon payment of
principal and accrued interest due by August 2, 1999. The Company intends
to repay these loans (Messrs. Press and Edelson have each agreed to waive
interest payments under these loans) with a portion of the proceeds from
this offering. In connection with their making these loans, the Company
issued to each of Messrs. Press and Edelson warrants to purchase up to
142,500 shares of Common Stock. These warrants are exercisable at any time
on or prior to September 30, 2000, at an exercise price of $1.50 per share.
From June 1, 1996 to March 31, 1997, Performance Capital Management
loaned the Company $21,000. This loan bears interest at the rate of 12%
per annum with a balloon payment of principal and accrued interest due by
August 2, 1999.
From June 1, 1996 to March 31, 1997, Tile's International ("Tiles"), a
company controlled by Steven Dreyer, loaned the Company $100,000, of which
approximately $81,321 was outstanding at March 31, 1997. This loan bears
interest at the rate of 13 1/2% per annum, requires monthly payments of
principal and interest and matures in November 1998. The Company intends
to satisfy $14,333.10 of this loan (which sum includes accrued and unpaid
interest) with a portion of the proceeds from this offering. In connection
with the loans made to the Company by Tiles, the Company issued to Tiles
warrants to purchase up to 5,625 shares of Common Stock. These warrants
are exercisable at any time prior to September 30, 2000, at an exercise
price of $1.50 per share.
In December 1996, the Company sold Maynard Hellman, a director of the
Company, in consideration for $100,000, warrants to purchase up to
1,000,000 shares of Common Stock of the Company. These warrants are
identical to the Warrants being offered hereby except that the exercise
price of the Warrants owned by Mr. Hellman is $5.00 per share.
The Company will utilize $165,000 from this offering to redeem, at a
price of $5.50 per share, an aggregate of 30,000 shares of Common Stock
owned by Messrs. Press and Edelson. These shares were transferred and
assigned by Group to Messrs. Press and Edelson in January 1996 in
consideration for services performed by them on behalf of the Company.
Following the consummation of this offering, the Company will require
all agreements and arrangements involving it and the Underwriter,
Performance Capital Management or any other related party, including the
Company's officers, directors and 5% or greater stockholders to be (i)
negotiated, to the extent possible, on an arm's-length basis, (ii) on terms
no more favorable to the party other than the Company thereto than
otherwise could be obtained from an unaffiliated party and (iii) approved
by a majority of the disinterested directors of the Company. In addition,
the Company has agreed that following the closing of the Minimum Offering
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and the concurrent satisfaction by Group, on behalf of Medley
Refrigeration, of all receivables then outstanding from Medley
Refrigeration to the Company, the Company will not permit receivables from
affiliates to exceed, at any time, the lesser of 10% of all of the
Company's total assets or $500,000 in the aggregate and that any loans to
the Company's officers, directors, 5% or greater stockholders or affiliates
will be for bona fide business purposes only and approved by a majority of
the Company's disinterested directors. To date, all transactions between
the Company and its officers, directors and greater than 5% stockholders
have been on terms no more favorable to such officers, directors and
stockholders as otherwise could be obtained from unaffiliated parties.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 15,000,000 shares of Common Stock,
par value $.01 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share. As of the date of this Prospectus, there were
1,680,000 shares of Common Stock issued and outstanding, and 2,958,817
shares of preferred stock issued and outstanding. All such preferred stock
is Convertible Preferred Stock, the only series of preferred stock
outstanding as of the date of this Prospectus.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the
result that the holders of more than 50% of the shares voting for the
election of directors can elect all of the directors then up for election.
The holders of Common Stock are entitled to receive ratably dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining which are available for distribution to them after payment
of liabilities and after provision has been made for each class of stock,
if any, having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are (and the shares
of Common Stock offered hereby, when issued in exchange for the
consideration set forth in this Prospectus, will be) fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue preferred stock in one or more
series with such designations, rights, preferences and restrictions as may
be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Company's Common Stock and, in certain instances, could
adversely affect the market price of such stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of the
Company.
In June 1996, the Company authorized and issued an aggregate of
2,958,817 shares designated as Series A 10% Convertible Preferred Stock.
There is not authorized or outstanding, as of the date of this Prospectus,
any other series of preferred stock of the Company. The Convertible
Preferred Stock accrues dividends, payable quarterly (to the extent legally
sufficient funds are then available to the Company), at an annual rate of
$.10 per share. All regularly declared but unpaid dividends cumulate. If
the Company, for whatever reason, fails to pay the regular quarterly
dividend with respect to the Convertible Preferred Stock for four
consecutive quarters, the holders of the Convertible Preferred Stock,
voting separately as a class, shall be entitled to elect one designee to
the Company's Board of Directors. Holders of shares of Convertible
Preferred Stock are not otherwise entitled to vote on any matters affecting
the Company or its stockholders, except as may be required by law.
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The Convertible Preferred Stock is entitled to a $1.00 per share
liquidation preference (together with all accrued and unpaid dividends)
over the Company's Common Stock in the event of dissolution of the Company.
After the satisfaction of all indebtedness of the Company, holders of
Convertible Preferred Stock would then receive any remaining assets in
priority to holders of the Company's Common Stock.
Holders of the Convertible Preferred Stock shall have the right,
effective at any time following the closing of the Minimum Offering, to
convert any or all of such holder's shares of Convertible Preferred Stock
into shares of Common Stock of the Company at the initial public offering
price for the Common Stock being offered hereby ($5.50 per share) less a
15% discount, or approximately $4.68 per share (the "conversion price").
The number of shares of Common Stock issuable upon conversion shall be
determined by dividing the aggregate liquidation value ($1.00 per share) of
all shares of Convertible Preferred Stock being converted (together with
the amount of all accrued and unpaid dividends with respect to such shares)
by the conversion price for such shares.
The Company has the unilateral right, commencing on June 1, 2001 (the
"anniversary date"), to redeem all or any shares of Convertible Preferred
Stock at the redemption price of $1.00 per share (together with the amount
of all accrued and unpaid dividends with respect to such shares) if the
average closing price for shares of the Company's Common Stock for the 20
consecutive trading days immediately preceding the anniversary date exceeds
the conversion price by 20% (approximately $5.62 per share).
REDEEMABLE WARRANTS
Each Warrant offered hereby entitles the registered holder thereof
(the "Warrant Holders") to purchase, commencing one year following the date
of this Prospectus, one share of Common Stock at a price of $5.75, subject
to adjustment in certain circumstances, until 5:00 p.m., Eastern time, on
( ), 2002 (five years following the date of this Prospectus). The Warrants
will be separately transferable immediately upon issuance. The exercise
price for the Warrants has been set below the proposed initial public
offering price since purchasers of Warrants are bearing an economic risk
because the Warrants are not exercisable for the one year period from the
date of this Prospectus.
The Warrants are redeemable by the Company, upon the consent of the
Underwriter, at any time after ( ), 1998 (one year following the date of
this Prospectus), upon notice of not less than 30 days at a price of $.15
per Warrant, provided that the closing bid quotation of the Common Stock on
all 25 of the trading days ending on the third day prior to the day on
which the Company gives notice of redemption has been at least 150%
(currently $8.25, subject to adjustment) of the initial offering price of
the Common Stock offered hereby. The Warrant Holders shall have the right
to exercise their Warrants until the close of business on the date fixed
for redemption. The Warrants will be issued in registered form under a
warrant agreement by and among the Company, American Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent"), and the Underwriter (the
"Warrant Agreement"). The exercise price and number of shares of Common
Stock issuable on exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
However, the Warrants are not subject to adjustment for issuances of Common
Stock at prices below the exercise price of the Warrants. Reference is
made to the Warrant Agreement (which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part) for a complete
description of the terms and conditions of the Warrants.
The Warrants may be exercised upon surrender of the Warrant
certificate on or prior to the expiration date at the offices of the
Warrant Agent, with the exercise form on the reverse side of the Warrant
certificate completed and executed as indicated, accompanied by full
payment of the exercise price (by certified check or bank draft payable to
the Company) to the Warrant Agent for the number of Warrants being
exercised. Warrant Holders do not have the rights or privileges of holders
of Common Stock until their Warrants are exercised.
No Warrant will be exercisable unless at the time of exercise the
Company has filed a current registration statement with the Commission
covering the shares of Common Stock issuable upon exercise of such Warrant
and such shares have been registered or qualified or deemed to be exempt
from registration or qualification under the securities laws of the state
of residence of the holder of such Warrant. The Company will use its best
efforts to have all shares so registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until
the expiration of the Warrants, subject to the terms of the Warrant
Agreement. While it is the Company's intention to do so, there can be no
assurance that it will be able to do so.
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No fractional shares will be issued upon exercise of the Warrants.
However, if a Warrant Holder exercises all Warrants then owned of record by
him, the Company will pay such Warrant Holder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based
on the market value of the Common Stock on the last trading day prior to
the exercise date.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The General Corporation Law of Delaware (the "DGCL") provides that a
corporation may limit the liability of each director to the corporation or
its stockholders for monetary damages except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and
(iv) for any transaction from which the director derives an improper
personal benefit. The Company's certificate of incorporation provides for
the elimination and limitation of the personal liability of directors of
the Company for monetary damages to the fullest extent permitted by the
DGCL. In addition, the certificate of incorporation provides that if the
DGCL is amended to authorize the further elimination or limitation of the
liability of a director, then the liability of the directors shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended. The effect of this provision is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for
breach of the fiduciary duty of care as a director (including breaches
resulting from negligence or grossly negligent behavior), except in the
situations described in clauses (i) through (iv) above. This provision
does not limit or eliminate the rights of the Company or any stockholder to
seek non-monetary relief such as an injunction or rescission in the event
of a breach of a director's duty of care. The certificate of incorporation
also provides that the Company shall, to the full extent permitted by the
DGCL, as amended from time to time, indemnify and advance expenses to each
of its currently acting and former directors, officers, employees and
agents.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ANTI-TAKEOVER PROVISIONS
The Company is subject to certain anti-takeover provisions under
Section 203 of the DGCL. In general, under Section 203, a Delaware
corporation may not engage in any business combination with any "interested
stockholder" (a person that owns, directly or indirectly, 15% or more of
the outstanding voting stock of the corporation or is an affiliate of the
corporation and was the owner of 15% or more of the outstanding voting
stock), for a period of three years following the date such stockholder
became an interested stockholder, unless (i) prior to such date the board
of directors of the corporation approved either the business combination or
the transaction which resulted in the stockholder becoming an interested
stockholder, or (ii) upon consummation of the transaction which resulted in
the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, or (iii) on or
subsequent to such date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of stockholders
by at least 66 2/3% of the outstanding voting stock not owned by the
interested stockholder. The restrictions imposed by Section 203 will not
apply to a corporation if the corporation's original certificate of
incorporation contains a provision expressly electing not to be governed by
this Section or the corporation by action of its stockholders holding a
majority of outstanding stock adopts an amendment to its certificate of
incorporation or by-laws expressly electing not to be governed by Section
203.
The Company has not elected not to be governed by Section 203, and
upon consummation of this offering and the listing of the Common Stock and
Warrants on NASDAQ, the restrictions imposed by Section 203 will apply to
the Company. Such provision could have the effect of discouraging,
delaying or preventing a takeover of the Company, which could otherwise be
in the best interest of the Company's stockholders, and have an adverse
effect on the market price for the Company's Common Stock and/or Warrants.
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TRANSFER AGENT AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New
York, New York 10005.
REPORTS TO SECURITYHOLDERS
The Company will furnish to its securityholders annual reports
containing audited financial statement and such unaudited interim reports
as it deems appropriate. Contemporaneously with the commencement of this
offering, the Company intends to register its Common Stock and Warrants
with the Commission pursuant to the provisions of Section 12(g) promulgated
under the Exchange Act. In accordance therewith, the Company will be
required to comply with certain reporting, proxy solicitation and other
requirements of the Exchange Act.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have
2,650,000 shares of Common Stock outstanding if the Minimum Offering is
sold and 3,050,000 shares of Common Stock outstanding if the Maximum
Offering is sold, assuming no exercise of the Warrants or any other
outstanding warrant or the issuance of any shares of Common Stock
underlying shares of the Company's Convertible Preferred Stock. At that
time, only the 1,000,000 shares being offered by the Company hereby in the
event the Minimum Offering is sold (the Selling Stockholder is offering
200,000 shares), and the 1,400,000 shares being offered by the Company
hereby in the event the Maximum Offering is sold (the Selling Stockholder
is offering 200,000 shares), will be freely tradable without restriction or
further registration under the Securities Act. The remaining 1,400,000
shares, in either instance, will be deemed to be "restricted securities,"
as that term is defined under Rule 144 promulgated under the Securities
Act, in that such shares were issued and sold by the Company in private
transactions not involving a public offering and, as such, may, subject to
the contractual restrictions described below, only be sold pursuant to an
effective registration statement under the Securities Act, in compliance
with the exemption provisions of Rule 144 or pursuant to another exemption
under the Securities Act, except for any shares purchased by an "affiliate"
of the Company (in general, a person who has a control relationship with
the Company), which shares will be subject to the resale limitations,
described below, of Rule 144 promulgated under the Securities Act. None of
such "restricted" securities will be eligible for sale under Rule 144 prior
to December 1997.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate
of the Company (or persons whose shares are aggregated with an affiliate),
who has owned restricted shares of Common Stock beneficially for at least
one year is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or, if the Common Stock is quoted on
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the sale. A person who has not been an affiliate of the Company
for at least three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least two years is
entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.
Group, which is controlled by Messrs. Press and Edelson, the President
and Chairman of the Board, respectively, of the Company, beneficially owns,
as of the date of this Prospectus, 1,500,000 shares of Common Stock of the
Company. Group is selling, as part of the Minimum Offering, 200,000 shares
of Common Stock. Upon the closing of the Minimum Offering, and Group's
concurrent receipt of the approximate $990,000 in net proceeds from the
sale of its 200,000 shares, Group will cause Medley Refrigeration to
satisfy, in their entirety, all receivables then outstanding from Medley
Refrigeration to the Company. Group has otherwise agreed not to sell or
dispose of any of its shares for a period of six months from the date of
this Prospectus without the prior written consent of the Underwriter. In
addition, each holder of Convertible Preferred Stock has agreed not to sell
or otherwise dispose of any shares of Common Stock issuable upon conversion
of such Convertible Preferred Stock for a period of six months from the
date of this Prospectus without the prior written consent of the
Underwriter.
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Moreover, Group and the Underwriter have agreed that Group,
with respect to 800,000 of the shares of Common Stock which it
will own upon the consummation of this offering (the "Affected
Shares") will not sell such Affected Shares during the 36-month
period following the consummation of this offering unless certain
Common Stock target prices and other conditions are met.
Specifically, Group has agreed that the first block of 200,000
Affected Shares will not be eligible for sale unless, for any ten
trading day period within 20 consecutive trading days commencing
upon the consummation of this offering, the closing bid price for
shares of the Company's Common Stock equals or exceeds $5.50 per
share. Following the first sale of any portion of the first
block of 200,000 Affected Shares, Group must wait 180 days before
a second block of 200,000 Affected Shares will be eligible for
sale, provided that for any ten trading day period within 20
consecutive trading days during this 180 day period, the closing
bid price for shares of the Company's Common Stock equals or
exceeds $5.75 per share. Following the first sale of any portion
of the second block of 200,000 Affected Shares, Group must wait
another 180 days before a third block of 200,000 Affected Shares
will be eligible for sale, provided that for any ten trading day
period within 20 consecutive trading days during this 180 day
period, the closing bid price for shares of the Company's Common
Stock equals or exceeds $6.75 per share. Following the first
sale of any portion of the third block of 200,000 Affected
Shares, Group must wait another 180 days before a third block of
200,000 Affected Shares will be eligible for sale, provided that
for any ten trading day period within 20 consecutive trading days
during this 180 day period, the closing bid price for shares of
the Company's Common Stock equals or exceeds $8.00 per share.
Each of the foregoing 180 day periods will extend longer, if
necessary, for the target prices to be achieved. All of the
Affected Shares become eligible for sale, irrespective of
historical Common Stock closing bid prices, following the 36-
month anniversary of the consummation of this offering.
In addition, Group shall be free to sell any or all of its
Affected Shares, irrespective of historical Common Stock closing
bid prices, in any transaction with an unaffiliated third party
which transaction results in the sale of all or substantially all
of the outstanding Common Stock of the Company or the merger or
reorganization of the Company with another entity and the Company
is not the surviving corporation to such merger or
reorganization, provided that such transaction is approved by a
majority of the unaffiliated stockholders of the Company. The
foregoing exception shall also apply if an unaffiliated third
person makes a tender offer for shares of Common Stock. The
Underwriter, at its option from time to time, may also waive the
foregoing restrictions and permit Group to sell Affected Shares,
irrespective of historical closing bid prices if, in the
Underwriter's opinion, the sale by Group in a "block transaction"
to the Underwriter or another member of the NASD is necessary in
order to prevent any member of the NASD from dominating and
controlling greater than 70% of the outstanding Common Stock or
permitting such NASD member to become, or maintain its status as,
a market maker in the Common Stock, so that the Company's Common
Stock continues to be eligible for inclusion on the Nasdaq Stock
Market.
Prior to this offering, there has been no market for the Common Stock
or Warrants and no prediction can be made as to the effect, if any, that
public sales of shares of Common Stock or the availability of such shares
for sale will have on the market prices of the Common Stock and the
Warrants prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and the
Warrants and could impair the Company's ability in the future to raise
additional capital through the sale of its equity securities.
-38-
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriter has agreed to use its best efforts to offer a
minimum of 1,200,000 shares of Common Stock (1,000,000 of which will be
sold by the Company and 200,000 of which will be sold by the Selling
Stockholder) and 1,200,000 Warrants and a maximum of 1,600,000 shares of
Common Stock (1,400,000 of which will be sold by the Company and 200,000 of
which will be sold by the Selling Stockholder) and 1,600,000 Warrants to
the public. The first 1,200,000 shares of Common Stock (which includes the
200,000 shares being sold by the Selling Stockholder) and 1,200,000
Warrants will be offered on a "best efforts all-or-none" basis at a
purchase price of $5.50 per share of Common Stock and $.15 per Warrant. If
the first 1,200,000 shares of Common Stock and 1,200,000 Warrants are sold,
the offering will continue on a "best efforts" basis up to 1,600,000 shares
of Common Stock and 1,600,000 Warrants. The Underwriter has made no
commitment to purchase any of the Common Stock or Warrants offered hereby.
The Underwriter has agreed to use its best efforts to find purchasers for
the Common Stock and Warrants offered hereby within a period of 30 days
from the date of this Prospectus, subject to an extension by mutual
agreement for an additional period of 30 days. The Underwriter will
promptly send to each subscriber who subscribes to this offering a
confirmation of the subscriber's purchase of Common Stock and/or Warrants
with instructions to forward their funds to the Underwriter. Subscribers'
checks shall be made payable to the Escrow Agent and the Underwriter (and
Broker Dealers participating in this offering) will transmit subscribers'
checks directly to the Escrow Agent by noon of the next business day after
receipt. All proceeds raised in this offering will be deposited by the
Underwriter in an escrow account maintained at SunTrust Bank, South
Florida, N.A., the Escrow Agent for the Company. If the Minimum Offering
is not achieved and the offering is canceled, all subscriptions held in the
escrow account will be returned without interest or deduction.
The Common Stock and Warrants will be sold on a fully paid basis only.
Certificates representing shares of Common Stock and Warrants will be
issued to subscribers only if the proceeds from the sale of at least
1,200,000 shares of Common Stock and 1,200,000 Warrants are released to the
Company. Until such time as the funds have been released by the Escrow
Agent, such subscribers will not be deemed stockholders or warrantholders.
The Underwriter has advised the Company that it proposes to offer the
Common Stock and Warrants to the public at the public offering prices set
forth on the cover page of this Prospectus. The Underwriter may allow to
certain Broker Dealers who are members of the NASD concessions not in
excess of $.385 per share of Common Stock and $.0105 per Warrant.
The Company has agreed to pay to the Underwriter a nonaccountable
expense allowance of 1.9% of the gross proceeds of this offering, none of
which has been paid as of the date of this Prospectus. The Company has
also agreed to pay all expenses in connection with qualifying the shares
of Common Stock and Warrants offered hereby for sale under the laws of
such states as the Underwriter may designate, including expenses of
counsel retained for such purpose by the Underwriter.
Mr. Steven L. Edelson, Chairman of the Board of the Company, also
serves as a licensed securities principal of the Underwriter, responsible
for the day to day affairs and operations of the Underwriter. As such, the
Underwriter may be deemed to be an affiliate of the Company. As a
consequence of this affiliation, the Underwriter will provide a market
making prospectus in connection with its aftermarket transactions and this
offering is being conducted in accordance with the applicable provisions of
Section 2720 of the NASD Rules of Conduct. Accordingly, the initial public
offering prices for the Common Stock and Warrants offered hereby can be no
higher than that recommended by a "qualified independent underwriter"
meeting certain standards. The NASD requires that the "qualified
independent underwriter" (i) be an NASD member experienced in the
securities or investment banking business, (ii) not be an affiliate of the
issuer of the securities and (iii) agree to undertake the responsibilities
and liabilities of an underwriter under the Securities Act. In accordance
with this requirement, Lew Lieberbaum & Co., Inc. ("Lieberbaum") is serving
as qualified independent underwriter in this offering. Lieberbaum has
assumed the responsibilities of acting as qualified independent underwriter
in pricing the Offering, has performed due diligence with respect to the
information contained herein and has participated in preparing the
Registration Statement. In its role as qualified independent underwriter,
Lieberbaum will receive an aggregate fee from the Underwriter of $65,000,
$10,000 of which has been paid and $55,000 of which is to be paid upon
consummation of the Minimum Offering.
-39-
<PAGE>
The Company has also agreed, in connection with the exercise of the
Warrants pursuant to solicitation (commencing one year from the date of
this Prospectus), to pay to the Underwriter a fee of 5% of the exercise
price for each Warrant exercised; provided, however, that the Underwriter
will not be entitled to receive such compensation in Warrant exercise
transactions in which (i) the market price of the Common Stock at the time
of exercise is lower than the exercise price of the Warrants; (ii) the
Warrants are held in any discretionary account; (iii) disclosure of
compensation arrangements is not made, in addition to the disclosure
provided in this Prospectus, in documents provided to holders of Warrants
at the time of exercise; (iv) the exercise of the Warrants is unsolicited;
and (v) the solicitation of exercise of the Warrants was in violation of
Rule 10b-6 promulgated under the Exchange Act. Holders of Warrants will be
required to designate in writing that they were solicited in order for the
5% exercise fee to be payable to the Underwriter.
Performance Capital Management, an entity controlled by Messrs. Press
and Edelson, is party to a five year management agreement with the
Underwriter, expiring in April 2001, pursuant to which, among other things,
Performance Capital Management, in consideration for $200,000 per year,
designates a representative to serve as the licensed securities principal
of the Underwriter, responsible for supervising the day to day operations
and affairs of the Underwriter. Mr. Edelson has been designated by
Performance Capital Management to serve as such licensed securities
principal of the Underwriter. In addition, Mr. Press has served as a
licensed registered representative of the Underwriter since 1991.
The Company's officers and directors, beneficially owning 2,556,503
shares of Common Stock as of the date of this Prospectus, have agreed not
to sell or otherwise dispose of any securities of the Company beneficially
owned by them for a period of six months from the date of this Prospectus,
without the prior written consent of the Underwriter.
Each investor must purchase a minimum of 100 shares of Common Stock
and/or 100 Warrants in this offering. Any larger number of shares and/or
Warrants must be purchased in 100 share and/or Warrant increments.
The Company has agreed to indemnify the Underwriter and Lieberbaum
against certain civil liabilities, including liabilities under the
Securities Act.
Prior to this offering, there has been no public trading market for
the Common Stock or Warrants. Consequently, the initial public offering
prices of the Common Stock and Warrants and the exercise price of the
Warrants have been determined by negotiations between the Company and the
Underwriter, with the guidance of Lieberbaum, and do not bear any
relationship to the Company's book value, assets, past operating results or
financial condition or to any other established criteria of value.
It is anticipated that the Common Stock and Warrants will be listed on
NASDAQ under the proposed symbols "MCAC" and "MCACW," respectively. These
listings will not be effective, however, until the consummation of the
Minimum Offering. The Underwriter may act as a market maker with respect
to the Common Stock and Warrants.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed
upon for the Company by Reid & Priest LLP, New York, New York. David R.
Hardy, Esq., a partner of Reid & Priest LLP, is the beneficial owner of
34,095 shares of common stock of Group, 40,000 shares of preferred stock of
Group and warrants to purchase up to an additional 10,000 shares of common
stock of Group. Siegel, Lipman, Dunay & Shepard, LLP, Boca Raton, has
acted as counsel for the Underwriter in connection with this offering.
-40-
<PAGE>
EXPERTS
The financial statements of the Company as of December 31, 1996 and
for the year ended December 31, 1996, included in this Prospectus and
elsewhere in the Registration Statement have been audited by Daszkal,
Bolton & Manela, independent certified public accountants ("Daszkal,
Bolton"), as indicated by its report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
The statement of operations, cash flow and stockholders' equity of the
Company for the year ended December 31, 1995 included in this Prospectus
and elsewhere in the Registration Statement has been audited by Israeloff,
Trattner & Co., independent certified public accountants ("Israeloff,
Trattner"), as indicated by its report with respect thereto, and is
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
During January 1997, Israeloff, Trattner resigned as independent
certified public accountants for the Company. Concurrently therewith,
Daszkal, Bolton was retained by the Company to serve as its independent
certified public accountants. Israeloff, Trattner's report with respect to
the Company's Fiscal 1995 financial statements contained a statement,
generally, that the Company's financial situation raises substantial doubt
about the Company's ability to continue as a going concern. The Board of
Directors of the Company unanimously accepted Israeloff, Trattner's
resignation and Daszkal, Bolton's retention. There were no disagreements
between the Company and Israeloff, Trattner on any matter of accounting
principles or practices, financial statement disclosure or auditing scope
or procedure.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form SB-2 (the "Registration Statement") under the Securities Act with
respect to the securities offered by this Prospectus. This Prospectus,
filed as part of such Registration Statement, does not contain all of the
information set forth in, or annexed as exhibits to, the Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. For further information with respect to
the Company and this offering, reference is made to the Registration
Statement, including the exhibits filed therewith, which may be inspected
without charge at the office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, New
York, New York 10048. Copies of the Registration Statement may be obtained
from the Commission at its principal office upon payment of prescribed
fees. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, where the
contract or other document has been filed as an exhibit to the Registration
Statement, each such statement is qualified in all respects by reference to
the applicable document filed with the Commission.
-41-
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
INDEX TO FINANCIAL STATEMENTS
Page
----
I. Fiscal 1996:
-----------
Independent Auditors' Report . . . . . . . . . . . . F-2
Balance Sheets as of December 31, 1996
and unaudited at March 31, 1997. . . . . . . . . . . . F-3
Statements of Operations for the year
ended December 31, 1996 and unaudited for
the three months ended March 31, 1997 and 1996 . . . . F-5
Statements of Stockholders' Equity for the
year ended December 31, 1996 and unaudited for
the three months ended March 31, 1997. . . . . . . . . F-6
Statements of Cash Flows for the year ended
December 31, 1996 and unaudited for the three
months ended March 31, 1997 and 1996 . . . . . . . . . F-7
Notes to Financial Statements . . . . . . . . . . . . F-9
II. Fiscal 1995:
-----------
Independent Auditors' Report . . . . . . . . . . . . F-19
Statement of Operations for the year ended
December 31, 1995 . . . . . . . . . . . . . . . . . . F-20
Statement of Shareholders' Deficit for the
year ended December 31, 1995 . . . . . . . . . . . . . F-21
Statements of Cash Flows for the year
ended December 31, 1995 . . . . . . . . . . . . . . . F-22
Notes to Financial Statements . . . . . . . . . . . . F-23
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Medley Credit Acceptance Corp.:
We have audited the accompanying balance sheet of
Medley Credit Acceptance Corp. as of December 31, 1996, and the
related statement of income, stockholder's equity, and cash flows
from the year then ended. These financial statements are the
responsibility of the management of Medley Credit Acceptance
Corp. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Medley Credit Acceptance Corp. as of December 31,
1996 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the
Company experienced a loss from operations in 1996, has
substantial working capital deficiency at December 31, 1996, and
is in arrears on its preferred stock dividends. These matters
raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these
matters are also described in Note 1. The accompanying financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might result
from the resolution of these uncertainties.
Boca Raton, Florida
March 31, 1997
/s/ Daszkal, Bolton & Manela
DASZKAL, BOLTON & MANELA
F-2
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
BALANCE SHEETS
ASSETS
DECEMBER 31, MARCH 31,
1996 1997
------------ --------
(UNAUDITED)
CURRENT ASSETS
Cash $ - $ 19,466
Accounts receivable, net of
allowance for doubtful
accounts of $3,000 73,727 141,774
Notes receivable 29,816 30,491
Due from affiliates 585,288 412,601
Prepaid offering costs 73,015 128,488
-------- --------
Total Current Assets 761,846 732,820
-------- --------
RENTAL EQUIPMENT, AT COST, NET OF 234,619 272,002
ACCUMULATED DEPRECIATION -------- --------
PROPERTY AND EQUIPMENT, AT COST, 19,154 16,654
NET OF ACCUMULATED DEPRECIATION -------- --------
OTHER ASSETS
Investments - 39,075
Due from affiliates 711,837 711,837
Rental equipment not in service 65,565 65,565
Security deposits 1,799 1,799
-------- --------
Total Other Assets 779,201 818,276
-------- --------
TOTAL ASSETS $1,794,820 $1,839,752
========== ==========
See accompanying notes to financial statements.
F-3
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES DECEMBER 31, MARCH 31,
1996 1997
----------- ---------
(UNAUDITED)
Notes Payable $210,000 $150,000
Current portion of long-term debt 250,937 212,525
Current portion of obligations
to finance companies 91,027 83,003
Accounts payable and accrued
expenses 172,534 162,960
Dividends payable - preferred 127,668 201,638
stock ---------- ----------
Total Current Liabilities 852,166 810,126
---------- ----------
OTHER LIABILITIES
Long-term debt, net of current
portion 167,286 306,088
Obligations to finance companies,
net of current portion 100,996 78,123
Notes payable - officers 105,236 105,236
Customer deposits 7,115 12,115
---------- ----------
Total Other Liabilities 380,633 501,562
---------- ----------
Total Liabilities 1,232,799 1,311,688
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
5,000,000 authorized,
2,958,817 shares issued and
outstanding 29,588 29,588
Common stock, .01 par value,
10,000,000 authorized,
1,680,000 shares issued and
outstanding 16,800 16,800
Additional paid-in capital 2,322,899 2,322,899
Accumulated deficit (1,807,266) (1,841,223)
---------- ----------
Total Stockholder's Equity 562,021 528,064
---------- ----------
TOTAL LIABILITIES AND $1,794,820 $1,839,752
STOCKHOLDERS' EQUITY ========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
------------- ------------------
1996 1997 1996
---- ---- ----
REVENUES $356,235 $94,158 $118,812
-------- -------- --------
COST AND EXPENSES
Depreciation 95,483 17,000 23,870
Interest expense 146,914 9,643 41,092
Loss on sale of leased
equipment 35,687 - -
General and administrative 447,855 65,851 47,463
expenses -------- -------- --------
Total Costs and 725,939 92,494 112,425
Expenses -------- -------- --------
Income (Loss) From (369,704) 1,664 6,387
Operations -------- -------- --------
OTHER INCOME (EXPENSES)
Interest income 93,064 45,005 30,636
Loss on sale of securities - (6,656) -
Reversal of estimate for
uncollectible advances to
affiliate 600,000 - -
Gain on sale of leased - - 12,828
equipment -------- -------- --------
Total Other Income 693,064 38,349 43,464
-------- -------- --------
NET INCOME $323,360 $40,013 $49,851
======== ======== ========
NET INCOME (LOSS) APPLICABLE TO $ 90,638 $(33,957) $(3,570)
COMMON SHAREHOLDERS ======== ======== =======
NET INCOME (LOSS) PER COMMON $.05 $(.02) $ -
SHARE ==== ===== ====
WEIGHTED AVERAGE NUMBER OF SHARES 1,680,000 1,680,000 1,120,000
OUTSTANDING ========= ========= =========
See accompanying notes to financial statements.
F-5
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
PREFERRED STOCK COMMON STOCK
--------------- ------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
BALANCE, AT JANUARY 1, 1996 1,643,700 $ 16,437 1,000 $200,000
RECLASSIFICATION OF S-CORP
UNDISTRIBUTED EARNINGS - - - -
RESTATEMENT OF COMMON STOCK - - - (199,990)
PAR VALUE ---------- -------- ------- -------
BEGINNING BALANCE AS RESTATED 1,643,700 $ 16,437 1,000 10
ISSUANCE OF PREFERRED STOCK FOR
EXTINGUISHMENT OF DEBT 1,300,117 13,001 - -
ISSUANCE OF PREFERRED STOCK 15,000 150 - -
STOCK SPLIT - 1,120 TO 1 - - 1,119,000 11,190
ISSUANCE OF WARRANTS - - - -
COMPENSATION VALUE OF
COMMON STOCK - - - -
STOCK SPLIT - 3 TO 2 - - 560,000 5,600
PREFERRED STOCK DIVIDENDS - - - -
NET INCOME - - - -
---------- -------- -------- ------
BALANCE AT DECEMBER 31, 1996 2,958,817 $ 29,588 1,680,000 $16,800
NET INCOME, MARCH 31, 1997
(UNAUDITED) - - - -
PREFERRED STOCK DIVIDENDS - - - -
(UNAUDITED) --------- ------- --------- ------
BALANCE, MARCH 31, 1997 2,958,817 $29,588 1,680,000 $16,800
(UNAUDITED) ========= ======= ========= =======
ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
------- ------- -----
BALANCE, AT JANUARY 1, 1996 $ 979,146 $(1,793,044) $(597,461)
RECLASSIFICATION OF S-CORP
UNDISTRIBUTED EARNINGS 104,860 (104,860) -
RESTATEMENT OF COMMON STOCK 199,990 - -
PAR VALUE --------- ---------- --------
BEGINNING BALANCE AS RESTATED 1,283,996 (1,897,904) (597,461)
ISSUANCE OF PREFERRED STOCK
FOR EXTINGUISHMENT OF DEBT 775,843 - 788,844
ISSUANCE OF PREFERRED STOCK 14,850 - 15,000
STOCK SPLIT - 1,120 TO 1 (11,190) - -
ISSUANCE OF WARRANTS 100,000 - 100,000
COMPENSATION VALUE OF
COMMON STOCK 165,000 - 165,000
STOCK SPLIT - 3 TO 2 (5,600) - -
PREFERRED STOCK DIVIDENDS - (232,722) (232,722)
NET INCOME - 323,360 323,360
---------- ---------- ---------
BALANCE AT DECEMBER 31, 1996 $2,322,899 $(1,807,266) $562,021
NET INCOME, MARCH 31, 1997
(UNAUDITED) - 40,013 40,013
PREFERRED STOCK DIVIDENDS - (73,970) 73,970
(UNAUDITED) ---------- ----------- --------
BALANCE, MARCH 31, 1997 $2,322,899 $(1,841,223) $528,064
(UNAUDITED) ========== =========== ========
See accompanying notes to financial statements.
F-6
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
------------ ------------------
CASH FLOWS FROM OPERATING 1996 1997 1996
ACTIVITIES ---- ---- ----
Net income $323,360 - -
-------- ------- -------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 95,483 - -
Reversal of estimate
for uncollectible
advances
to affiliate (600,000) - -
Loss on sale of leased
equipment 35,687 - -
Compensation value of
common stock 165,000 - -
Changes in assets and
liabilities:
Accounts (43,907) - -
receivable
Prepaid expenses (65,423) - -
Accounts payable 130,118 - -
and accrued
expenses
Customer deposits (20,229) - -
-------- ------- ------
Total Adjustments (468,271) - -
-------- ------- ------
Net cash (used) provided by 20,089 (64,425) 55,241
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Net receipts from 42,083 120,158 26,041
affiliates
Purchase of securities - (75,010) -
Proceeds from sale of - 29,250 -
securities
Purchase of rental (111,544) - -
equipment -------- -------- ------
Proceeds from sale of - - 60,343
leased equipment -------- -------- ------
Net cash (used) provided (69,461) 74,398 86,384
by investing activities -------- ------- ------
CASH FLOWS FROM FINANCING
ACTIVITIES
Short-term borrowings 10,000 - -
Proceeds from long-term 276,000 115,000 -
debt
Repayments of short-term (145,000) - -
borrowings
Repayments of long-term (216,577) (45,507) (94,953)
debt and obligations
to finance companies
Payment of preferred stock (105,054) - (40,721)
dividends
Net proceeds from 111,200 - -
shareholders loans
Issuance of preferred stock 15,000 - -
Issuance of warrants 100,000 - -
Repayments of notes payable - (60,000) -
------- -------- -------
Net cash provided (used) by 45,569 9,493 (135,674)
financing activities ------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS (3,803) 19,466 5,951
CASH AND EQUIVALENTS - 3,803 - 3,803
BEGINNING OF YEAR ------- ------- -------
CASH AND EQUIVALENTS - END $ - $19,466 $9,754
OF YEAR ======= ======= ======
See accompanying notes to financial statements.
F-7
<PAGE>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
------------ -------------------
1996 1997 1996
---- ---- ----
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION: $59,628 $20,657 $41,092
======= ======= =======
Interest paid
SUPPLEMENTAL NONCASH
INVESTING AND FINANCIAL
ACTIVITIES:
Long-term debt and $ 788,844 $ - $ -
related accrued
interest
converted into
convertible preferred
stock
Leased equipment
received from affiliate
company as payments on - 51,883 -
intercompany receivable ========= ======== =======
$ 788,844 $ 51,883 $ -
========= ======== =======
See accompanying notes to financial statements.
F-8
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND MARCH 31, 1996 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
-----------------------
Medley Credit Acceptance Corp. ("the Company"), a Delaware
corporation, is a majority-owned subsidiary of Medley Group, Inc.
The Company is a specialty finance company operating in Florida
and engaged primarily in the leasing of dry cleaning equipment.
In addition, the Company has provided financing arrangements on
certain refrigeration equipment sold or leased by Medley
Refrigeration, Inc., an affiliated company.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company
experienced a loss from operations in 1996, has substantial
working capital deficiency at December 31, 1996, and is in
arrears on its preferred stock dividends. These matters raise
substantial doubt about the Company's ability to continue as a
going concern. The Company's ability to continue in existence as
a going concern is dependent upon its ability to attain
profitable operations and to obtain equity and/or debt financing.
Management plans to rely, to a substantial extent, on the
Company's ability to successfully complete a proposed initial
public offering.
Cash and Cash Equivalents
-------------------------
The Company considers highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates include those related to valuation of
amounts due from affiliates and the net realizable value of
rental equipment not in service. It is at least reasonably
possible that the significant estimates used will change within
the next year.
Fair Value of Financial Instruments
-----------------------------------
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments
and related-party transactions.
The fair value of financial instruments classified as current
assets or liabilities including cash and cash equivalents,
receivables and accounts payable approximate carrying value
due to the short-term maturity of the instruments. The fair
value of short-term and long-term debt approximate carrying
value based on their effective interest rates compared to current
market rates.
F-9
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Revenue Recognition
-------------------
The Company leases equipment to others under non-cancelable
operating leases, whereby revenue is recognized as lease payments
are due from customers and the related costs are depreciated
using the straight-line method over the rental equipment's
expected life. Dry cleaning and refrigeration equipment is not
generally subject to obsolescence, however, the Company
periodically evaluates the realizable value of such assets to
determine whether any impairment has occurred in the value based
on the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets".
In the opinion of the Company, though not assured, the estimated
residual value will be realized.
Property, Equipment and Depreciation
------------------------------------
Property and equipment are stated at cost. Major expenditures
for property and those which substantially increase useful lives
are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred. When assets are retired or otherwise
disposed of, their costs and related accumulated depreciation are
removed from the accounts and resulting gains or losses are
included in income. Depreciation is provided by the straight-
line method over the estimated useful lives of the assets.
Income Taxes
------------
Income taxes have been provided using the asset and liability
method in accordance with Statements of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
NOTE 2 - DUE FROM AFFILIATES
Due from affiliates resulted principally from interest bearing
advances with no definitive due date. As security, the
affiliated companies have assigned various operating leases to
the Company whereby all lease payments are received from the
lessee by the Company and credited against the amount due from
the related affiliates. Management believes that the future
lease payments will be sufficient to satisfy the obligations from
the affiliated Companies.
NOTE 3 - RENTAL EQUIPMENT AND DEPRECIATION
Rental equipment consists of the following:
(Unaudited)
(Unaudited) March 31,
March 31, December 31, 1997
1997 1996 ----------
---------- ----------- Not
In Service In Service In Service
---------- ---------- ---------
Equipment, at cost $517,258 $465,375 $562,140
Less, accumulated
depreciation 245,256 230,756 496,575
-------- -------- --------
Net Rental Equipment $272,002 $234,619 $ 65,565
======== ======== ========
December 31, (Unaudited) December
1996 March 31, 31,
----------- 1997 1996
Not ---------- --------
In Service Total Total
---------- ---------- --------
Equipment, at cost $562,140 $1,079,398 $1,027,515
Less, accumulated depreciation 496,575 741,831 727,331
------- -------- -------
Net Rental Equipment $65,565 $337,567 $300,184
======= ======== ========
F-10
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - RENTAL EQUIPMENT AND DEPRECIATION (CONT.)
The depreciation expense on rental equipement for the three months
ended March 31, 1997 and the year ended December 31, 1996 was
$14,500 and $85,415, respectively.
Rents receivable under non-cancelable operating lease commitments
for the next five years are as follows:
1997 $120,653
1998 92,118
1999 80,448
2000 22,968
2001 -
--------
$316,187
--------
NOTE 4 - PROPERTY, EQUIPMENT AND DEPRECIATION
Major classes of property and equipment consist of the following:
(UNAUDITED) DECEMBER
MARCH 31, 31,
1997 1996
--------- --------
Office equipment . . . . . . . $48,571 $48,571
Automobile . . . . . . . . . . 6,955 6,955
------- -------
55,526 55,526
Less: Accumulated depreciation 38,872 36,372
------- -------
Net property and Equipment $16,654 $19,154
======= =======
Depreciation expense on property and equipment for the three
months ended March 31, 1997 and the year ended December 31, 1996
was $2,500 and $10,068, respectively.
F-11
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
Notes payable of $150,000 at March 31, 1997 and $210,000 at
December 31, 1996 are comprised of the following:
Note Payable to Bank
--------------------
The Company maintains a revolving credit line agreement with a
commercial bank that is used to finance working capital
requirements. At March 31, 1997 and December 31, 1996, the
amount outstanding was $135,000 and $195,000, respectively.
Borrowings are due on demand, with interest payable monthly at
prime (9.5% at December 31, 1996) plus 2%. Borrowings under the
note are collateralized by certain of the Company assets not
otherwise pledged and the debt is personally guaranteed by the
Company's principal officers and Medley Group, Inc.
Notes Payable to Individuals
----------------------------
Included in notes payable is $15,000 due to individuals, bearing
interest at 10% per annum, with due dates in June and October
1997.
NOTE 6 - LONG-TERM DEBT
The Company has received funds from individuals and issued notes
for these loans. In June 1996, the Company offered to convert
these individual notes to 10% convertible preferred stock at a
conversion ratio of approximately 1.03 shares to $1.00 of debt.
Certain note holders elected to convert their debt, amounting to
$765,657, and $23,187 of accrued interest to the convertible
preferred stock.
At March 31, 1997 and December 31, 1996, the Company remained
obligated to various individuals, not electing to convert their
debt, for amounts aggregating $518,613 and $418,223,
respectively. These notes are for various amounts and maturities
through January 1999. Interest is payable at rates ranging from
10% to 13.5% per annum. The unsecured portion of these notes at
March 31, 1997 and December 31, 1996 is $473,223 and $358,223,
respectively.
As of December 31, 1996, annual maturities of long-term debt
(excluding converted notes) are as follows:
1997 $ 250,937
1998 97,286
1999 70,000
---------
Total $ 418,223
=========
F-12
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - OBLIGATIONS TO FINANCE COMPANIES
Obligations to finance companies, secured by rental equipment and
related rental agreements, consist of the following at:
(unaudited) December
March 31, 31,
1997 1996
--------- --------
18.7% obligation, payable in monthly
installments of $2,260, including
interest, through April 1998 . . . . $28,014 $ 33,527
23.6% obligation, payable in varying
monthly installments, including
interest, through November 1999 . . . 33,249 40,341
21.2% obligation, payable in varying
monthly installments, including
interest, through November 1999 . . . 50,229 62,223
18.3% obligation, payable in varying
monthly installments, including
interest, through November 1999 . . . 21,827 26,678
21.4% obligation, payable in monthly
installments of $996, including
interest, through June 2000 . . . . . 27,807 29,254
-------- --------
161,126 192,023
Less: Current maturities . . . . . . 83,003 91,027
-------- --------
Long-Term Obligations . . . . . $78,123 $100,996
======== ========
As of December 31, 1996, the annual maturities of obligations to
finance companies for the next five years are as follows:
1997 $ 91,027
1998 58,666
1999 36,626
2000 5,704
2001 -
---------
$ 192,023
=========
F-13
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - DIVIDENDS PAYABLE - PREFERRED STOCK
The Company has declared dividends on its preferred stock;
however, it is in arrears on the 10% dividends for the last two
quarters of the year. The majority of the unpaid preferred stock
dividends are due the Company officers. The Company has accrued
$73,970 of dividends on its preferred stock at March 31, 1997.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has transactions with related companies whose
ownership is substantially the same as that of the Company.
Included in the statements of operations are the following items
of income and expense for the year ended December 31, 1996:
Rental revenues . . . . . . $ 92,144
General and administrative
expenses - allocated . . . . $(18,000)
Management expense . . . . . $(15,000)
The Company has recorded its share of allocated corporate overhead
expenses of $18,000 as follows:
Allocated 15% of rent,
utilities and insurance
based upon square footage
used $ 13,650
Allocated 12% of office
salaries based upon
companies determination
of labor hours incurred 4,350
---------
Total allocated $ 18,000
=========
Included in the balance sheet at December 31, 1996 are the
following assets:
Due from affiliates $1,297,125
The balance due from affiliates results principally from advances
with interest at 10% per annum with no definite due date.
The Company has reversed its $600,000 previous estimated
allowance for uncollectible advances due from an affiliated
company. This was effected, as the Company received in December
1996, an assignment of leases. In January 1997, approximately
$200,000 was received as payment against the receivable. As a
result of the above transactions, management feels no allowance
for collectability of the affiliated Company receivable is
F-14
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - RELATED PARTY TRANSACTIONS (CONT.)
required as the future collection of cash by Medley Credit
Acceptance Corporation from the assigned leases will be
sufficient to pay the obligation.
Included in long-term debt is a $10,000 note due to a company
owned by one of the stockholders.
NOTE 10 - STOCKHOLDERS' EQUITY
Common Stock - Stock Splits
---------------------------
On June 30, 1996, the Company declared a 1,120 to 1 stock split,
which increased the issued and outstanding shares from 1,000 to
1,120,000 shares. On December 31, 1996, the Company declared a 3
for 2 stock split, which increased the issued and outstanding
shares to 1,680,000 shares. Per share amounts in the
accompanying financial statements have been adjusted for the
stock splits.
Additional Paid-In Capital
--------------------------
30,000 shares of stock owned by the parent Company, Medley Group,
Inc., was transferred to the officers for services performed by
them on behalf of the Company.
At December 31, 1996, $165,000, representing the fair value of
the officer's compensation was recorded as an expense and included
in additional paid-in capital.
Preferred Stock - Exchange for Debt
-----------------------------------
In June 1996, the Company offered to certain note holders the
option to exchange their notes, approximating $972,000, to
convertible preferred stock of Medley Credit Acceptance Corp. at
a ratio of approximately 1.03 shares to $1.00. Note holders
elected to convert $788,844 of notes and accrued interest to
convertible preferred stock. Dividends on the preferred stock
are payable quarterly and are cumulative. The preferred stock is
convertible to common stock of the Company at a 15% discount to
the public offering price of $5.50.
Under the terms of the convertible preferred stock issue, the
Company may redeem the stock commencing on or after the fifth
anniversary of its issuance if the average trading price of the
common stock, if any, in the 20 trading days immediately
preceding such anniversary, exceeds the conversion price by 20%.
At anytime thereafter, the Company has the right to redeem the
convertible preferred stock, in whole or in part, upon 30 days
notice to the holders. The Company will be obligated to commence
a preferred stock redemption sinking fund if the public offering
of the Company's stock has not occurred within one year of the
date of the issuance of the convertible preferred stock.
Commencing 18 months after issuance of the convertible preferred
stock and annually thereafter, the Company will offer to redeem
25% of the shares.
Warrants Issued
---------------
During December 1996, the Company sold 1,000,000 warrants at $.10
each. Each warrant is exercisable for the purchase of one share
of common stock at a price of $5.00 per share for a period of
four years commencing one year after the effective date of the
Company's registration statement filing.
F-15
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - RECLASSIFICATION
The common stock par value in the 1996 financial statements has
been reclassified to the proper par value amount of $.01 per
share. The resultant reclassification has increased additional
paid in capital by $199,990 and reduced common stock by a
corresponding amount.
At the time the Company changed its status from a S-Corporation
to C-Corporation, there was $104,860 of undistributed S-
Corporation earnings which has been reclassified from retained
earnings to additional paid-in capital. This treatment assumes a
constructive distribution to the owners followed by a
contribution to paid-in capital.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Lease Agreements
----------------
In 1992, an affiliate of the Company entered into a lease for the
premises which is currently occupied by Medley Group and
subsidiaries. This lease expires October 1997. The lease
requires a minimum annual base rent of $25,000 plus real estate
taxes and operating costs. Medley Credit Acceptance Corp. has
included in the statement of operations its allocated portion of
$3,750 as an expense.
In addition, the Company rents warehouse space on a month-to-
month basis for storage purposes at a cost of approximately $700
per month.
Management Agreement
--------------------
The Company entered into a management agreement with a related
company for management services at a fee of $90,000 per annum
effective January 1, 1994. The related company has agreed to
modify this agreement to $15,000 per annum for 1996. This
management agreement expired December 1, 1996 but carries an
automatic annual renewal commencing on that date.
Litigation
----------
The Company is involved in litigation in the normal course of
business. None of the legal actions are expected to have a
material effect on the Company's results of operations or
financial condition.
F-16
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - INCOME TAXES
The Company is included in the consolidated federal tax return of
its parent, Medley Group, Inc. Federal and state income taxes
are provided for on a stand-alone basis as if the Companies filed
their own tax returns.
The provision for income taxes is as follows:
(Unaudited)
March 31, December 31,
1997 1996
---------- --------
Deferred Income Tax
Expense:
Federal $10,800 $102,500
State 2,200 17,500
Less Valuation Allowance (13,000) (120,000)
-------- --------
Deferred Income Tax $ $
======== ========
At March 31, 1997 and December 31, 1996, the Company has an
unused net operating loss carryforward of approximately $533,000
and $573,000, respectively, expiring in 2010, which is available
for use on its future corporate federal and state tax returns.
The Company's evaluation of the tax benefit of its net operating
loss carryforward is presented in the following table. The tax
amounts have been calculated using a 40% combined effective tax
rate.
(Unaudited)
March 31, December 31,
1997 1996
---------- -----------
Deferred Tax Asset:
Tax Benefit of Net $213,200 $229,200
Operating Loss
Les: Valuation Allowance (213,200) (229,200)
-------- --------
Deferred Tax Asset $ $
======== ========
Reconciliation of the federal statutory income tax rate to the
Company's effective income tax rate is as follows:
(Unaudited)
March 31, December 31,
1997 1996
-------- ------------
Benefit of Federal (32%) (34)%
Statutory Rate
Benefit at State Income (5)% (6)%
Tax Rate ---- ----
(37)% (40)%
==== ====
F-17
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - DEPENDENCE ON AFFILIATES AND OTHERS
The Company has relied primarily on the customer relationships
generated by its affiliates for a significant source of its
business. In addition, the Company has outstanding receivable
balances from the affiliates of $1,297,125. The future
operations of Medley Credit is therefore dependent upon these
affiliates.
NOTE 15 - PROPOSED PUBLIC OFFERING
The Company has signed a Letter of Intent with an underwriter to
complete an initial public offering for a minimum of 1,200,000
shares of common stock (of which the Company is offering 1,000,000
shares and the Selling Stockholder is offering 200,000 shares) and
1,200,000 warrants and a maximum of 1,600,000 shares of common
stock (of which the Company is offering 1,400,000 shares and the
Selling Stockholder is offering 200,000 shares) and 1,600,000
warrants. The stock to be issued consists of $.01 par value common
stock at $5.50 per share. The warrants to be issued consist of one
redeemable warrant to purchase one share of common stock. The
warrants will be issued at $.15 each and entitles the registered
holder to purchase one share of common stock at a price of $5.00.
The common shares of stock and the warrants may be purchased
separately and will be separately transferrable. Professional
fees incurred through December 31, 1996, in connection with the
proposed offering, have been recorded as prepaid offering costs
in the amount of $73,015 and will be charged to additional paid-
in capital upon completion of the offering or will be charged to
expense, if the offering is not completed.
NOTE 16 - SUBSEQUENT EVENTS
Line of Credit Expiration
-------------------------
The Company's line of credit, described in Note 5, expired
January 29, 1997. Subsequent to January 29, 1997 an additional
payment of $55,000 was made to the bank and the note was
extended.
Stock Option Plan
-----------------
On January 9, 1997, the Company adopted a stock option plan (the
"Stock Option Plan"). The Stock Option Plan has 500,000 shares
of Common Stock reserved for issuance upon the exercise of
options designated as either (i) incentive stock options ("ISOs")
under the Internal Revenue Code of 1986, as amended, or (ii) non-
qualified options. ISOs may be granted under the Stock Option
Plan to employees and officers of the Company. Non-qualified
options may be granted to consultants, directors (whether or not
they are employees), employees or officers of the Company. In
certain circumstances, the exercise of stock options may have an
adverse effect on the market price of the Company's Common Stock
and/or Warrants. No options have been granted under the Stock
Option Plan.
Employment Agreements
---------------------
The Company entered into employment agreements on January 9, 1997
with its President and Chairman in the amounts of $60,000 and
$30,000, respectively, which will begin to accrue upon
consummation of the public offering described in Note 15. The
agreements are effective for a period of one year. The
Agreements are automatically renewable by the Company on an
annual basis.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders of
Medley Credit Acceptance Corp.
We have audited the accompanying statements of operations,
shareholders' deficit and cash flows for the year ended December
31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the results of
operations and cash flows of Medley Credit Acceptance Corp. for
the year ended December 31, 1995 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company experienced a
substantial loss in 1995, has substantial working capital
deficiency and shareholders' deficit at December 31, 1995, and in
addition, there is substantial uncertainty concerning the
collectibility of amounts due from affiliates. These matters
raise substantial doubt about the Company's ability to continue
as a going concern, which in turn raise uncertainty about the
carrying value of its rental equipment. Management's plans in
regard to these matters are also described in Note 1. The
accompanying financial statements do not include any adjustments
relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities
that might result from the resolution of these uncertainties.
Valley Stream, New York
September 13, 1996, except for
notes 3, 5 and 8, as to which the date is
December 6, 1996.
/s/ Israeloff, Tratner & Co. P.C.
ISRAELOFF, TRATTNER & CO. P.C.
F-19
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues (Note 1) $388,008
Costs and Expenses
Depreciation (Notes 1 and 2) $151,914
Interest expense 160,040
Repairs and disposition losses on 74,577
rental equipment
Write-down of rental equipment not 87,456
in service (Note 2)
General and administrative expenses 210,628
--------
Total costs and expenses 684,615
--------
Loss before other expense (296,607)
Other expense - provision for
uncollectible advances 600,000
to affiliates (Note 4) --------
Net loss (896,607)
Preferred dividends (205,447)
--------
Net loss applicable to common $(1,102,054)
shareholders ==========
Net loss per common share (Note 1) $ (.98)
==========
Weighted average number of shares 1,120,000
outstanding ==========
See accompanying notes to financial statements.
F-20
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
Preferred Shares Common Shares
Number Amount Number Amount
------ ------ ------ ------
Balance - beginning of
year as previously
reported 1,643,726 $16,437 1,000 $200,000
Prior period - - - -
adjustment (Note 7) --------- -------- ----- ------
Balance, beginning of
year as restated 1,643,726 16,437 1,000 200,000
Net loss - - - -
- - - -
Preferred dividends --------- ------- ------ -----
Balance - December 1,643,726 $16,437 1,000 $200,000
31, 1995 ========= ======= ===== =======
Additional
Paid-In Accumulated
Capital Deficit Total
---------- ---------- -----
Balance - beginning of
year as previously
reported $979,146 $(369,183) $826,400
Prior period
adjustment - (321,807) (321,807)
(Note 7) -------- -------- ---------
Balance, beginning of
year as restated 979,146 (690,990) 504,593
Net loss - (896,607) (896,607)
- (205,447) (205,447)
Preferred dividends -------- ----------- --------
Balance - December 31, $979,146 $(1,793,044) $(597,461)
1995 ======== =========== =========
See notes to accompanying financial statements.
F-21
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(896,607)
Adjustments to reconcile net loss
to net cash provided
by operating activities;
Depreciation $151,914
Provision for uncollectible
advances to affiliates 600,000
Write-down of rental
equipment not in service 87,456
Changes in assets and
liabilities:
Accounts receivable (29,820)
Prepaid expenses 140,905
Accounts payable 12,396
Customer deposits (17,775)
--------
Total adjustments 945,076
-------
Net cash provided by 48,469
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net advances to affiliates (276,949)
Increase in security deposits (719)
--------
Net cash used by investing (277,668)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term bank borrowings 196,735
Proceeds from long-term debt 389,506
Repayments of long-term debt (313,022)
Dividends paid (205,447)
--------
Net cash provided by
financing activities 67,772
--------
NET DECREASE IN CASH (161,427)
CASH - beginning 165,230
--------
CASH - end $ 3,803
========
See accompanying notes to financial statements.
F-22
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Medley Credit Acceptance Corp. (the "Company"), a Delaware
Corporation, is a wholly-owned subsidiary of Medley Group,
Inc. ("Medley"). The Company is engaged in the leasing of
dry cleaning equipment, principally in Florida.
The financial statements have been prepared on a going
concern basis which contemplates realization of assets and
satisfaction of liabilities in the ordinary course of
business. However, the Company incurred a net loss of
$896,607 for the year ended December 31, 1995, and as of that
date, it has a working capital deficiency of $664,021 and a
shareholders' deficit of $597,461. These conditions raise
substantial doubt about the Company's ability to continue as
a going concern. The Company's ability to continue in
existence as a going concern, is dependent upon its ability
to attain profitable operations and to obtain equity and/or
debt financing. Management plans to rely, to a substantial
extent, on the Company's ability to successfully complete a
proposed initial public offering (Note 8), and also upon the
collectibility of amounts advanced to affiliates (Note 4).
The Company believes the above plan will permit it to
continue operations. However, there can be no assurance that
the Company will be successful in raising additional capital
or in achieving profitable operations. The financial
statements do not include any adjustments that might result
from this uncertainty.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include
those related to valuation of amounts due from affiliates and
the net realizable value of rental equipment. It is at least
reasonably possible that the significant estimates used will
change within the next year.
REVENUE RECOGNITION
The Company recognizes revenue from its leased equipment as
earned under operating lease agreements. Rental equipment is
stated at cost using the specific identification method.
When assets are sold or otherwise disposed of, their cost and
related accumulated depreciation are removed from the
accounts and resulting gains or losses are included in
income. Depreciation is provided by the straight-line method
over the estimated useful life of the assets, 7 years.
F-23
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Major
expenditures for property and those which substantially
increase useful lives are capitalized. Maintenance, repairs,
and minor renewals are expensed as incurred. When assets are
retired or otherwise disposed of, their costs and related
accumulated depreciation are removed from the accounts and
resulting gains or losses are included in income.
Depreciation is provided by the straight-line method over the
estimated useful lives of the assets.
DEFERRED INCOME TAXES
The Company provides deferred income taxes resulting from
temporary differences between the financial statement and tax
bases of assets and liabilities. Deferred tax assets or
liabilities at the end of each period are determined using
the tax rate expected when taxes are actually paid or
recovered. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount
expected to be realized. Temporary differences result
principally from the write-down of amounts due from
affiliates and of certain rental equipment.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average of
common shares outstanding. On June 30, 1996, the Company
effected a 1,120 for 1 stock split, thereby increasing the
common shares outstanding from 1,000 to 1,120,000. All per
share data have been restated to reflect this stock split.
2. RENTAL EQUIPMENT AND DEPRECIATION
Rental equipment consists of the following:
Not
In Service In Service Total
---------- ---------- -----
Equipment, at cost $751,529 $695,840 $1,447,369
Less: Accumulated 406,949 620,371 1,027,320
depreciation -------- -------- ----------
Net rental $344,580 $ 75,469 $ 420,049
equipment ======== ======== ==========
The depreciation expense for the year was $141,208. The
Company provided a write-down of $87,456 on the equipment not
currently in service, to reduce it to its estimated net
realizable value. However, it is at least reasonably
possible that this estimate will change.
F-24
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 1995
Rents receivable under operating lease commitments are as
follows:
1996 $152,400
1997 38,288
Thereafter 0
--------
$190,688
========
3. NOTES PAYABLE
The Company maintains a $350,000 revolving credit line
agreement with a commercial bank that is used to finance
working capital requirements. At December 31, 1995, the
amount outstanding was $334,895. Borrowings are due on
demand, with interest payable monthly at 2 1/2% over the bank's
prime rate. The agreement was due to expire June 3, 1996 and
was extended to October 3, 1996, but still remains
substantially unpaid. All borrowings under the note are
collateralized by substantially all assets not otherwise
pledged and are personally guaranteed by the Company's
principal officers and "Medley". The note contains various
restrictive covenants, which among other things require the
maintenance of certain financial ratios. As of December
1996, approximately $100,000 had been repaid to the bank.
The Company is currently negotiating an extension of the
line.
4. RELATED PARTY TRANSACTIONS
The Company has transactions with related companies whose
ownership is substantially the same as that of the Company.
Included in the statement of operations are the following
items of income and (expense):
Management fees $ (30,000)
Allocated general and $ (24,650)
administrative expenses
Rental revenues $ 16,162
Included in the balance sheet at December 31, 1995 are:
Due from affiliates (less $ 766,665
allowance of $600,000)
Due to affiliated company $ (127,279)
The balance due to and due from related companies result
principally from non-interest bearing advances with no
definite due date. The Company has reduced the receivable to
its estimated net realizable value through a $600,000
allowance. However, it is at least reasonably possible that
the amount collected will differ from management's estimate.
F-25
<PAGE>
MEDLEY CEDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 1995
5. COMMITMENTS AND CONTINGENCIES
Lease Agreements
An affiliate of the Company is obligated under a lease for
its premises expiring October 1997, which requires minimum
annual rentals of $25,000 plus increases based on real estate
taxes and operating costs. Included in the statement of
operations is $2,700 allocated to the Company, under this
lease.
In addition, the Company rents warehouse space on a month-to-
month basis for storage purposes at a cost of approximately
$700 per month.
Employment Agreements
Effective December 1, 1996, the Company entered into one-year
employment agreements with its President and Secretary for
annual amounts of $60,000 and $30,000, respectively. The
agreements may be automatically renewed on an annual basis.
Management Agreement
On October 31, 1996, but effective January 1, 1994, the
Company entered into a management agreement with a related
company. The related company provides management services at
a fee of $90,000 per annum. The agreement expires December
1996 and may be renewed on an annual basis.
In 1995, the related company agreed to modify the agreement
to $30,000 for that year.
Litigation
The Company is involved in several actions in the normal
course of business, none of which are expected to have a
material effect on the Company's results of operations or
financial condition.
6. INCOME TAXES
The Company, its parent company and its parent's other
subsidiaries file a consolidated Federal income tax return.
The effective consolidated federal tax rate is applied to
each company's taxable income or loss for purposes of
allocating the consolidated federal tax.
The potential deferred tax asset resulting from net operating
loss carryforwards has been reduced to zero by a valuation
allowance because management could not conclude that
realization of such benefits was more likely than not.
Furthermore, the Internal Revenue Code contains provisions
which may limit the loss carryforwards available if
significant changes in stockholder ownership of the Company
occur.
F-26
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF MEDLEY GROUP, INC.)
NOTES TO FIANCNIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 1995
7. PRIOR YEAR ADJUSTMENTS
The accumulated deficit at the beginning of 1995 has been
restated to correct the valuation of certain rental equipment
that was taken out of service and placed in storage in prior
years and to correct the treatment of proceeds from a
financing company in 1994.
8. PROPOSED PUBLIC OFFERING
The Company has signed a Letter of Intent with an underwriter
to complete an initial public offering for a minimum of
420,000 units and a maximum of 620,000 units. Each unit
consists of one share of $.01 par value common stock at $6.50
per share and one redeemable warrant to purchase one share of
common stock at $.10 per share. Professional fees incurred
in connection with the proposed offering will be recorded as
a deferred cost and will be charged to additional paid-in
capital upon completion of the offering, or will be charged
to expense if the offering is not completed.
F-27
<PAGE>
===========================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. EXCEPT WHERE
OTHERWISE INDICATED, THIS PROSPECTUS SPEAKS AS OF THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Information . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Management and
Certain Securityholders . . . . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . .
Description of Securities . . . . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares Eligible for Future Sale . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements . . . . . . . . . . . . . . . . . . . .
------------------
UNTIL ( ), 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
==========================================================================
==========================================================================
1,600,000 SHARES
COMMON STOCK
1,600,000 REDEEMABLE WARRANTS
TO PURCHASE COMMON STOCK
MEDLEY CREDIT
ACCEPTANCE CORP.
----------
PROSPECTUS
----------
PCM SECURITIES LIMITED, L.P.
JUNE ( ), 1997
=========================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation") provides that no director shall be
personally liable to the Company or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's By-Laws and Certificate of Incorporation provide that
the Company shall indemnify, to the fullest extent authorized by the
Delaware General Corporation Law, each person who is involved in any
litigation or other proceeding because he or she is or was a director or
officer of the Company against all expense, loss or liability in connection
therewith.
Section 145 of the Delaware General Corporation Law permits a
corporation to indemnify any director or officer of the corporation against
expenses (including attorneys' fees), judgements, fines and amounts paid in
settlements actually and reasonably incurred in connection with any action,
suit or proceeding brought by reason of the fact that such person is or was
a director or officer of the corporation, if such person acted in good
faith and in a manner that he or she reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, if he or she had no reason to believe his or
her conduct was unlawful. In a derivative action indemnification may be
made only for expenses actually and reasonably incurred by any director or
officer in connection with the defense or settlement of an action or suit,
if such person has acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person
shall have been adjudged to be liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant is reasonably entitled to
indemnification for such expenses despite such adjudication of liability.
The right to indemnification includes the right to be paid expenses
incurred in defending any proceeding in advance of its final disposition
upon the delivery to the corporation of an undertaking, by or on behalf of
the director or officer, to repay all amounts so advanced if it is
ultimately determined that such director or officer is not entitled to
indemnification.
If a person is entitled to indemnification in respect to a portion,
but not all, of any liabilities to which such person may be subject, the
Company shall indemnify such person to the maximum extent for such portion
of the liabilities.
Pursuant to the Underwriting Agreement, the Underwriter is obligated,
under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the
form of Underwriting Agreement filed as Exhibit 1.1 hereto.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the offering described in this Registration Statement.
SEC registration fee . . . . . . . . $ 5,527.28
NASD filing fee . . . . . . . . . . 2,204.00
Nasdaq SmallCap Market
listing fee . . . . . . . . . . . . 9,880.00
Accounting fees and expenses . . . . 30,000.00
Legal fees and expenses . . . . . . 100,000.00
Blue sky fees and expenses . . . . . 10,000.00
Transfer and Warrant Agent fee . . . 3,500.00
Printing and engraving fees . . . . 3,000.00
Miscellaneous . . . . . . . . . . . 888.72
-----------
Total . . . . . . . . . . . . . . $165,000.00*
----------------------
* The Company will pay the above expenses with the proceeds from this
offering, except that for $30,000 of such expenses have already been paid.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During June 1996, the Company offered holders of approximately
$951,590 principal amount of unsecured notes of the Company, each of whom
was an "accredited investor" within the meaning of Rule 501(a) promulgated
under the Securities Act, the opportunity to exchange their notes into
shares of the Company's Convertible Preferred Stock. Noteholders converted
approximately $765,657 principal amount of notes into 811,973 shares of
Convertible Preferred Stock.
Concurrently, in June 1996, the Company offered Messrs. Robert Press
and Steven Edelson, President and Chairman of the Board, respectively, of
the Company, the opportunity to exchange their shares of 13 1/2% preferred
stock of the Company then owned by them, having an aggregate liquidation
value of $1,643,726, into shares of Convertible Preferred Stock. Messrs.
Press and Edelson exchanged all of their shares of 13 1/2% preferred stock
for an aggregate of 2,136,844 shares of Convertible Preferred Stock
(604,717 shares to Mr. Press and 1,532,127 shares to Mr. Edelson).
From June 1, 1996 through March 31, 1997, Messrs. Press and Edelson
loaned the Company $58,218 and $47,018, respectively. In connection with
these loans, the Company issued to each of Messrs. Press and Edelson
warrants to purchase up to 142,500 shares of Common Stock. These warrants
are exercisable at any time on or prior to September 30, 2000, at an
exercise price of $1.50 per share.
From June 1, 1996 to March 31, 1997, Tile's International, a company
controlled by Steven Dreyer, a director of the Company, loaned the Company
$100,000, of which approximately $81,321 was outstanding at March 31, 1997.
In connection with these loans, the Company issued to Tile's International
warrants to purchase up to 5,625 shares of Common Stock. These warrants
are exercisable at any time prior to September 30, 2000, at an exercise
price of $1.50 per share.
II-2
<PAGE>
In December 1996, the Company sold to Maynard Hellman, a director of
the Company, in consideration for $100,000, warrants to purchase up to
1,000,000 shares of Common Stock of the Company. These warrants are
identical to the Warrants being offered hereby except that the exercise
price of the warrants owned by Mr. Hellman is $5.00.
Section 4(2) of the Securities Act provides an exemption for the
Company for each of the above-described transactions.
ITEM 27. EXHIBITS.
1.1 Underwriting Agreement
1.2 Selected Dealer Agreement
3.1 Amended and Restated Certificate of Incorporation of
the Company
3.2 Certificate of Designation, Rights and Preferences
relating to shares of the Company's Series A 10%
Convertible Preferred Stock
3.3 By-Laws of the Company
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate (included as Exhibit A
to Exhibit 4.3)
4.3 Warrant Agency Agreement, dated as of ( ), 1997,
between the Company and American Stock Transfer &
Trust Company
5.1 Opinion of Reid & Priest LLP
10.1 Employment Agreement, dated as of December 1, 1996,
between Robert D. Press and the Company
10.2 Employment Agreement, dated as of December 1, 1996,
between Steven L. Edelson and the Company
10.3 Management Agreement, dated as of October 31, 1996,
between Performance Capital Management, Inc. and the
Company
10.4 Agreement, dated as of May 23, 1997, between the
Company and Medley Group, Inc.
10.5 Escrow Agreement, dated as of ( ), 1997, among the
Company, Medley Group, Inc. and SunTrust/South
Florida, National Association
10.6 The Company's 1997 Stock Option Plan
16 Letter on Change in Certifying Accountant
23.1 Consent of Reid & Priest LLP (included in Exhibit
5.1)
23.2 Consent of Israeloff, Trattner & Co. P.C.
23.3 Consent of Daszkal, Bolton & Manela
24 Power of attorney+
27 Financial Data Schedule+
------------------------------------
+ Previously filed.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes:
(a) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) To include any additional or changed material on the
plan of distribution.
(b) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
The Company will provide to the underwriter at the closing specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
For determining any liability under the Securities Act, the Company
will treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company under Rule 424(b)(1)
or (4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
For determining any liability under the Securities Act, the Company
will treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as
the initial bona fide offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in
the City of Miami, State of Florida, on this 10th day of June, 1997.
MEDLEY CREDIT ACCEPTANCE CORP.
/s/ Robert D. Press
----------------------------------
Robert D. Press
President, Chief Executive Officer,
Treasurer and Director
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
Signatures Title Date
-------- -------- --------
/s/ Robert D. Press
--------------------
Robert D. Press President, Chief June 10, 1997
Executive Officer,
Treasurer
and Director
(Principal Executive,
Financial
and Accounting
Officer)
/s/ *
-------------------
Steven L. Edelson Chairman of the Board June 10, 1997
and Secretary
/s/ *
-------------------
Steven Dreyer Director June 10, 1997
/s/ *
-------------------
Maynard Hellman Director June 10, 1997
* By: Robert D. Press as
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
-------------
1.1 Underwriting Agreement
1.2 Selected Dealer Agreement
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Certificate of Designation, Rights and Preferences relating to
shares of the Company's Series A 10% Convertible Preferred Stock
3.3 By-Laws of the Company
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate (included as Exhibit A to Exhibit
4.3)
4.3 Warrant Agency Agreement, dated as of ( ), 1997, between the
Company and American Stock Transfer & Trust Company
5.1 Opinion of Reid & Priest LLP
10.1 Employment Agreement, dated as of December 1, 1996, between
Robert D. Press and the Company
10.2 Employment Agreement, dated as of December 1, 1996, between
Steven L. Edelson and the Company
10.3 Management Agreement, dated as of October 31, 1996, between
Performance Capital Management, Inc. and the Company
10.4 Agreement, dated as of May 23, 1997, between the Company and
Medley Group, Inc.
10.5 Escrow Agreement, dated as of ( ), 1997, among the Company,
Medley Group, Inc. and SunTrust/South Florida, National
Association
10.6 The Company's 1997 Stock Option Plan
16 Letter on Change in Certifying Accountant
23.1 Consent of Reid & Priest LLP (included in Exhibit 5.1)
23.2 Consent of Israeloff, Trattner & Co. P.C.
23.3 Consent of Daszkal, Bolton & Manela
24 Power of attorney+
27 Financial Data Schedule+
----------------------------------
+ Previously filed.
MEDLEY CREDIT ACCEPTANCE CORP.
1,600,000 SHARES OF COMMON STOCK AND
REDEEMABLE WARRANTS TO PURCHASE
1,600,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
June ( ), 1997
PCM SECURITIES LIMITED, L.P.
32 Old Slip, 9th Floor
New York, New York 10004
Ladies/Gentlemen:
Medley Credit Acceptance Corp., a Delaware corporation (the
"Company"), hereby confirms its agreement with PCM Securities
Limited, L.P. (the "Underwriter") and, for purposes of Section 8
hereof only, Lew Lieberbaum & Co., Inc. (the "Qualified
Independent Underwriter"; the Underwriter and the Qualified
Independent Underwriter are sometimes hereinafter referred to
collectively as the Underwriter), as follows:
1. Description of Shares. Subject to the immediately
---------------------
following paragraph, the Company proposes to issue and sell
through the Underwriter, as agent for the Company, a minimum of
1,200,000 shares of its authorized and unissued Common Stock, par
value $.01 per share ("Common Stock"), and redeemable warrants to
purchase a minimum of 1,200,000 shares of Common Stock (the
"Warrants"), on a best efforts, all or none basis (the "Minimum
Offering"), and a maximum of 1,600,000 shares of Common Stock and
Warrants to purchase 1,600,000 shares of Common Stock (the
"Maximum Offering"). The shares of Common Stock and Warrants in
excess of the Minimum Offering will be offered on a best efforts
basis.
Of the shares of Common Stock being offered, 1,000,000
shares (in the event of the Minimum Offering and 1,400,000 shares
in the event of the Maximum Offering) are being offered directly
by the Company and 200,000 shares are being offered directly by
Medley Group, Inc., the Company's parent ("Group"). The Company
is assuming all obligations, responsibilities and potential
liabilities of Group hereunder.
The Common Stock, the Warrants, and the shares of
Common Stock underlying the Warrants (the "Warrant Shares", are
sometimes hereinafter collectively called the "Securities").
2. Representations, Warranties and Agreements of the
-------------------------------------------------
Company.
-------
The Company represents and warrants to and agrees with
the Underwriter that:
(a) A registration statement on Form SB-2 (File No.
333-24937) with respect to the Securities, including a prospectus
(subject to completion), has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed
with the Commission and such amendments to such registration
statement, and such amended prospectuses (subject to completion)
as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company
will file such additional amendments to such registration
statement, and such amended prospectuses as may hereafter be
required. Copies of such registration statement and amendments,
of each related prospectus (subject to completion) (the
"Preliminary Prospectuses"), including all documents incorporated
by reference therein, have been delivered to you. The Company
and the transactions contemplated by this Agreement meet the
requirements for using Form SB-2 under the Act.
If the registration statement relating to the
Securities has been declared effective under the Act by the
Commission, the Company will prepare and promptly file with the
Commission any information omitted from the registration
statement pursuant to Rule 430A(a) and Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the
registration statement (including a final form of prospectus).
If the registration statement relating to the Securities has not
been declared effective under the Act by the Commission, the
Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement, including financial statements,
schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to
Rule 430A(a), the information deemed to be a part of the
registration statement at the time it became effective pursuant
to Rule 430A(b) of the Rules and Regulations) and, in the event
of any amendment thereto after the effective date of such
registration statement, shall also mean (from and after the
effectiveness of such amendment such registration statement as so
amended. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Securities as included in
such Registration Statement at the time it becomes effective
(including, if the Company omitted information from the
Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the
Registration Statement at the time it became effective pursuant
to Rule 430A(b) of the Rules and Regulations). Notwithstanding
the foregoing, if any revised prospectus shall be provided to the
Underwriter by the Company for use in connection with the
offering of the Securities that differs from the prospectus
referred to in the immediately preceding sentence (whether or not
such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations),
the term "Prospectus" shall refer to such revised prospectus from
and after the time it is first provided to the Underwriters for
such use. Any reference to the Registration Statement or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein as of the date of the
Registration Statement or the Prospectus, as the case may be, and
any reference to any amendment or supplement to the Registration
Statement or the Prospectus shall be deemed to refer to and
include any documents filed after such date under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which,
upon filing, are incorporated by reference therein. As used in
this Agreement, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the
Registration Statement, the Prospectus or any amendment or
supplement thereto.
(b) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus or instituted
proceedings for that purpose, and each such Preliminary
Prospectus has conformed in all material respects to the
requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and at the time the Registration
Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date
(hereinafter defined) (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained
and will contain all material information required to be included
therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any
amendments or supplements thereto, did not and will not include
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 not misleading, and (iii) the Prospectus,
and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations
and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration
Statement or Prospectus, or any amendment or supplement thereto,
in reliance upon, and in conformity with, written information
relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed), conformed in
all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission thereunder; any
further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such
amendment was filed), contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and no such further amendment will 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 not misleading.
(c) Each of the Company and its affiliates has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other)
to own, lease and operate its properties and conduct its business
as described in the Prospectus; each of the Company and its
affiliates is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to
be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the
Company; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or
qualification; each of the Company or its affiliates is in
possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities
which are material to the conduct of its business, all of which
are valid and in full force and effect; neither the Company nor
any of its affiliates is in violation of its respective charter
or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained
in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any of its
affiliates is a party or by which it or any of its affiliates or
their respective properties may be bound; and neither the Company
nor any of its affiliates is in material violation of any law,
order, rule, regulation, writ, injunction, judgment or decree of
any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its
affiliates or over their respective properties of which it has
knowledge. Except as set forth in the Prospectus, the Company
does not own or control, directly or indirectly, any corporation,
association or other entity.
(d) The Company has full legal right, power and
authority to enter into this Agreement and perform the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid
and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by
general equitable principles; the performance of this Agreement
and the consummation of the transactions herein contemplated will
not result in a material breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any bond,
debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to
which the Company or any of its affiliates is a party or by which
it or any of its affiliates or their respective properties may be
bound, (ii) the charter or bylaws of the Company or any of its
affiliates, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its affiliates or over
their respective properties. No consent, approval, authorization
or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its affiliates or over
their respective properties is required for the execution and
delivery of this Agreement and the consummation by the Company or
any of its affiliates of the transactions herein contemplated,
except such as may be required under the Act, the Exchange Act or
under state or other securities or blue sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding
against the Company, any of its affiliates or any of their
respective officers or any of their respective properties, assets
or rights before any court, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company
or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material
adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the
Company and its affiliates considered as one enterprise or might
materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions
contemplated hereby or (iii) is required to be disclosed in the
Registration Statement or Prospectus and is not so disclosed; and
there are no agreements, contracts, leases or documents of the
Company or any of its subsidiaries of a character required to be
described or referred to in the Registration Statement or
Prospectus or any Incorporated Document or to be filed as an
exhibit to the Registration Statement or any Incorporated
Document by the Act or the Rules and Regulations or by the
Exchange Act or the rules and regulations of the Commission
thereunder which have not been accurately described in all
material respects in the Registration Statement or Prospectus or
any Incorporated Document or filed as exhibits to the
Registration Statement or any Incorporated Document.
(f) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and the authorized and
outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and conforms in all
material respects to the statements relating thereto contained in
the Registration Statement and the Prospectus and any
Incorporated Document (and such statements correctly state the
substance of the instruments defining the capitalization of the
Company); the Common Stock and the Warrants have been duly
authorized for issuance and sale through the Underwriter pursuant
to this Agreement and, when issued and delivered by the Company
(or Group, with respect to its 200,000 shares) against payment
therefor in accordance with the terms of this Agreement, will be
duly and validly issued and fully paid and nonassessable, and
will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of
first refusal or other similar right of shareholders exists with
respect to any of the Common Stock or Warrants or the issuance
and sale thereof other than those that have been expressly waived
prior to the date hereof and those that will automatically expire
upon and will not apply to the consummation of the transactions
contemplated on the Closing Date. No further approval or
authorization of any shareholder, the Board of Directors of the
Company or others is required for the issuance and sale or
transfer of the Securities except as may be required under the
Act, the Exchange Act or under state or other securities or blue
sky laws. Except as disclosed in the Prospectus and the
financial statements of the Company and the related notes thereto
included or incorporated by reference in the Prospectus, neither
the Company nor any affiliate has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted and exercised thereunder,
set forth or incorporated by reference in the Prospectus
accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and
rights.
(g) Daszkal, Bolton & Manela and Israeloff, Trattner &
Co. which have examined the financial statements of the Company,
together with the related schedules and notes, as of December 31,
1996 and 1995, respectively, filed with the Commission as a part
of or incorporated by reference into the Registration Statement,
which are included or incorporated by reference in the
Prospectus, are independent accountants within the meaning of the
Act and the Rules and Regulations; the audited consolidated
financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results
of operations of the Company and its subsidiaries at the
respective dates and for the respective periods to which they
apply; and all audited consolidated financial statements of the
Company, together with the related schedules and notes, and the
unaudited consolidated financial information, filed with the
Commission as part of or incorporated by reference into the
Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated
therein. The selected and summary financial and statistical data
included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis
consistent with the audited financial statements presented
therein. Except as set forth in the Prospectus, no other
financial statements or schedules are required to be included in
the Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, there has not been (i) any material adverse change in
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (ii) any
transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (iii) any
obligation, direct or contingent, that is material to the
Company, incurred by the Company, except obligations incurred in
the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company that is material
to the Company, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or
(vi) any loss or damage (whether or not insured) to the property
of the Company which has been sustained or will have been
sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company.
(i) Except as set forth in the Registration Statement
and Prospectus and any Incorporated Document, (i) the Company has
good and marketable title to all properties and assets described
in the Registration Statement and Prospectus and any Incorporated
Document as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest,
other than such as would not have a material adverse effect on
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (ii) the
agreements to which the Company is a party described in the
Registration Statement and Prospectus and any Incorporated
Document are valid agreements, enforceable by the Company (as
applicable), except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and, to the best of
the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any
of such agreements, and (iii) the Company has valid and
enforceable leases for all properties described in the
Registration Statement and Prospectus and any Incorporated
Document as leased by it, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, the Company owns or leases all
such properties as are necessary to its operations as now
conducted or as proposed to be conducted.
(j) The Company has timely filed all necessary
federal, state and foreign income and franchise tax returns and
has paid all taxes shown thereon as due, and there is no tax
deficiency that has been or, to the best of the Company's
knowledge, might be asserted against the Company that might have
a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects
of the Company; and all tax liabilities are adequately provided
for on the books of the Company.
(k) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses
and consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against, all of which
insurance is in full force and effect; the Company has not been
refused any insurance coverage sought or applied for; and the
Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would
not materially and adversely affect the condition (financial or
otherwise), earnings, operations, business or business prospects
of the Company.
(l) To the best of Company's knowledge, no labor
disturbance by the employees of the Company exists or is
imminent; and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its
principal suppliers, subassemblers, value added resellers,
subcontractors, original equipment manufacturers, authorized
dealers or international distributors that might be expected to
result in a material adverse change in the condition (financial
or otherwise), earnings, operations, business or business
prospects of the Company. No collective bargaining agreement
exists with any of the Company's employees and, to the best of
the Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to
use all patents, patent rights, inventions, trade secrets, know-
how, trademarks, service marks, trade names and copyrights which
are necessary to conduct its businesses as described in the
Registration Statement and Prospectus and any Incorporated
Document; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights
would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company; the Company has not received
any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights;
and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks,
trade names or copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects
of the Company.
(n) The Company has filed an application for
registration of the Common Stock and Warrants pursuant to Section
12(g) of the Exchange Act with the National Association of
Securities Dealers, Inc. ("NASD") for listing those securities on
The Nasdaq SmallCap Market, and the Company has taken no action
designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act, nor has
the Company received any notification that the NASD is
contemplating not granting such registration or listing.
(o) The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and
the rules and regulations thereunder, and has in the past
conducted, and intends in the future to conduct, its affairs in
such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company"
within the meaning of the 1940 Act and such rules and
regulations.
(p) The Company has not distributed and will not
distribute prior to the completion of the sale of the Common
Stock and Warrants, any offering material in connection with the
offering and sale of the Common Stock and Warrants other than any
Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(q) The Company has not at any time during the last
five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(r) The Company has not taken and will not take,
directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock or Warrants to
facilitate the sale or resale of the Common Stock or Warrants or
the exercise of the Warrants.
(s) Each officer and director of the Company has
agreed in writing that such person will not, for a period of six
(6) months from the date that the Registration Statement is
declared effective by the Commission (the "Lock-up Period"),
offer to sell, contract to sell, or otherwise sell, dispose of,
loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities
convertible into or exchangeable for shares of Common Stock
(collectively, "Lock-up Securities") now owned or hereafter
acquired directly by such person or with respect to which such
person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or shareholders
of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii)
with the prior written consent of the Underwriter. The foregoing
restriction has been expressly agreed to preclude the holder of
the Lock-up Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead
to or in a Disposition of Lock-up Securities during the Lock-up
Period, even if such Lock-up Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call
option) with respect to any Lock-up Securities or with respect to
any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its
value from Lock-up Securities. Furthermore, such person has also
agreed and consented to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the
Lock-up Securities held by such person except in compliance with
this restriction. The Company has provided to counsel for the
Underwriter a complete and accurate list of all securityholders
of the Company and the number and type of securities held by each
securityholder. In addition, Group has agreed to prohibit the
sale by it of up to 800,000 shares of Common Stock under certain
circumstances until such time as the closing bid price for shares
of the Company's Common Stock exceeds certain targets for a
period of time, all as more fully set forth in the Prospectus.
(t) Except as set forth in the Registration Statement
and Prospectus and any Incorporated Document, (i) the Company is
in compliance with all rules, laws and regulations relating to
the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Laws")
which are applicable to its business, (ii) the Company has
received no notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is
required to be disclosed in the Registration Statement and the
Prospectus and any Incorporated Document, (iii) the Company will
not be required to make future material capital expenditures to
comply with Environmental Laws and (iv) no property which is
owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.
(S) 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
(u) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for
the benefit of any of the officers or directors of the Company or
any of the members of the families of any of them, except as
disclosed in the Registration Statement and the Prospectus and
any Incorporated Document.
(w) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with
the Government of Cuba or with any person or affiliate located in
Cuba.
3. Purchase, Sale and Delivery of Shares. The Company
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appoints the Underwriter the agent of the Company (and Group) for
the period commencing on the date hereof until ( ), 1997,
extended by the Company and the Underwriter by their mutual
agreement for a period not to exceed an additional thirty (30)
days (the "Offering Termination Date"), to use Underwriter's best
efforts to offer and sell, on a best efforts, all or none basis,
a minimum of 1,200,000 shares of Common Stock (of which the
Company is offering 1,000,000 shares and Group is offering
200,000 shares) and Warrants to purchase a minimum of 1,200,000
shares of Common Stock, and a maximum of 1,600,000 shares of
Common Stock (of which the Company is offering 1,400,000 shares
and Group is offering 200,000 shares) and Warrants to purchase
1,600,000 shares of Common Stock at an offering price of $5.50
per share of Common Stock and $0.15 per Warrant. The shares of
Common Stock and Warrants in excess of the Minimum Offering will
be offered on a "best efforts" basis. The Underwriter shall have
the right to engage participating broker-dealers pursuant to
Section 7(d) hereof. The Underwriter hereby accepts such
appointment and agrees pursuant to the terms and conditions set
forth herein to use its best efforts to offer and sell the Common
Stock and Warrants as agent for the Company (and Group) during
the periods specified above, and to find purchasers for the
Common Stock and Warrants.
The Underwriter shall send, by noon of the next
business day after receipt, each purchaser's payment for his
Common Stock and/or Warrants to the Escrow Agent designated in
the following paragraph. All subscription proceeds shall be
deposited directly into a special account or Escrow Account
("Escrow Account") at SunTrust/South Florida, National
Association (the "Escrow Agent"), subject to an escrow agreement
in the form agreed by the Company, the Underwriter and the Escrow
Agent. Purchasers shall be instructed to make their checks
payable to "SunTrust Bank, Escrow Agent for Medley Credit
Acceptance Corp." The Underwriter shall promptly give notice to
the Company if and when the Minimum Offering has been sold, or
upon the Underwriter's decision to terminate the offering for any
breach of any term, condition, warranty or representation
contained in this Agreement by the Company. If the Offering is
terminated prior to the closing of the Minimum Offering, all
subscriptions will be returned by the Escrow Agent to their
respective subscribers without interest and without deduction.
The first closing of the offering of Common Stock and
Warrants shall occur upon the sale of the Minimum Offering, which
shall be deemed to have occurred when the Company has received
subscriptions, and funds have cleared the banking system, for the
sale of the minimum of 1,200,000 shares of Common Stock
(1,000,000 shares of which will be sold by the Company and
200,000 shares of which will be sold by Group) and Warrants to
purchase a minimum of 1,200,000 shares of Common Stock (the
"Initial Closing"). After the Initial Closing, the Company and
the Underwriter shall hold one or more additional closings, as
proceeds of sale of the Common Stock and Warrants are received,
from time-to-time, but no less than every two weeks after the
Initial Closing.
Closings will be held at the offices of the
Underwriter, 1515 South Federal Highway, 3rd Floor, Boca Raton,
Florida, or in an alternative location and at such time and dates
as the Underwriter and the Company may mutually agree.
4. Further Agreements of the Company. The Company agrees
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with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not
effective at the time and date that this Agreement is executed
and delivered by the parties hereto, to become effective as
promptly as possible; the Company will notify you, promptly after
it shall receive notice thereof, of the time when the
Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement
has become effective or any supplement to the Prospectus has been
filed; if the Company omitted information from the Registration
Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the
Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within
the time period prescribed, with the Commission pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such
Registration Statement as originally declared effective which is
declared effective by the Commission; if for any reason the
filing of the final form of Prospectus is required under Rule
424(b)(3) of the Rules and Regulations, it will provide evidence
satisfactory to you that the Prospectus contains such information
and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel for the
Underwriter ("Underwriter's Counsel"), may be necessary or
advisable in connection with the distribution of the Common Stock
and Warrants by the Underwriter; it will promptly prepare and
file with the Commission, and promptly notify you of the filing
of, any amendments or supplements to the Registration Statement
or Prospectus which may be necessary to correct any statements or
omissions, if, at any time when a prospectus relating to the
Common Stock and Warrants is required to be delivered under the
Act, any event shall have occurred as a result of which the
Prospectus or any other prospectus relating to the Common Stock
and Warrants as then in effect would include any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading; in case the
Underwriter is required to deliver a prospectus nine (9) months
or more after the effective date of the Registration Statement in
connection with the sale of the Common Stock and Warrants, it
will prepare promptly upon request such amendment or amendments
to the Registration Statement and such prospectus or prospectuses
as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or
supplement to the Registration Statement or Prospectus or the
Incorporated Documents, or, prior to the end of the period of
time in which a prospectus relating to the Common Stock and
Warrants is required to be delivered under the Act, file any
document which upon filing becomes an Incorporated Document,
which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which
you shall reasonably object in writing, subject, however, to
compliance with the Act and the Rules and Regulations, the
Exchange Act and the rules and regulations of the Commission
thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it
shall receive notice or obtain knowledge, of the issuance of any
stop order by the Commission suspending the effectiveness of the
Registration Statement or of the initiation or threat of any
proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain
its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify
the Securities for offering and sale under the securities laws of
such jurisdictions as you may designate and to continue such
qualifications in effect for so long as may be required for
purposes of the distribution of the Common Stock and Warrants,
except that the Company shall not be required in connection
therewith or as a condition thereof to qualify as a foreign
corporation or to execute a general consent to service of process
in any jurisdiction in which it is not otherwise required to be
so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Securities shall have
been qualified as above provided, the Company will make and file
such statements and reports in each year as are or may be
required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as
available, and, in the case of the Prospectus in no event later
than the first (1st) full business day following the first day
that Common Stock and Warrants are traded, copies of the
Registration Statement (three of which will be signed and which
will include all exhibits), each Preliminary Prospectus, the
Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, and the Incorporated Documents
(three of which will include all exhibits) all in such quantities
as you may from time to time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not
later than the forty-fifth (45th) day following the end of the
fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the
Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
(f) During a period of five (5) years after the date
hereof, the Company will furnish to its shareholders as soon as
practicable after the end of each respective period, annual
reports (including financial statements audited by independent
certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal
year, and will furnish to the Underwriter hereunder, upon request
(i) concurrently with furnishing such reports to its
shareholders, statements of operations of the Company for each of
the first three (3) quarters in the form furnished to the
Company's shareholders, (ii) concurrently with furnishing to its
shareholders, a balance sheet of the Company as of the end of
such fiscal year, together with statements of operations, of
shareholders' equity, and of cash flows of the Company for such
fiscal year, accompanied by a copy of the certificate or report
thereon of independent certified public accountants, (iii) as
soon as they are available, copies of all reports (financial or
other) mailed to shareholders, (iv) as soon as they are
available, copies of all reports and financial statements
furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every
material news item or article in respect of the Company or its
affairs which was generally released to shareholders or prepared
by the Company or any of its subsidiaries, and (vi) any
additional information of a public nature concerning the Company
or its business which you may reasonably request. During such
five (5) year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company
and its subsidiaries are consolidated, and shall be accompanied
by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will apply the net proceeds from the
sale of the Common Stock and Warrants being sold by it in the
manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(h) The Company will maintain a warrant and transfer
agent and, if necessary under the jurisdiction of incorporation
of the Company, a registrar (which may be the same entity as the
transfer agent) for its Common Stock and Warrants.
(i) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the
part of the Company to perform any agreement on its part to be
performed hereunder or to fulfill any condition of the
Underwriter's obligations hereunder, or if the Company shall
terminate this Agreement pursuant to Section 11(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to
Section 11(b)(i), the Company will reimburse the Underwriter for
all out-of-pocket expenses (including fees and disbursements of
Underwriter's Counsel) incurred by the Underwriter in
investigating or preparing to market or marketing the Common
Stock and Warrants.
(j) If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall
occur as a result of which in your opinion the market price of
the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company
to the effect set forth above, forthwith prepare, consult with
you concerning the substance of and disseminate a press release
or other public statement, reasonably satisfactory to you,
responding to or commenting on such rumor, publication or event.
5. Expenses.
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(a) The Company agrees with the Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing
of the Registration Statement (including financial statements,
schedules and exhibits), Preliminary Prospectuses and the
Prospectus and the Incorporated Documents and any amendments or
supplements thereto; the printing of this Agreement, the Selected
Dealer Agreement, the Preliminary Blue Sky Survey and any
Supplemental Blue Sky Survey, the Underwriter's Questionnaire and
Power of Attorney, and any instruments related to any of the
foregoing; the issuance and delivery of the Common Stock and
Warrants hereunder to the purchasers thereof, including transfer
taxes, if any, the cost of all certificates representing the
Common Stock and Warrants and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all
fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the Underwriter
copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectus and the Prospectus and the
Incorporated Documents, and any amendments or supplements to any
of the foregoing; NASD filing fees and the cost of qualifying the
Common Stock and Warrants under the laws of such jurisdictions as
you may designate (including filing fees and fees and
disbursements of Underwriter's Counsel in connection with such
NASD filings and blue sky qualifications); and all other expenses
directly incurred by the Company in connection with the
performance of their obligations hereunder. Notwithstanding the
foregoing, all fees and disbursements of the Qualified
Independent Underwriter shall be borne by the Underwriter and not
the Company.
(ii) In addition to its other obligations under
Section 8(a) hereof, the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 8(a) hereof, it
will reimburse the Underwriter on a monthly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of
the Company's obligation to reimburse the Underwriter for such
expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so
held to have been improper, the Underwriter shall promptly return
such payment to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit
standing) listed from time to time in The Wall Street Journal
which represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks
(the "Prime Rate"). Any such interim reimbursement payments
which are not made to the Underwriters within thirty (30) days of
a request for reimbursement shall bear interest at the Prime Rate
from the date of such request.
(b) In addition to its other obligations under Section
8(b) hereof, the Underwriter agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry
or other proceeding described in Section 8(b) hereof, it will
reimburse the Company on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
Underwriter's obligation to reimburse the Company for such
expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so
held to have been improper, the Company shall promptly return
such payment to the Underwriter together with interest,
compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments which are not made to the
Company within thirty (30) days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such
request.
(c) It is agreed that any controversy arising out of
the operation of the interim reimbursement arrangements set forth
in Sections 5(a)(i) and 5(b) hereof, including the amounts of any
requested reimbursement payments, the method of determining such
amounts and the basis on which such amounts shall be apportioned
among the reimbursing parties, shall be settled by arbitration
conducted under the to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the
event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice,
then the party responding to said demand or notice is authorized
to do so. Any such arbitration will be limited to the operation
of the interim reimbursement provisions contained in Sections
5(a)(i) and 5(b) hereof and will not resolve the ultimate
propriety or enforceability of the obligation to indemnify for
expenses which is created by the provisions of Sections 8(a) and
8(b) hereof or the obligation to contribute to expenses which is
created by the provisions of Section 8(d) hereof.
6. Conditions of Underwriter's Obligations. The
---------------------------------------
obligations of the Underwriter as provided herein shall be
subject to the accuracy, as of the date hereof and the date of
each Closing, of the representations and warranties of the
Company herein, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 2:00 P.M., New York time, on the date
following the date of this Agreement, or such later date as shall
be consented to in writing by you; and no stop order suspending
the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or any Incorporated Document or otherwise) shall have
been complied with to the satisfaction of Underwriter's Counsel.
(b) All corporate proceedings and other legal matters
in connection with this Agreement, the form of Registration
Statement and the Prospectus, any Incorporated Document and the
registration, authorization, issue, sale and delivery of the
Common Stock and Warrants, shall have been reasonably
satisfactory to Underwriter's Counsel, and such counsel shall
have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have
been any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the
Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Common
Stock and Warrants as contemplated by the Prospectus.
(d) You shall have received on the Initial Closing
date the following opinion of counsel for the Company dated the
Initial Closing Date addressed to the Underwriter to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation;
(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus;
(iii) The Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of their
properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be
in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or
business of the Company. To such counsel's knowledge, the
Company does not own or control, directly or indirectly, any
corporation, association or other entity;
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" as of the dates stated
therein, the issued and outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid
and nonassessable, and, to such counsel's knowledge, will not
have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal
or other similar right;
(v) The Common Stock and Warrants to be issued by
the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms hereof, will be duly and
validly issued and fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal
or other similar right;
(vi) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver the Securities to be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized
by all necessary corporate action on the part of the Company and
has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be
limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally
or by general equitable principles;
(viii) The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(ix) The Registration Statement and the
Prospectus, and each amendment or supplement thereto (other than
the financial statements (including supporting schedules) and
financial data derived therefrom as to which such counsel need
express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
and each of the Incorporated Documents (other than the financial
statements (including supporting schedules) and the financial
data derived therefrom as to which such counsel need express no
opinion) complied when filed pursuant to the Exchange Act as to
form in all material respects with the requirements of the Act
and the Rules and Regulations and the Exchange Act and the
applicable rules and regulations of the Commission thereunder;
(x) The information in the Prospectus under the
caption "Description of Securities," to the extent that it
constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is a fair summary of such matters
and conclusions; and the forms of certificates evidencing the
Common Stock and Warrants and filed as exhibits to the
Registration Statement comply with Delaware law;
(xi) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company and
of statutes are accurate and fairly present the information
required to be presented by the Act and the applicable Rules and
Regulations;
(xii) To such counsel's knowledge, there are
no agreements, contracts, leases or documents to which the
Company is a party of a character required to be described or
referred to in the Registration Statement or Prospectus or any
Incorporated Document or to be filed as an exhibit to the
Registration Statement or any Incorporated Document which are not
described or referred to therein or filed as required;
(xiii) The performance of this Agreement and
the consummation of the transactions herein contemplated (other
than performance of the Company's indemnification obligations
hereunder, concerning which no opinion need be expressed) will
not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material
breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument known to such counsel to which the
Company is a party or by which its properties are bound, or any
applicable statute, rule or regulation known to such counsel or,
to such counsel's knowledge, any order, writ or decree of any
court, government or governmental agency or body having
jurisdiction over the Company or over any of their properties or
operations;
(xiv) No consent, approval, authorization or
order of or qualification with any court, government or
governmental agency or body having jurisdiction over the Company
or over any of its properties or operations is necessary in
connection with the consummation by the Company of the
transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or
other securities or blue sky laws in connection with the purchase
and the distribution of the Common Stock and Warrants by the
Underwriter;
(xv) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against
the Company of a character required to be disclosed in the
Registration Statement or the Prospectus or any Incorporated
Document by the Act or the Rules and Regulations or by the
Exchange Act or the applicable rules and regulations of the
Commission thereunder, other than those described therein;
(xvi) To such counsel's knowledge, the Company
is not presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable
statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company
or over any of their properties or operations;
(xvii) To such counsel's knowledge, except as
set forth in the Registration Statement and Prospectus and any
Incorporated Document, no holders of Common Stock or other
securities of the Company have registration rights with respect
to securities of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities
of the Company having rights known to such counsel to
registration of such shares of Common Stock or other securities,
because of the filing of the Registration Statement by the
Company have, with respect to the offering contemplated thereby,
waived such rights or such rights have expired by reason of lapse
of time following notification of the Company's intent to file
the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights;
In addition, such counsel shall state that such counsel
has participated in conferences with officials and other
representatives of the Company, the Underwriter, Underwriter's
Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of
such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times
subsequent thereto up to and on the Initial Closing Date, the
Registration Statement and any amendment or supplement thereto
and any Incorporated Document, when such documents became
effective or were filed with the Commission (other than the
financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to
which such counsel need express no comment) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or at the Initial Closing Date, the
Registration Statement, the Prospectus and any amendment or
supplement thereto and any Incorporated Document (except as
aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. Such counsel shall also state that the
conditions for the use of Form SB-2 set forth in the General
Instructions thereto have been satisfied.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or
the State of Delaware upon opinions of local counsel, and as to
questions of fact upon representations or certificates of
officers of the Company, and of government officials, in which
case their opinion is to state that they are so relying and that
they have no knowledge of any material misstatement or inaccuracy
in any such opinion, representation or certificate. Copies of
any opinion, representation or certificate so relied upon shall
be delivered to the Underwriter, and to Underwriter's Counsel.
(e) You shall have received on the Initial Closing
Date a letter from Daszkal, Bolton & Manela addressed to the
Underwriter, dated the Closing Date confirming that they are
independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures
described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original
Letter"), but carried out to a date not more than five (5)
business days prior to the Initial Closing Date as the case may
be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of
the Closing Date and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose
any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from
that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering as contemplated by the
Prospectus. The Original Letter from Daszkal, Bolton & Manela
shall be addressed to or for the use of the Underwriter in form
and substance satisfactory to the Underwriter and shall (i)
represent, to the extent true, that they are independent
certified public accountants with respect to the Company within
the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their
examination of the consolidated balance sheets of the Company as
of December 31, 1996, and related consolidated statements of
operations, shareholders' equity, and cash flows for the twelve
(12) months ended December 31, 1996, and (iii) address other
matters agreed upon by Daszkal, Bolton & Manela and you. In
addition, you shall have received from Daszkal, Bolton & Manela a
letter addressed to the Company and made available to you for the
use of the Underwriter stating that their review of the Company's
system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the
Company's consolidated financial statements as of December 31,
1996, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(f) You shall have received on the Closing Date a
certificate of the Company, dated the Initial Closing Date signed
by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and
as of the Initial Closing date and the Company has complied with
all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or threatened
under the Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the delivery
of such certificate, the Registration Statement and the
Prospectus, and any amendments or supplements thereto and the
Incorporated Documents, when such Incorporated Documents became
effective or were filed with the Commission, contained all
material information required to be included therein by the Act
and the Rules and Regulations or the Exchange Act and the
applicable rules and regulations of the Commission thereunder, as
the case may be, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations or the
Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, the Registration
Statement, and any amendment or supplement thereto, did not and
does not include 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 not misleading, the
Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to
be set forth in an amended or supplemented Prospectus which has
not been so set forth; and
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement and
Prospectus, there has not been (a) any material adverse change in
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (b) any
transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the
Company, incurred by the Company, except obligations incurred in
the ordinary course of business, (d) any change in the capital
stock or outstanding indebtedness of the Company or any of its
subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of
any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of
its subsidiaries which has been sustained or will have been
sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company.
(g) The Company shall have obtained and delivered to
you an agreement from each officer and director of the Company in
writing prior to the date hereof that such person will not,
during the Lock-up Period, effect the Disposition of any
Securities now owned or hereafter acquired directly by such
person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona
fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution
to partners or shareholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of
this restriction, or (iii) with the prior written consent of the
Underwriter. The foregoing restriction shall have been expressly
agreed to preclude the holder of the Lock-up Securities from
engaging in any hedging or other transaction which is designed to
or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Lock-up
Securities would be disposed of by someone other than the such
holder. Such prohibited hedging or other transactions would
including, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with
respect to any Lock-up Securities or with respect to any security
(other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from
Lock-up Securities. Furthermore, such person will have also
agreed and consented to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the
Lock-up Securities held by such person except in compliance with
this restriction. In addition, you shall have been furnished with
an acknowledgement from Group as to its agreement regarding
800,000 shares of Common Stock as set forth in Section 2(s)
hereof.
(h) You shall be satisfied, in your own discretion,
that all indebtedness owing to the Company at the Initial Closing
date from Medley Refrigeration, Inc. will be satisfied in its
entirety from the offering proceeds held in escrow by the Escrow
Agent attributable to the sale by Group, in the Minimum Offering,
of Group's 200,000 shares of Common Stock.
(i) The Company shall have furnished to you such
further certificates and documents as you shall reasonably
request (including certificates of officers of the Company as to
the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations
hereunder and as to the other conditions concurrent and precedent
to the obligations of the Underwriter hereunder.
All such opinions, certificates, letters and documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory to Underwriter's Counsel. The Company
will furnish you with such number of conformed copies of such
opinions, certificates, letters and documents as you shall
reasonably request.
7. Compensation.
------------
(a) As compensation for the Underwriter's services
hereunder, the Company shall pay to the Underwriter in cash a
selling commission ("Commission") upon closing, on a pro-rata
basis, in an amount equal to ten percent (10%) of the aggregate
offering price of the Common Stock and Warrants sold by the
Underwriter. At the Initial Closing and each subsequent closing
until the Offering Termination Date, the Company shall pay the
Underwriter its Commission relating to the sale of the Common
Stock and Warrants subject to the Closing. All or any portion of
such Commission may be re-allowed to Selected Dealers (as
hereinafter defined). Anything in this Agreement to the contrary
notwithstanding, the Company shall not be required to pay a
Commission to Underwriters pursuant to this Section 7(a) or any
other provision, if to do so would cause the Company to violate
federal or state securities laws, regulations or rules or any
other law applicable to the offering.
(b) The Company shall pay the Underwriter at each
Closing a non-accountable expense allowance equal to 1.9% of
the aggregate offering price of the Common Stock and Warrants
subject to the Closing sold by the Underwriter to cover the
cost of marketing, legal, mailing, travel and other similar
expenses. The non-accountable expense allowance may not be
re-allowed to Selected Dealers.
(c) The Company hereby authorizes the Underwriter to
engage other qualified broker-dealers (the "Selected Dealers") to
assist the Underwriter in the placement of the Common Stock and
Warrants; provided that during all times that each such Selected
Dealer shall offer and sell the Common Stock and Warrants, each
such Selected Dealer shall be registered as a broker-dealer under
the Securities Exchange act of 1934 (the "1934 Act"), shall be a
member in good standing of NASD, and shall be authorized to offer
and sell the Common Stock and Warrants under the laws of the
jurisdiction in which the Common Stock and Warrants will be
offered and sold by such Selected Dealer. All Selected Dealers
will be required to execute a Selected Dealer Agreement, the form
of which is subject to the approval of the Company, with the
Company containing substantially the same terms an conditions as
this Agreement, including provisions for indemnification of the
Company to the same extent as your indemnification provided in
Section 8, below.
(d) The Underwriter may allow selected dealers
concessions not in excess of $.385 per share of Common Stock and
$.0105 per Warrant.
(e) The Company has agreed, in connection with the
exercise of the Warrants pursuant to solicitation (commencing one
year from the date of the Prospectus), to pay to the Underwriter
a fee of five percent (5%) of the exercise price for each Warrant
exercised; provided, however, that the Underwriter will not be
entitled to receive such compensation in Warrant exercise
transactions in which (i) the market price of the Common Stock at
the time of exercise is lower than the exercise price of the
Warrants; (ii) the Warrants are held in any discretionary
account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in the Prospectus,
in documents provided to holders of Warrants at the time of
exercise; (iv) the exercise of the Warrants is unsolicited; and
(v) the solicitation of exercise of the Warrants was in violation
of Rule 10b-6 promulgated under the Exchange Act. Holders of
Warrants will be required to designate in writing that they were
solicited in order for the exercise fee to be payable to the
Underwriter.
8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless
each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may
become subject (including, without limitation, in its capacity as
an Underwriter, or, with respect to the Qualified Independent
Underwriter, as a "qualified independent underwriter" within the
meaning of Schedule E of the Bylaws of the NASD), under the Act,
the Exchange Act or otherwise, specifically including, but not
limited to, losses, claims, damages or liabilities (or actions in
respect thereof) arising out of or based upon (i) any breach of
any representation, warranty, agreement or covenant of the
Company herein contained, (ii) any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto,
including any Incorporated Document, or 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, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading, and agrees to reimburse
each Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the
Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information
relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the
preparation thereof and, provided further, that the indemnity
agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement
or alleged untrue statement of material fact or omission or
alleged omission to state therein a material fact purchased
Securities, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person
within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance
by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall
extend upon the same terms and conditions to, and shall inure to
the benefit of, each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act. This
indemnity agreement shall be in addition to any liabilities which
the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold
harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become
subject under the Act or otherwise, specifically including, but
not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of
such Underwriter herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto,
including any Incorporated Document, or 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, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(b) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Underwriter,
directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection
with investigating or defending any such loss, claim, damage,
liability or action. The indemnity agreement in this Section
8(b) shall extend upon the same terms and conditions to, and
shall inure to the benefit of, each officer of the Company who
signed the Registration Statement and each director of the
Company and each person, if any, who controls the Company within
the meaning of the Act or the Exchange Act. This indemnity
agreement shall be in addition to any liabilities which each
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to
be made against any indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case
any such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and,
to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to
such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified
party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party
representing all the indemnified parties under Section 8(a) or
8(b) hereof who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party. In no event shall any indemnifying party
be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the
terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all
liability on all claims that are the subject matter of such
proceeding.
(d) In order to provide for just and equitable
contribution in any action in which a claim for indemnification
is made pursuant to this Section 8 but it is judicially
determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that
this Section 8 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the
Underwriters severally and not jointly are responsible pro rata
for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price,
and the Company is responsible for the remaining portion,
provided, however, that (i) the Underwriter shall not be required
to contribute any amount in excess of the amount by which the
commission and non-accountable expense allowance of the
Underwriter (or, in the case of the Qualified Independent
Underwriter, its compensation) exceeds the amount of damages
which such Underwriter has otherwise required to pay and (ii) no
person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section
8(d) shall extend upon the same terms and conditions to, and
shall inure to the benefit of, each person, if any, who controls
any Underwriter, or the Company within the meaning of the Act or
the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented
by counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this
Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties
to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement
and Prospectus as required by the Act and the Exchange Act.
9. Representations, Warranties, Covenants and Agreements
-----------------------------------------------------
to Survive Delivery. All representations, warranties, covenants
-------------------
and agreements of the Company and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and
contribution agreements contained in Section 8 hereof shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter within the meaning of the Act
or the Exchange Act, or by or on behalf of the Company or any of
their officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the
delivery of the Common Stock or Warrants to the subsidiaries
therefor or termination of this Agreement.
10. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at the
earlier of (i) 6:30 A.M., New York City time, on the first full
business day following the effective date of the Registration
Statement, or (ii) the time of the initial public offering of any
of the Common Stock and Warrants by the Underwriter after the
Registration Statement becomes effective. The time of the
initial public offering shall mean the time of the release by
you, for publication, of the first newspaper advertisement
relating to the Common Stock and Warrants, or the time at which
the Common Stock and Warrants are first generally offered by the
Underwriter to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes
effective, you or the Company, may prevent this Agreement from
becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time
on or prior to the Initial Closing date, (i) if the Company shall
have failed, refused or been unable to perform any agreement on
its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is
not fulfilled, including, without limitation, any change in the
condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in
the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse, or (ii) if additional material
governmental restrictions, not in force and effect on the date
hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American
Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on
either such exchange or in the over the counter market by the
NASD, or if a banking moratorium shall have been declared by
federal or New York authorities, or (iii) if the Company shall
have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as to interfere
materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been
insured, or (iv) if there shall have been a material adverse
change in the general political or economic conditions or
financial markets as in your reasonable judgment makes it
inadvisable or impracticable to proceed with the offering, sale
and delivery of the Securities, or (v) if there shall have been
an outbreak or escalation of hostilities or of any other
insurrection or armed conflict or the declaration by the United
States of a national emergency which, in the reasonable opinion
of the Underwriter, makes it impracticable or inadvisable to
proceed with the public offering of the Securities as
contemplated by the Prospectus. In the event of termination
pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 4(j), 5
and 8 hereof. Any termination pursuant to any of subparagraphs
(ii) through (v) above shall be without liability of any party to
any other party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you
shall promptly notify the Company by telephone, telecopy or
telegram, in each case confirmed by letter. If the Company shall
elect to prevent this Agreement from becoming effective, the
Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
11. Notices. All notices or communications hereunder,
-------
except as herein otherwise specifically provided, shall be in
writing and if sent to you shall be mailed, delivered,
telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o PCM Securities Limited, L.P., 32
Old Slip, 9th Floor, New York, New York, telecopier number (212)
344-4445, Attention: General Counsel; if sent to the Company,
such notice shall be mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to
Medley Credit Acceptance Corp., 10910 N.W. South River Drive,
Miami, Florida 33178, telecopier number (305) 889-1905,
Attention: Robert D. Press, Chief Executive Officer;
12. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Underwriters and the Company and their
respective executors, administrators, successors and assigns.
Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person or entity, other than the
parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right,
remedy or claim in respect of this Agreement or any provisions
herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the
benefit of no other person or entity. No purchaser of any of the
Common Stock or Warrants through the Underwriter shall be
construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company under this Agreement,
you shall act on behalf of each Underwriter if there is more than
one, and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement made or given by you.
13. Applicable Law. This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the State of New
York.
14. Counterparts. This Agreement may be signed in several
------------
counterparts, each of which will constitute an original.
If the foregoing correctly sets forth the understanding
among the Company and the Underwriter, please so indicate in the
space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company and the
Underwriter.
Very truly yours,
MEDLEY CREDIT ACCEPTANCE CORP.
By:
------------------------------------
Robert D. Press, President
Accepted as of the date first above written:
PCM SECURITIES LIMITED, L.P.
On their behalf and on behalf of the Qualified
Independent Underwriter
By:
----------------------------------------
MEDLEY CREDIT ACCEPTANCE CORP.
1,600,000 SHARES OF COMMON STOCK AND
REDEEMABLE WARRANTS TO PURCHASE
1,600,000 SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
June ( ), 1997
Dear Sirs:
(1) We are named in the Prospectus relating to the above
securities (the "Securities") as Underwriter for Medley Credit
Acceptance Corp. (the "Company") with respect to the offering for
sale of the Common Stock and Warrants described in the headnote
to this Agreement (the "Securities") by the Company (of which
200,000 shares of Common Stock are being offered by Medley Group,
Inc.) through us as agent for the Company (and Medley Group,
Inc.). The Securities and the terms under which they are to be
offered for sale by the Company (and Medley Group, Inc.) through
us as Underwriter are as more particularly described in the
Prospectus.
(2) The Securities are to be offered to the public by the
Underwriter at the prices per share and per warrant set forth on
the cover page of the Prospectus in accordance with the terms of
offering set forth in the Prospectus.
(3) As Underwriter we have asked your firm to assist us, on
an agency basis, in connection with the sale of the Securities.
In that regard, you have represented to us that you are engaged
in the securities business and are a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD").
You have agreed to participate on such basis with us in
connection with the placement of the Securities and we have
advised you, and hereby confirm, that you will receive a re-
allowance equal to ( ) percent (_____%) of the ten percent (10%)
selling commission which we will receive for any Securities
placed by your firm. You have agreed to comply with the
provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD.
(4) Should you desire to take responsibility for the
placement of any of the Securities, you should advise us promptly
by telephone or telegraph to our office at 32 Old Slip, 9th
Floor, New York, New York 10005. We reserve the right to reject
subscriptions in whole or in part, to make allotments, and to
close the subscription books at any time without notice. The
Securities allotted to you will be confirmed, subject to the
terms and conditions of this Agreement. The Securities allotted
to you under the terms of this Agreement shall be offered by you
to the public on behalf of the Company in accordance with the
terms of offering thereof set forth herein and in the Prospectus,
subject to the securities or Blue Sky laws of the various states
or other jurisdictions.
You agree to advise us from time-to-time, upon request,
of the number of Securities subscribed through your firm and the
number of Securities remaining unsold at the time of such
request, and, if in our opinion any such Securities shall be
needed for us or another Selected Dealer, we shall so advise you
and shall reallocate the number of Securities which you may sell
pursuant to this Agreement.
Neither you nor any other person is or has been
authorized to give any information or to make any representation
in connection with the sale of the Securities other than as
contained in the Prospectus.
(5) Your services will terminate when we shall have
determined that the public offering of the Securities has been
completed and upon telegraphic notice to you of such termination,
but, if not theretofore terminated, they will terminate at the
close of business on the thirtieth calendar day after the date
hereof; provided, however, that we shall have the right to extend
such provisions for a further period or periods, not exceeding
forty-five calendar days in the aggregate, upon telegraphic
notice to you.
(6) On becoming a Selected Dealer, and in offering and
selling the Securities, you agree to comply with all the
applicable requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "1934 Act"). You confirm that you are familiar with
Rule 15c2-8 under the 1934 Act relating to the distribution of
prospectuses for securities of an issuer (whether or not the
issuer is subject to the reporting requirements of Section 13 or
15(d) of the 1934 Act) and confirm that you have complied and
will comply therewith.
We hereby confirm that we will make available to you
such number of copies of the Prospectus (as amended or
supplemented) as you may reasonably request for the purposes
contemplated by the 1933 Act or the 1934 Act, or the rules and
regulations thereunder.
(7) Upon request, you will be informed as to the states and
other jurisdictions in which we have been advised that the
Securities are qualified for sale under the respective securities
or Blue Sky laws of such states and other jurisdictions, but we
do not assume any obligation or responsibility as to the right of
any Selected Dealer to sell the Securities in any state or other
jurisdiction or as to the eligibility of the Securities for sale
therein.
(8) Nothing will constitute you, as a Selected Dealer, or
any other selected dealer, an association or other separate
entity or partner with us or with each other, but you will be
responsible for your share of any liability or expense based on
any claim to the contrary. We shall not be under any liability
for or in respect of value, validity or form of the Securities,
or the delivery of the certificates of the Common Stock or
Warrants, which are the components of the Securities, or the
performance by anyone of any agreement on its part, or the
qualification of the Securities for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating
to this Agreement, except for lack of good faith and for
obligations expressly assumed by us in this Agreement, and no
obligation on our part shall be implied herefrom. The foregoing
provisions shall not be deemed a waiver of any liability imposed
under the 1933 Act.
(9) Notices to us should be addressed to us at our office
at 32 Old Slip, 9th Floor, New York, New York 10005. Notices to
you shall be deemed to have been duly given if telegraphed or
mailed to you at the address to which this letter is addressed.
(10) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to the choice of law or conflicts of law principles
thereof.
(11) If you desire to participate in the placement of the
Securities in accordance with the terms hereof, please confirm
your agreement by signing and returning to us your confirmation
on the duplicate copy of this letter enclosed herewith.
Very truly yours,
PCM SECURITIES LIMITED, L.P.
By:_____________________________
Authorized Officer
Accepted and Confirmed as of the
Date Above Written
( )
By: _______________________________
Authorized Officer
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDLEY CREDIT ACCEPTANCE CORP.
The undersigned, Robert D. Press and Steven L. Edelson,
certify that they are the President and Secretary, respectively,
of MEDLEY CREDIT ACCEPTANCE CORP., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), and do hereby further certify as follows:
(1) The name of the Corporation is MEDLEY CREDIT
ACCEPTANCE CORP.
(2) The original Certificate of Incorporation of the
Corporation (then known as Premier Lease Concepts, Inc.) was
filed with the Secretary of State of the State of Delaware on May
2, 1990.
(3) This Amended and Restated Certificate of
Incorporation was duly adopted by stockholder written consent in
accordance with Sections 228, 242, and 245 of the General
Corporation Law of the State of Delaware (the "GCL").
(4) The text of the Certificate of Incorporation of
the Corporation as restated hereby is restated to read in its
entirety as follows:
FIRST: Name. The name of the Corporation is MEDLEY
----
CREDIT ACCEPTANCE CORP. (hereinafter the "Corporation").
SECOND: Registered Office. The address of the
-----------------
registered office of the Corporation in the State of Delaware is
1013 Centre Road, City of Wilmington, County of New Castle,
Delaware. This name of its registered agent at that address is
Corporation Service Company.
THIRD: Purpose. The nature of the business or
-------
purposes to be conducted or promoted by the Corporation are to
engage in any lawful act or activity for which corporations may
be organized under the GCL.
FOURTH: Capital Stock. The total number of shares of
-------------
stock which the Corporation shall have authority to issue is
twenty-five million (25,000,000) shares, of which fifteen million
(15,000,000) shares shall be Common Stock of the par value of one
cent ($.01) per share (hereinafter called "Common Stock"), and
ten million (10,000,000) shares shall be Preferred Stock of the
par value of one cent ($.01) per share (hereinafter called
"Preferred Stock").
A. Provisions relating to Preferred Stock. Shares of
--------------------------------------
Preferred Stock may be issued from time to time in series, and
the Board of Directors of the Corporation is hereby authorized,
subject to the limitations provided by law, to establish and
designate one or more series of the Preferred Stock, to fix the
number of shares constituting each series, and to fix the
designations, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof, of each series and the variations and
the relative rights, preferences and limitations as between
series, and to increase and to decrease the number of shares
constituting each series. The authority of the Board of
Directors of the Corporation with respect to each series shall
include, but shall not be limited to, the authority to determine
the following:
(i) The designation of such series.
(ii) The number of shares initially constituting such
series.
(iii) The increase, and the decrease to a number not
less than the number of the outstanding shares of
such series, of the number of shares constituting
such series theretofore fixed.
(iv) The rate or rates, and the conditions upon and the
times at which dividends on the shares of such
series shall be paid, the preference or relation
which such dividends shall bear to the dividends
payable on any other class or classes or on any
other series of stock of the Corporation, and
whether or not such dividends shall be cumulative,
and, if such dividends shall be cumulative, the
date or dates from and after which they shall
accumulate.
(v) Whether or not the shares of such series shall be
redeemable, and, if such shares shall be
redeemable, the terms and conditions of such
redemption, including, but not limited to, the
date or dates upon or after which such shares
shall be redeemable and the amount per share which
shall be payable upon such redemption, which
amount may vary under different conditions and at
different redemption dates.
(vi) The rights to which the holders of the shares of
such series shall be entitled upon the voluntary
or involuntary liquidation, dissolution or winding
up of, or upon any distribution of the assets of,
the Corporation, which rights may be different in
the case of a voluntary liquidation, dissolution
or winding up than in the case of such an
involuntary event.
(vii) Whether or not the shares of such series shall
have voting rights, in addition to the voting
rights provided by law, and, if such shares shall
have such voting rights, the terms and conditions
thereof, including, but not limited to, the right
of the holders of such shares to vote as a
separate class either alone or with the holders of
shares of one or more other series of Preferred
Stock and the right to have more than one vote per
share.
(viii) Whether or not a sinking fund or a purchase fund
shall be provided for the redemption or purchase
of the shares of such series, and, if such a
sinking fund or purchase fund shall be provided,
the terms and conditions thereof.
(ix) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of
any other class or classes or any other series of
the same or any other class or classes of stock of
the Corporation, and, if provision be made for
conversion or exchange, the terms and conditions
of conversion or exchange, including, but not
limited to, any provision for the adjustment of
the conversion or exchange rate or the conversion
or exchange price.
(x) Any other relative rights, preferences and
limitations.
B. Provisions relating to Common Stock.
-----------------------------------
(i) Subject to the preferential dividend rights
applicable to shares of the Preferred Stock, as
determined by the Board of Directors of the
Corporation pursuant to the provisions of Part A
of this Article FOURTH, the holders of shares of
the Common Stock shall be entitled to receive such
dividends as may be declared by the Board of
Directors of the Corporation.
(ii) Subject to the preferential liquidation rights and
except as determined by the Board of Directors of
the Corporation pursuant to the provisions of Part
A of this Article FOURTH, in the event of any
voluntary or involuntary liquidation, dissolution
or winding up of, or any distribution of the
assets of, the Corporation, the holders of shares
of the Common Stock shall be entitled to receive
all of the assets of the Corporation available for
distribution to its stockholders ratably in
proportion to the number of shares of the Common
Stock held by them.
(iii) Except as otherwise determined by the Board of
Directors of the Corporation pursuant to the
provisions of Part A of this Article FOURTH, the
holders of shares of the Common Stock shall be
entitled to vote on all matters at all meetings of
the stockholders of the Corporation, and shall be
entitled to one vote for each share of the Common
Stock entitled to vote at such meeting, voting
together with the holders of the Preferred Stock
who are entitled to vote, and not as a separate
class.
FIFTH: Compromise. Whenever a compromise or
----------
arrangement is proposed between this Corporation and its
creditors or any class of them and/or between this Corporation
and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or
receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section
279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization
of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also
on this Corporation.
SIXTH: Board of Directors and By-Laws. All corporate
------------------------------
powers shall be exercised by the Board of Directors, except as
otherwise provided by statute or by this Certificate of
Incorporation, or any amendment thereof, or by the By-Laws.
Directors need not be elected by written ballot. The By-Laws may
be adopted, amended or repealed by the Board of Directors of the
Corporation, except as otherwise provided by law, but any by-law
made by the Board of Directors is subject to amendment or repeal
by the stockholders of the Corporation.
SEVENTH: Limited Liability. A director of the
-----------------
Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived any improper personal
benefit. If the GCL is hereafter amended to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the GCL, as so amended.
Any repeal or modification of the foregoing paragraph
by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing
at the time of such repeal or modification.
EIGHTH: Indemnification. The Corporation shall
---------------
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or complete action, suit
or proceeding, whether civil, criminal, administrative or
investigative, or by or in the right of the Corporation to
procure judgment in its favor, by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, in
accordance with and to the full extent permitted by statute.
Expenses (including attorneys' fees) incurred in defending any
civil, criminal administrative or investigative action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by
the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the
Corporation as authorized in this section. The indemnification
provided by this section shall not be deemed exclusive of any
other rights to which those seeking indemnification may be
entitled under this Certificate or any agreement or vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
NINTH: Meetings of Stockholders. Meetings of
------------------------
stockholders may be held within or without the State of Delaware,
as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the GCL) outside the
State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-Laws of
the Corporation.
TENTH: Amendment. The Corporation reserves the right
---------
to amend, alter, change, restate or repeal any provision
contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
<PAGE>
IN WITNESS WHEREOF, MEDLEY CREDIT ACCEPTANCE CORP. has
caused its corporate seal to be hereunto affixed and this
Restated Certificate of Incorporation to be signed by Robert D.
Press, its President, and attested by Steven L. Edelson, its
Secretary, on this 29th day of May, 1997.
MEDLEY CREDIT ACCEPTANCE CORP.
By: /s/ Robert D. Press
---------------------------
Robert D. Press
President
ATTEST:
/s/ Steven L. Edelson
----------------------------
Steven L. Edelson
Secretary
CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES
OF THE
SERIES A 10% CONVERTIBLE PREFERRED STOCK
OF
MEDLEY CREDIT ACCEPTANCE CORP.
Medley Credit Acceptance Corp., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that pursuant to the authority
conferred upon the Board of Directors of the Corporation (the "Board of
Directors") by its Restated Certificate of Incorporation (the "Certificate
of Incorporation"), and pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware (the "GCL"), the Board of
Directors, by unanimous written consent dated May 29, 1997, duly approved
and adopted the following resolutions:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of a Series A 10%
Convertible Preferred Stock, par value $.01 per share, with a stated value
of $1.00 per share, consisting initially of 2,958,817 shares, having the
designations, preferences and relative, participating, optional and other
special rights and the qualifications, limitations and restrictions thereof
that are set forth in the Certificate of Incorporation and in this
resolution as follows:
1. Designation and Number of Shares. The designation of such
--------------------------------
preferred stock, par value $.01 per share, authorized by this resolution
shall be Series A 10% Convertible Preferred Stock (the "10% Convertible
Preferred Stock"). The number of shares of the 10% Convertible Preferred
Stock shall be 2,958,817 and no more.
2. Rank. The 10% Convertible Preferred Stock shall, with
----
respect to dividend rights and rights upon liquidation, winding up and
dissolution, rank senior to (i) any other series or classes of preferred
stock hereafter created by the Corporation, and (ii) all other equity
securities of the Corporation, including the common stock, par value $.01
per share, of the Corporation (the "Common Stock") (all of the securities
of the Corporation which rank junior to the 10% Convertible Preferred Stock
are collectively referred to herein as the "Junior Securities").
3. Dividends. (a) The holder of the shares of the 10%
---------
Convertible Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds at the time legally
available for such purpose, regular, quarterly cumulative dividends in cash
at the annual rate of 10% per annum in respect of the Liquidation Value (as
defined below). Such dividends shall be payable in equal quarterly
payments on August 31, November 30, February 28 and May 31 of each year
(each such date being referred to herein as a "Dividend Payment Date").
Such dividends shall be paid to the holder of record at the close of
business on the date specified by the Board of Directors of the Corporation
at the time such dividend is declared; provided, however, that such date
-------- -------
shall not be more than 60 days nor less than 10 days prior to the
respective Dividend Payment Date. Each such quarterly dividend shall be
fully cumulative and shall accrue (whether or not declared), without
interest, from the first day of the quarter in which such dividend may be
payable through the Dividend Payment Date with respect to such quarter as
herein provided. If the Dividend Payment Date is not a business day, the
Dividend Payment Date shall be the next succeeding business day. All
dividends paid with respect to shares of 10% Convertible Preferred Stock
shall be paid pro rata to the holders of such 10% Convertible Preferred
--- ----
Stock.
(b) (i) Holders of shares of the 10% Convertible Preferred
Stock shall be entitled to receive the dividends provided for in Section
3(a) hereof in preference to and in priority over any dividends upon any of
the Junior Securities.
(ii) So long as any shares of the 10% Convertible Preferred
Stock are outstanding, the Corporation shall not declare, pay or set apart
for payment any dividend on any of the Junior Securities or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of,
any of the Junior Securities or any warrants, rights, calls or options
exercisable for any of the Junior Securities, or make any distribution in
respect thereof, either directly or indirectly and whether in cash,
obligations or shares of the Corporation or other property (other than
distributions or dividends in stock to the holders of such stock), and
shall not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any of the Junior
Securities or any warrants, rights, calls or options exercisable for any of
the Junior Securities, unless prior to or concurrently with such
declaration, payment or setting apart for payment, purchase or
distribution, as the case may be, all accrued and unpaid cash dividends on
shares of the 10% Convertible Preferred Stock not paid on the dates
provided for in Section 3(a) hereof shall have been or, concurrently
therewith, shall be paid.
4. Liquidation Preference. (a) In the event of a liquidation,
----------------------
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holder of shares of the 10% Convertible Preferred Stock
shall be entitled to receive out of the assets of the Corporation available
for distribution to its stockholders, an amount equal to $1.00 per share
(the "Liquidation Value"), plus any dividends accrued and unpaid thereon to
the date of liquidation, before any payment shall be made or any assets
distributed to the holders of Common Stock or any class or series of the
Corporation's capital stock ranking junior as to liquidation rights to the
10% Convertible Preferred Stock. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the holders
of outstanding shares of 10% Convertible Preferred Stock, then the holders
of all such shares shall share ratably in such distribution of assets in
proportion with the amount which would be payable on such distribution if
the amounts to which the holders of outstanding shares of 10% Convertible
Preferred Stock are entitled were paid in full.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of the 10% Convertible Preferred Stock shall
have been paid in full the amounts to which they shall be entitled, the
remaining assets of the Corporation may be distributed to the holders of
the Junior Securities. For the purposes of this Section 4, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or any part of the
property or assets of the Corporation nor the merger or consolidation of
the Corporation with one or more corporations nor the reduction of the
capital stock of the Corporation shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary.
5. Redemption.
----------
(a) Mandatory Redemption. Commencing on June 1, 2001 (the
--------------------
"Anniversary Date"), the Corporation shall have the unilateral right to
redeem, in whole or in part, the outstanding shares of 10% Convertible
Preferred Stock at the price of $1.00 per share (together with all accrued
but unpaid dividends thereon to the date fixed for redemption), provided,
--------
that the Average Closing Price (as defined below) per share of the
Corporation's Common Stock for the 20 consecutive Trading Days (as defined
below) immediately preceding the Anniversary Date exceeds the then
Conversion Price (as defined in Section 7(a) below) by not less than 20%.
For purposes of this Certificate of Designations, the term
"Average Closing Price per share of the Corporation's Common Stock on a
Trading Day" shall mean the last reported sale price for the Common Stock
or, in case no such reported sale takes place on such Trading Day, the
average of the closing bid and asked prices for the Common Stock for such
Trading Day, in either case on the principal national securities exchange
on which the Common Stock is then listed or admitted to trading, or if the
Common Stock is not then listed or admitted to trading on any national
securities exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, if no sale is publicly reported,
the average of the closing bid and asked quotations for the Common Stock,
as reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or any comparable system or, if the Common
Stock is not then listed on NASDAQ or a comparable system, the closing sale
price of the Common Stock or, if no sale is publicly reported, the average
of the closing bid and asked prices, as furnished by two members of the
National Association of Securities Dealers, Inc. who make a market in the
Common Stock selected from time to time by the Corporation for that
purpose. A "Trading Day" shall mean, if the Common Stock is then listed on
any national securities exchange, a business day during which such exchange
was open for trading and at least one trade of Common Stock was effected on
such exchange on such business day, or, if the Common Stock is not then
listed on any national securities exchange but is traded in the
over-the-counter market, a business day during which the over-the-counter
market was open for trading and at least one "eligible dealer" quoted both
a bid and asked price for the Common Stock. An "eligible dealer" for any
day shall include any broker-dealer who quoted both a bid and asked price
for such day, but shall not include any broker-dealer who quoted only a bid
or only an asked price for such day. In the event the Common Stock is not
then publicly traded, the Average Closing Price of the Common Stock shall
be determined in good faith by the Board of Directors of the Corporation.
(b) Notice of and Matters Relating to Mandatory Redemption.
------------------------------------------------------
Notice of redemption shall be given not less than 30 days prior to the
redemption date to the holder of record of the 10% Convertible Preferred
Stock, and shall be sufficiently given if the Corporation shall cause a
copy thereof to be mailed to the holder of record at the last address, if
any, appearing on the books of the Corporation or given by such holder to
the Corporation for the purpose of notice, by first class mail, postage
prepaid. If notice of redemption shall have been duly given (or if the
Corporation shall have granted to a bank or trust company irrevocable
written authorization promptly to give or complete such notice), and if on
or before the redemption date all funds necessary for redemption shall have
been set aside or deposited by the Corporation with a bank or trust company
designated in such notice in trust for the benefit of the holders of the
shares of 10% Convertible Preferred Stock, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, the shares of 10% Convertible Preferred Stock
shall be deemed no longer outstanding from and after the close of business
of such redemption date and all rights with respect to the shares of 10%
Convertible Preferred Stock, including the right to receive dividends,
shall forthwith cease and terminate, except only the right of the record
holder of the certificates thereof to receive, upon presentation of the
certificate(s) representing the shares so called for redemption, the
redemption price therefor in accordance with this Section 5. Any shares of
10% Convertible Preferred Stock redeemed by the Company pursuant hereto, or
purchased or otherwise acquired by the Corporation, shall be deemed retired
and shall be canceled and may not thereafter be reissued. In case of the
redemption of only a part of the outstanding shares of 10% Convertible
Preferred Stock, all shares of 10% Convertible Preferred Stock to be
redeemed shall be selected pro rata, and there shall be so redeemed from
--- ----
each registered holder in whole shares, as nearly as practicable to the
nearest share, that proportion of all of the shares to be redeemed which
the number of shares held of record by such holder bears to the total
number of shares of 10% Convertible Preferred Stock at the time
outstanding.
6. Voting Rights; Default by Corporation in Payment of
---------------------------------------------------
Dividends.
---------
(a) Except as specifically provided in Section 6(b) below, the
holders of shares of 10% Convertible Preferred Stock shall not be entitled
to any voting rights except as otherwise required by law.
(b) (i) If and whenever accrued dividends on the 10%
Convertible Preferred stock shall not have been paid or declared (with a
sum sufficient for the payment thereof set aside) for four consecutive
quarters on all shares of 10% Convertible Preferred Stock at the time
outstanding, then, and in such event, the holders of the 10% Convertible
Preferred Stock, voting separately as a class, shall be entitled, at any
annual meeting of the Corporation's stockholders or special meeting held in
place thereof, or at a special meeting of the holders of the 10%
Convertible Preferred Stock called as hereinafter provided, to elect one
(1) director to the Board of Directors of the Corporation. Such right of
the holders of 10% Convertible Preferred Stock to elect a director may be
exercised until all dividends accumulated on the 10% Convertible Preferred
Stock shall have been paid in full, and dividends for the current quarterly
period shall have been declared and set apart for payment, at which time
the right of the holders of the 10% Convertible Preferred Stock to elect a
director shall cease, but subject always to the same provisions for the
vesting of such special voting rights to elect a director in the case of
any such future dividend defaults.
(ii) At any time when such special voting rights shall have
so vested in the holders of the 10% Convertible Preferred Stock, the
Secretary of the Corporation may, and upon the written request of the
holders of record of 10% or more of the number of shares of the 10%
Convertible Preferred Stock then outstanding addressed to him at the
principal office of the Corporation, shall, call a special meeting of the
holders of the 10% Convertible Preferred Stock for the election of a
director to be elected by them as herein provided, to be held in the case
of such written request within forty (40) days after delivery of such
request, and in either case to be held at the place and upon the notice
provided by law and in the by-laws of the Corporation for the holding of
meetings of stockholders; provided, however, that the Secretary shall not
be required to call such a special meeting in the case of any such request
received less than ninety (90) days before the date fixed for the next
ensuing annual meeting of stockholders. No such special meeting and no
adjournment thereof shall be held on a date less than ninety (90) days
before the date fixed for the next ensuing annual meeting of stockholders.
If at any such annual or special meeting or any adjournment thereof the
holders of at least a majority of the 10% Convertible Preferred Stock then
outstanding shall be present or represented by proxy, then by vote of the
holders of at least a majority of the shares of the 10% Convertible
Preferred Stock present or so represented at such meeting, the then
authorized number of directors of the Corporation shall be increased by one
to enable the election of an additional director (the "Additional
Director") and the holders of the 10% Convertible Preferred Stock shall be
entitled to elect the Additional Director so provided for. The Additional
Director so elected shall serve until the next annual meeting of
stockholders or until his successor shall be elected and qualified,
provided, however, that whenever the holders of the 10% Convertible
-------- -------
Preferred Stock shall be divested of the special rights to elect the
Additional Director as above provided, the term of office of the person so
elected as the Additional Director, or elected to fill any vacancy
resulting form the death, resignation or removal of the Additional
Director, shall forthwith terminate and the authorized number of directors
shall be reduced by one.
(iii) If, during any interval between any special
meeting of the holders of the 10% Convertible Preferred Stock for the
election of the Additional Director and the next ensuing annual meeting of
stockholders, or between annual meetings of stockholders for the election
of directors and while the holders of the 10% Convertible Preferred Stock
shall be entitled to elect the Additional Director, the Additional Director
shall, by reason of resignation, death or removal, have departed from the
Board of Directors, the vacancy with respect to such Additional Director
shall be filled by a majority vote of the holders of the 10% Convertible
Preferred Stock, voting separately as a class, at a special meeting of the
holders of the 10% Convertible Preferred Stock called for such purpose or
by the written consent of the holders of the 10% Convertible Preferred
Stock in lieu thereof.
(iv) The Additional Director may not be removed from office
by the vote or written consent of stockholders, unless such vote or written
consent includes that of the holders of a majority of the outstanding
shares of 10% Convertible Preferred Stock.
7. Conversion Rights; Adjustments. (a) Subject to, and in
------------------------------
compliance with, the provisions of this Section 7, all of the issued and
outstanding shares of 10% Convertible Preferred Stock shall, at the option
of the holder of record thereof, be convertible, at any time from and after
the consummation by the Corporation of its Initial Public Offering (as
defined below), in whole or in part, into fully paid and nonassessable
shares of Common Stock (as such shares may be constituted on the Conversion
Date, as defined below). The number of shares of Common Stock issuable
upon conversion shall be determined by dividing the aggregate Liquidation
Value of all shares of 10% Convertible Preferred Stock being converted
(together with the amount of any and all accrued but unpaid dividends with
respect to such shares) by the Conversion Price. As used herein, the
"Conversion Price" shall equal the initial public offering price at which
shares of Common Stock were sold in the Corporation's Initial Public
Offering, less a 15% discount or, in case an adjustment of such Conversion
Price has taken place pursuant to the provisions of Section 7(c) below,
then the Conversion Price shall be as last adjusted and in effect on the
Conversion Date, less a 15% discount. "Initial Public Offering" shall mean
the sale of shares of Common Stock (irrespective of whether any other
securities are sold in conjunction with such Common Stock) pursuant to one
or more effective registration statements under the Securities Act of 1933,
as amended, other than a registration statement relating to Common Stock
issuable upon exercise of employee stock options or in connection with any
employee benefit or similar plan of the Corporation, which sale of shares
of Common Stock results in the receipt by the Corporation of net proceeds
of not less than $3 million.
(b) Before any holder of shares of 10% Convertible Preferred
Stock shall be entitled to convert the shares into Common Stock, the holder
thereof shall deliver the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or the Corporation's transfer
agent, if any, and shall give written notice to the Corporation that such
holder elects to convert all or part of the shares represented by the
certificate or certificates and shall state in writing therein the name or
names in which such holder wishes the certificate or certificates for
Common Stock to be issued. Conversion shall be deemed to have been made
effective on the date when such delivery is made, and such date is referred
to herein as the "Conversion Date". The Corporation will, as soon as
practicable thereafter, issue and deliver to such holder, or to such
holder's nominee or nominees, certificates for the number of full shares of
Common Stock to which such holder shall be entitled as aforesaid, together
with cash in lieu of any fraction of a share as hereinafter provided. If
surrendered certificates for shares of 10% Convertible Preferred Stock are
converted only in part, the Corporation will issue and deliver to such
holder a new certificate or certificates representing the aggregate number
of the unconverted shares of 10% Convertible Preferred Stock.
(c) The Conversion Price shall be subject to adjustment from
time to time as hereinafter provided (such price, or the price as last
adjusted, also being referred to herein as the "Conversion Price"):
If any capital reorganization or reclassification of the capital
stock of the Corporation, any consolidation or merger of the Corporation
with another entity, or the sale of all or substantially all of the
Corporation's assets to another entity 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, then, as a
condition of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provisions shall be made whereby the holders
of shares of the 10% Convertible Preferred Stock shall thereafter have the
right to convert into and receive upon the basis and the terms and
conditions specified in this Certificate of Designations and in lieu of the
shares of Common Stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby had such reorganization, reclassification, consolidation, merger or
sale not taken place and in any such case appropriate provision shall be
made with respect to the rights and interests of the holders of shares of
the 10% Convertible Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustments 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 hereof. The Corporation will not effect any
such consolidation, merger or sale, unless prior to the consummation
thereof, the successor corporation (if other than the Corporation)
resulting from such consolidation or merger or the corporation purchasing
such assets shall assume by written instrument, executed and mailed or
delivered to the holders of shares of the 10% Convertible Preferred Stock
at the last address thereof appearing on the books of the Corporation, the
obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase.
(d) Upon any adjustment of the Conversion Price, then and in
each such case the Corporation shall give written notice thereof, by first
class mail, postage prepaid, addressed to the holders of shares of the 10%
Convertible Preferred Stock at the addresses as shown on the books of the
Corporation. The notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon conversion of the 10% Convertible
Preferred Stock. If more than one certificate representing shares of the
10% Convertible Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
10% Convertible Preferred Stock so surrendered. Instead of any fractional
share of Common Stock that would otherwise be issuable upon conversion of
any shares of 10% Convertible Preferred Stock, the Corporation will pay a
cash adjustment in respect of such fractional interest in an amount equal
to the same fraction of the Closing Price per share of Common Stock on the
business day prior to the Conversion Date as calculated in accordance with
Section 5(a) above.
(f) The Corporation shall reserve at all times out of its
authorized but unissued shares of Common Stock or its shares of Common
Stock held in treasury sufficient shares of Common Stock to permit the
conversion of all outstanding shares of 10% Convertible Preferred Stock.
All shares of Common Stock which may be issued upon conversion of the 10%
Convertible Preferred Stock shall be validly issued, fully paid and non-
assessable.
(g) The issuance of certificates for shares of Common Stock upon
the conversion of shares of 10% Convertible Preferred Stock shall be made
without charge to the holder of shares of 10% Convertible Preferred Stock
converting such shares of 10% Convertible Preferred Stock for any issue or
stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names
as may be directed by, the holder of shares of 10% Convertible Preferred
Stock converted.
(h) Shares of Common Stock held in the treasury of the
Corporation may, in the Corporation's discretion, be delivered upon any
conversion of shares of 10% Convertible Preferred Stock.
(i) All certificates for the shares of 10% Convertible Preferred
Stock and any shares of Common Stock issued upon conversion thereof shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
QUALIFICATION UNDER THE BLUE SKY LAWS OF ANY
JURISDICTION. SUCH SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF,
BENEFICIALLY OR ON THE RECORDS OF THE CORPORATION,
UNLESS THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND
QUALIFIED UNDER APPLICABLE BLUE SKY LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE."
The certificates evidencing such shares shall also bear any legends
required pursuant to any state, local or foreign law governing such
securities.
"RESOLVED FURTHER, that a certificate pursuant to Section 151 of
the GCL shall be made, executed, acknowledged, filed and recorded in
accordance with the provisions of Sections 103 and 151 of the GCL, and the
proper officers of the Corporation are hereby authorized and directed to do
all acts and things which may be necessary or proper in their opinion to
carry into effect the purposes and intent of this and the foregoing
resolution."
IN WITNESS WHEREOF, MEDLEY CREDIT ACCEPTANCE CORP. has caused
this Certificate of Designation, Rights and Preferences to be signed by
Robert D. Press, its President, and attested by Steven L. Edelson, its
Secretary, as of this 29th day of May, 1997.
MEDLEY CREDIT ACCEPTANCE CORP.
BY: /s/Robert D. Press
-----------------------
By: Robert D. Press
Title: President
Attest:
/s/Steven L. Edelson
-------------------------
By: Steven L. Edelson
Title: Secretary
BY-LAWS
OF
MEDLEY CREDIT ACCEPTANCE CORP.
ARTICLE I
Shareholders' Meetings; Voting
------------------------------
Section 1.1. Annual Meetings. An annual meeting of shareholders
---------------
shall be held for the election of directors on the first Monday in May of
each year, if not a legal holiday, and, if a legal holiday, then on the
next day not a legal holiday, at 10:00 o'clock in the forenoon at such time
and place either within or without the State of Delaware as may be
designated by the Board of Directors from time to time. Any other proper
business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of shareholders
----------------
may be called at any time by the Chairman of the Board, the President, the
Board of Directors, or as provided in Section 2.2, to be held at such date,
time and place either within or without the State of Delaware as may be
stated in the notice of the meeting. A special meeting of shareholders
shall be called by the Secretary upon the written request, stating the
purpose of the meeting, of shareholders who together own of record at least
twenty-five percent (25%) of the outstanding shares of stock entitled to
vote at such meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are
------------------
required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Unless otherwise provided by law, the
written notice of any meeting shall be given not less than ten nor more
than sixty days before the date of the meeting to each shareholder entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed
to the shareholder at his address as it appears on the records of the
Corporation. The Corporation shall, at the written request of any
shareholder, cause such notice to such shareholder to be confirmed to such
other address and/or by such other means as such shareholder may reasonably
request, provided that if such written request is received after the date
any such notice is mailed, such request shall be effective for subsequent
notices only.
Section 1.4. Adjournments. Any meeting of shareholders, annual
------------
or special, may adjourn from time to time to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of shareholders, except
------
where otherwise provided by law or the certificate of incorporation or
these by-laws, the holders of a majority of the outstanding shares of each
class of stock entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum. With respect to any
matter on which shareholders vote separately as a class, the holders of a
majority of the outstanding shares of such class shall constitute a quorum
for a meeting with respect to such matter. Two or more classes or series
of stock shall be considered a single class for purposes of determining
existence of a quorum for any matter to be acted on if the holders thereof
are entitled or required to vote together as a single class at the meeting
on such matter. In the absence of a quorum the shareholders so present
may, by majority vote, adjourn the meeting from time to time in the manner
provided by Section 1.4 of these by-laws until a quorum shall attend.
Section 1.6. Organization. Meetings of shareholders shall be
------------
presided over by the Chairman of the Board, or in his absence by the
President, or in his absence by a Vice President, or in the absence of the
foregoing persons by a chairman designated by the Board of Directors, or in
the absence of such designation by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
---------------
certificate of incorporation, each shareholder entitled to vote at any
meeting of shareholders shall be entitled to one vote for each share of
stock held by him which has voting power upon the matter in question. Each
shareholder entitled to vote at a meeting of shareholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long
as, it is coupled with an interest sufficient in law to support an
irrevocable power. A shareholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy
bearing a later date with the Secretary of the Corporation. Voting at
meetings of shareholders need not be by written ballot and need not be
conducted by inspectors unless the holders of a majority of the outstanding
shares of any class of stock entitled to vote thereon present in person or
by proxy at such meeting shall so determine. At all meetings of
shareholders for the election of directors, such election and all other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of
the holders of a majority of the outstanding shares of all classes of stock
entitled to vote thereon present in person or by proxy at the meeting,
voting as a single class.
Section 1.8. Fixing Date for Determination of Shareholders of
------------------------------------------------
Record. In order that the Corporation may determine the shareholders
------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to
any other action. If no record date is fixed: (1) the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding
the day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held;
(2) the record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first
written consent is expressed; and (3) the record date for determining
shareholders for any other purpose shall be at the close of business on the
day on which the Board adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at
a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the
adjourned meeting.
Section 1.9. List of Shareholders Entitled to Vote. The
-------------------------------------
Secretary shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each
shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any shareholder who is present.
Section 1.10. Consent of Shareholders in Lieu of Meeting. To
------------------------------------------
the extent provided by any statute at the time in force, whenever the vote
of shareholders at a meeting thereof is required or permitted to be taken
for or in connection with any corporate action, by any statute, by the
certificate of incorporation or by these by-laws, the meeting and prior
notice thereof and vote of shareholders may be dispensed with if the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted shall
consent in writing to such corporate action without a meeting by less than
unanimous written consent and notice thereof shall be given to those
shareholders who have not consent in writing.
ARTICLE II
Board of Directors
------------------
Section 2.1. Powers; Number; Qualifications. The business and
------------------------------
affairs of the Corporation shall be managed by or under the direction of
the Board of Directors, except as may be otherwise provided by law or in
the certificate of incorporation. The number of Directors which shall
constitute the whole Board of Directors shall not be less than one (1) nor
more than nine (9). Within such limits, the number of directors may be
fixed from time to time by vote of the shareholders or of the Board of
Directors, at any regular or special meeting, subject to the provisions of
the certificate of incorporation.
Section 2.2. Election; Term of Office; Resignation; Removal;
----------------------------------------------
Vacancies; Special Elections. Except as otherwise provided in this Section
----------------------------
2.2, the directors shall be elected annually at the annual meeting of the
shareholders. Each director (whenever elected) shall hold office until the
annual meeting of shareholders or any special meeting of shareholders
called to elect directors next succeeding his election and until his
successor is elected and qualified or until his earlier resignation or
removal, except as provided in the certificate of incorporation. Any
director may resign at any time upon written notice to the Board of
Directors or to the Chairman of the Board or to the President of the
Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. Any director may be
removed with or without cause at any time upon the affirmative vote of the
holders of a majority of the outstanding shares of stock of the Corporation
entitled to vote for the election of such director, given at a special
meeting of such shareholders called for the purpose. If any vacancies
shall occur in the Board of Directors, by reason of death, resignation,
removal or otherwise, or if the authorized number of directors shall be
increased, the directors then in office shall continue to act, and such
vacancies may be filled by a majority of the directors then in office,
though less than a quorum; provided, however, that whenever the holders of
any class or classes of stock or series thereof are entitled to elect one
or more directors by the provisions of the certificate of incorporation,
vacancies and newly created directorships of such class or classes or
series shall be filled by a majority of the directors elected by such class
or classes or series thereof then in office though less than a quorum or by
a sole remaining director so elected. Any such vacancies or newly created
directorships may also be filled upon the affirmative vote of the holders
of a majority of the outstanding shares of stock of the Corporation
entitled to vote for the election of directors, given at a special meeting
of the shareholders called for the purpose.
Section 2.3. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held at such places within or without the State of
Delaware and at such times as the Board may from time to time determine,
and if so determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
----------------
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, by the President or
by any two directors. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise
-----------------------------
restricted by the certificate of incorporation or these by-laws, any member
of the Board of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the case may
be, by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings
--------------------------------
of the Board of Directors the presence of a majority of the total number of
directors shall constitute a quorum for the transaction of business. The
vote of at least a majority of the directors present at any meeting at
which a quorum is present shall be necessary to constitute and shall be the
act of the Board unless the certificate of incorporation or these by-laws
shall otherwise provide. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present may adjourn the
meeting from time to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
------------
shall be presided over by the Chairman of the Board, or in his absence by
the President, or in their absence by a chairman chosen at the meeting.
The Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Action by Directors Without a Meeting. Unless
-------------------------------------
otherwise restricted by the certificate of incorporation or these by-laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if
all members of the Board or such committee, as the case may be, consents
thereto in writing, and the writing or writings are filed with the minutes
of proceedings of the Board or committee.
ARTICLE III
Committees
----------
Section 3.1. Committees. The Board of Directors may, by
----------
resolution passed by a majority of the total number of directors, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. Any such committee, to the extent provided
in the resolution of the Board, and unless otherwise restricted by the
certificate of incorporation or these by-laws, shall have and may exercise
all the powers and authority of the Board in the management of the business
and affairs of the Corporation, to the full extent permitted by law.
Section 3.2. Committee Rules. Unless the Board of Directors
---------------
otherwise provides, each committee designated by the Board may adopt, amend
and repeal rules for the conduct of its business. In the absence of a
provision by the Board or a provision in the rules of such committee to the
contrary, the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of all such
members present at a meeting shall be the act of such committee, and in
other respects each committee shall conduct its business pursuant to
Article II of these by-laws.
ARTICLE IV
Officers
--------
Section 4.1. Officers; Election. As soon as practicable after
------------------
the annual meeting of shareholders in each year, the Board shall elect a
President and a Secretary. The Board may also elect a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the
same person.
Section 4.2. Term of Office; Resignation; Removal; Vacancies.
-----------------------------------------------
Except as otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the first
meeting of the Board after the annual meeting of shareholders next
succeeding his election, and until his successor is elected and qualified
or until his earlier resignation or removal. Any officer may resign at any
time upon written notice to the Board or to the President of the
Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board may remove
any officer with or without cause at any time, provided that such action by
the Board shall require the vote of a majority of the whole Board. Any
such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation, but the election of an officer shall
not of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise shall
or may be filled for the unexpired portion of the term by the Board at any
regular or special meeting in the manner provided in Section 4.1 for
election of officers following the annual meeting of shareholders.
Section 4.3. Chairman of the Board. The Chairman of the Board
---------------------
or, if there is not a Chairman of the Board, the President, shall be the
chief executive officer and shall have general charge and supervision of
the business of the Corporation. In addition, he shall preside at all
meetings of the Board of Directors and of the shareholders at which he
shall be present. He shall have and may exercise such powers and perform
such other duties as are, from time to time, assigned to him by the Board
and as may be provided by law.
Section 4.4. President. The President shall be the chief
---------
operating officer and shall perform all duties incident to such office, and
such other duties as, from time to time, may be assigned to him by the
Board or as may be provided by law.
Section 4.5. Vice Presidents. The Vice President or Vice
---------------
Presidents, at the request of the President or in his absence or during his
inability to act, shall perform the duties of the President, and when so
acting shall have the powers of the President. If there be more than one
Vice President, the Board of Directors may determine which one or more of
the Vice Presidents shall perform any of such duties; or if such
determination is not made by the Board, the President may make such
determination; otherwise any of the Vice Presidents may perform any of such
duties. The Vice President or Vice Presidents shall have such other powers
and perform such other duties as may be assigned to him or them by the
Board or the President or as may be provided by law.
Section 4.6. Secretary. The Secretary shall have the duty to
---------
record the proceedings of the meetings of the shareholders, the Board of
Directors and any committees in a book to be kept for that purpose; he
shall see that all notices are duly given in accordance with the provisions
of these by-laws or as required by law; he shall be custodian of the
records of the Corporation; he may affix the corporate seal to any document
the execution of which, on behalf of the Corporation, is duly authorized,
and when so affixed may attest the same; and, in general, he shall perform
all duties incident to the office of secretary of a corporation, and such
other duties as, from time to time, may be assigned to him by the Board or
the President or as may be provided by law.
Section 4.7. Treasurer. The Treasurer shall have charge of and
---------
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by
or under authority of the Board of Directors; if required by the Board, he
shall give a bond for the faithful discharge of his duties, with such
surety or sureties as the Board may determine; he shall keep or cause to be
kept full and accurate records of all receipts and disbursements in books
of the Corporation and shall render to the President and to the Board,
whenever requested, an account of the financial condition of the
Corporation; and, in general, he shall perform all the duties incident to
the office of treasurer of a corporation, and such other duties as may be
assigned to him by the Board or the President or as may be provided by law.
Section 4.8. Other Officers. The other officers, if any, of the
--------------
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution adopted by the Board of
Directors which is not inconsistent with these by-laws and, to the extent
not so stated, as generally pertain to their respective offices, subject to
the control of the Board. The Board may require any officer, agent or
employee to give security for the faithful performance of his duties.
ARTICLE V
Stock
-----
Section 5.1. Certificates. Every holder of stock in the
------------
Corporation shall be entitled to have a certificate signed by or in the
name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by him in the Corporation. If such
certificate is manually signed by one officer or manually countersigned by
a transfer agent or by a registrar, any other signature on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the
date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
---------------------------------------------
Issuance of New Certificates. The Corporation may issue a new certificate
----------------------------
of stock in the place of any certificate theretofore issued by it, alleged
to have been lost, stolen or destroyed, and the Corporation may require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged
loss, theft or destruction of any such certificate or the issuance of such
new certificate.
ARTICLE VI
Miscellaneous
-------------
Section 6.1. Seal. The Corporation may have a corporate seal
----
which shall have the name of the Corporation inscribed thereon and shall be
in such form as may be approved from time to time by the Board of
Directors. The corporate seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
Section 6.2. Waiver of Notice of Meetings of Shareholders,
---------------------------------------------
Directors and Committees. Whenever notice is required to be given by law
------------------------
or under any provision of the certificate of incorporation or these by-
laws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent
to notice. Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the shareholders, directors, or members
of a committee of directors need be specified in any written waiver of
notice unless so required by the certificate of incorporation or these by-
laws.
Section 6.3. Form of Records. Any records maintained by the
---------------
Corporation in the regular course of its business, including its stock
ledger, books of account and minute books, may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, microphotographs or any
other information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The
Corporation shall so convert any records so kept upon the request of any
person entitled to inspect the same.
Section 6.4. Dividends. Dividends upon the stock of the
---------
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, bonds, in
property, or in shares of stock, subject to the provisions of the
Certificate of Incorporation.
Section 6.5. Reserves. Before the payment of any dividend,
--------
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purposes as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve.
Section 6.6. Checks. All checks or demands for money and notes
------
of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 6.7. Fiscal Year. The fiscal year of the Corporation
-----------
shall be fixed by resolution of the Board of Directors.
Section 6.8. Offices. The registered office of the Corporation
-------
shall be in the City of Wilmington, County of New Castle, State of
Delaware. The Corporation may also have offices at such other places
within or outside the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE VII
Amendments
----------
Section 7.1. Amendments. These by-laws may be altered, amended
----------
or repealed at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment or repeal be contained in
the notice of such special meeting.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 8.1. Indemnification. The Corporation shall indemnify
---------------
to the fullest extent permitted by law any person made or threatened to be
made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or
a person of whom he or she is the legal representative, is or was a
director, officer, employee or agent of the Corporation or any predecessor
of the Corporation, or serves or served any other enterprise as a director,
officer, employee or agent at the request of the Corporation or any
predecessor of the Corporation.
The Corporation shall pay any expenses reasonably incurred by a
director or officer in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Corporation under this
Article or otherwise. The Corporation may, by action of its Board of
Directors, provide for the payment of such expenses incurred by employees
and agents of the Corporation as it deems appropriate.
The rights conferred on any person under this Article shall not
be deemed exclusive of any other rights that such person may have or
hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation, by-law, agreement, vote of shareholders or
disinterested directors or otherwise. All rights to indemnification and to
the advancement of expenses under this Article shall be deemed to be
provided by a contract between the Corporation and the director, officer,
employee or agent who serves in such capacity at any time while these By-
Laws and any other relevant provisions of the Delaware General Corporation
Law and any other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then
existing.
For purposes of this Article, references to "the Corporation"
shall be deemed to include any subsidiary of the Corporation now or
hereafter organized under the laws of the State of Delaware.
COMMON STOCK COMMON STOCK
Number: MED Shares
--- ---
CUSIP 58501J 10 0
Incorporated Under the Laws of Delaware
MEDLEY CREDIT ACCEPTANCE CORP.
This Certifies that is
-------------------------------------
the owner of fully paid and non
------------------------------
-assessable shares of Common Stock, $.01 par value, of MEDLEY
CREDIT ACCEPTANCE CORP. transferable on the books of the
Corporation in person or by attorney duly authorized in writing
upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all the provisions of the
Corporation's Amended and Restated Certificate of Incorporation
and any amendments thereof, copies of which are on file with the
Transfer Agent, to all the provisions of which the holder hereof
by acceptance of this certificate assents.
This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS the facsimile signatures of its duly authorized
officers.
--------------------------- ---------------------------------
President Secretary
Countersigned and Registered: American Stock Transfer & Trust Company
Transfer Agent
By:
---------------------------------------
Authorized Signature
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
The Corporation will furnish to each shareholder who so
requests in writing and without charge a summary of the
designations, preferences, limitations, and relative rights
applicable to each class of the Corporation's stock authorized to
be issued, the variations in preferences, limitations, and rights
determined for each series thereof, and the authority of the
Board of Directors to determine variations for future classes or
series. Such requests may be made to the Secretary of the
Corporation.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM- as tenants UNIF GIFT/TRANS MIN ACT-
in common ----------------------
(Cust)
Custodian
TEN ENT- as tenants -------------------------------
by the (Minor)
entireties
JT TEN- as joint
tenants with
right of
survivorship under Uniform Gifts/Transfers to Minors
and not as Act
tenants in ------------------------------------
common (State)
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED, hereby sell(s)
------------------------------
and transfer(s) unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
PLEASE PRINT OR TYPWRITE NAME AND ADDRESS OF ASSIGNEE
-----------------------------------------------------------------
-----------------------------------------------------------------
Shares
-----------------------------------------------------------
of the capital stock represented by the within Certificate, and
do(es) hereby irrevocably constitute and appoint
Attorney to
---------------------------------------------------
transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, X
----------------- ----------------------------------
X
----------------------------------
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAMES(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE
WHATSOEVER.
SIGNATURE GUARANTEED:
-------------------------------------------
THE SIGNATURES(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION, (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR
DESTROYED, THE CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS
CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
=================================================================
MEDLEY CREDIT ACCEPTANCE CORP.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
WARRANT AGENCY AGREEMENT
Dated as of June . , 1997
=================================================================
<PAGE>
WARRANT AGENCY AGREEMENT, dated this . day of June,
1997 by and between MEDLEY CREDIT ACCEPTANCE CORP., a Delaware
corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST
COMPANY.
WITNESSETH:
WHEREAS, in connection with the offering (the
"Offering") to the public, pursuant to the terms of the
Underwriting Agreement (as defined in Section 1(r) below), of a
minimum of 1,200,000 shares of common stock, $.01 par value per
share (the "Common Stock"), and redeemable warrants to purchase a
minimum of 1,200,000 shares of Common Stock (the "Warrants"), and
a maximum of 1,600,000 shares of Common Stock and Warrants to
purchase 1,600,000 shares of Common Stock, the Company will issue
up to 1,600,000 Warrants (subject to increase as provided
herein);
WHEREAS, the Company desires to provide for the
issuance of certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent (as
defined in Section 1(t) hereof) to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with
the issuance, registration, transfer and exchange of certificates
representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and
the mutual agreements hereinafter set forth and for the purpose
of defining the terms and provisions of the Warrants and the
certificates representing the Warrants and the respective rights
and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the
parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following
terms shall have the following meanings, unless the context shall
otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as
amended.
(b) "Commission" shall mean the Securities and
Exchange Commission.
(c) "Common Stock" shall have the meaning set forth in
Section 8(d) hereof.
(d) "Company" shall have the meaning assigned to such
term in the preamble to this Agreement.
(e) "Corporate Office" shall mean the office of the
Warrant Agent at which at any particular time its principal
business in New York, New York shall be administered, which
office is located on the date hereof at 40 Wall Street, New York,
New York 10005.
(f) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(g) "Exercise Date" shall mean, subject to the
provisions of Section 5(b) hereof, as to any Warrant, the date on
which the Warrant Agent shall have received both (i) the Warrant
Certificate representing such Warrant, with the exercise form
thereon duly executed by the Registered Holder (as defined in
Section l(m) hereof) thereof or his attorney duly authorized in
writing, and (ii) payment in cash or by check made payable to the
Warrant Agent for the account of the Company of an amount in
lawful money of the United States of America equal to the
applicable Purchase Price (as defined in Section l(k) hereof).
(h) "Group" shall mean Medley Group, Inc., a Delaware
corporation.
(i) "Initial Warrant Exercise Date" shall mean . ,
1998.
(j) "Initial Warrant Redemption Date" shall mean . ,
1998.
(k) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(l) "Purchase Price" shall mean, subject to
modification and adjustment as provided in Section 8 hereof,
$5.75 per share of Common Stock.
(m) "Redemption Date" shall mean the date (which may
not occur before the Initial Warrant Redemption Date) fixed for
the redemption of the Warrants in accordance with the terms
hereof.
(n) "Registered Holder" shall mean the person in whose
name any certificate representing the Warrants shall be
registered on the books maintained by the Warrant Agent pursuant
to Section 6(b) hereof.
(o) "Subsidiary" or "Subsidiaries" shall mean any
corporation or corporations, as the case may be, of which stock
having ordinary power to elect a majority of the board of
directors of such corporation or corporations (regardless of
whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power
by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
(p) "Transfer Agent" shall mean American Stock
Transfer & Trust Company of New York, New York or its authorized
successor.
(q) "Underwriter" shall mean PCM Securities Limited,
L.P.
(r) "Underwriting Agreement" shall mean the
underwriting agreement dated June . , 1997 between the Company
and the Underwriter relating to the purchase for resale to the
public of a minimum of 1,200,000 shares of Common Stock
(1,000,000 shares of which are being offered by the Company and
200,000 shares of which are being offered by Group) and 1,200,000
Warrants and a maximum of 1,600,000 shares of Common Stock
(1,400,000 shares of which are being offered by the Company and
200,000 shares of which are being offered by Group) and 1,600,000
Warrants.
(s) "Warrant" shall have the meaning set forth in the
recitals to this Agreement.
(t) "Warrant Agent" shall mean American Stock Transfer
& Trust Company of New York, New York or its authorized
successor.
(u) "Warrant Certificate" shall mean a certificate
representing each of the Warrants substantially in the form
annexed hereto as Exhibit A.
(v) "Warrant Expiration Date" shall mean, unless the
Warrants are redeemed as provided in Section 9 hereof prior to
such date, 5:00 p.m. (New York time) on . , 2002 or, if such date
shall in the State of New York be a holiday or a day on which
banks are authorized to close, then 5:00 p.m. (New York time) on
the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close, subject
to the Company's right, prior to the Warrant Expiration Date,
with the consent of the Underwriter, to extend such Warrant
Expiration Date on five (5) business days prior written notice to
the Registered Holders.
SECTION 2. Warrants and Issuance of Warrant
Certificates.
(a) One Warrant shall initially entitle the Registered
Holder of the Warrant Certificate representing such Warrant to
purchase at the Purchase Price therefor from the Initial Warrant
Exercise Date until the Warrant Expiration Date one (1) share of
Common Stock upon the exercise thereof, subject to modification
and adjustment as provided in Section 8 hereof.
(b) Upon execution of this Agreement, Warrant
Certificates representing a minimum of 1,200,000 Warrants to
purchase up to an aggregate of 1,200,000 shares of Common Stock
and a maximum of 1,600,000 Warrants to purchase up to an
aggregate of 1,600,000 shares of Common Stock (subject to
modification and adjustment as provided in Section 8 hereof),
shall be executed by the Company and delivered to the Warrant
Agent.
(c) From time to time, up to the Warrant Expiration
Date, the Warrant Agent shall countersign and deliver Warrant
Certificates in required denominations of one or whole number
multiples thereof to the person entitled thereto in connection
with any transfer or exchange permitted under this Agreement. No
Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant
Certificates issued upon any transfer or exchange of Warrants,
(iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7
hereof, and (iv) at the option of the Company, Warrant
Certificates in such form as may be approved by its Board of
Directors, to reflect any adjustment or change in the Purchase
Price, the number of shares of Common Stock purchasable upon the
exercise of a Warrant or the redemption price therefor.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in
the form annexed hereto as Exhibit A (the provisions of which are
hereby incorporated herein) and may have such letters, numbers or
other marks of identification or designation and such legends,
summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock
exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of
issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed
Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf
of the Company by its Chief Executive Officer, President or any
Vice President and by its Treasurer or an Assistant Treasurer or
its Secretary or an Assistant Secretary, by manual signatures or
by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates
shall be manually countersigned by the Warrant Agent and shall
not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before
the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery
thereof, such Warrant Certificates, nevertheless, may be
countersigned by the Warrant Agent and issued and delivered with
the same force and effect as though the officer of the Company
who signed such Warrant Certificates had not ceased to hold such
office.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number
multiples thereof may be exercised commencing at any time on or
after the Initial Warrant Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the
conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date,
provided that the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered
Holder thereof or his attorney duly authorized in writing,
together with payment in cash or by check made payable to the
Warrant Agent for the account of the Company of an amount in
lawful money of the United States of America equal to the
applicable Purchase Price, have been received by the Warrant
Agent. The person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the
holder of such securities as of the close of business on the
Exercise Date. As soon as practicable on or after the Exercise
Date and in any event within three (3) business days after such
date, the Warrant Agent, on behalf of the Company, shall cause to
be issued to the person or persons entitled to receive the same a
Common Stock certificate or certificates for the shares of Common
Stock deliverable upon such exercise, and the Warrant Agent shall
deliver the same to the person or persons entitled thereto. Upon
the exercise of any Warrants, the Warrant Agent shall promptly
notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to Section
4(b) hereof, shall cause all payments in cash or by check made
payable to the order of the Company in respect of the Purchase
Price to be deposited promptly in the Company's bank account or
delivered to the Company.
(b) At any time upon the exercise of any Warrants
after the Initial Warrant Exercise Date, the Warrant Agent shall,
on a daily basis, within two business days after such exercise,
notify the Underwriter, its successors or assigns of the exercise
of any such Warrants and shall, on a weekly basis (subject to
collection of funds constituting the tendered Purchase Price, but
in no event later than five business days after the last day of
the calendar week in which such funds were tendered), for
services rendered by the Underwriter to the Registered Holders of
the Warrants then being exercised, remit to the Underwriter an
amount equal to five percent (5%) of the Purchase Price of such
Warrants then being exercised unless the Underwriter shall have
notified the Warrant Agent that the payment of such amount with
respect to such Warrant is violative of the General Rules and
Regulations promulgated under the Exchange Act, or the rules and
regulations of the NASD or applicable state securities or "blue
sky" laws; provided, that, the Warrant Agent shall not be
obligated to pay any amounts pursuant to this Section 4(b) during
any week that such amounts payable are less than $1,000 and the
Warrant Agent's obligation to make such payments shall be
suspended until the amount payable aggregates $1,000, and
provided further, that, in any event, any such payment
(regardless of amount) shall be made not less frequently than
monthly.
(c) The Company shall not be obligated to issue any
fractional share interests or fractional warrant interests upon
the exercise of any Warrant or Warrants, nor shall it be
obligated to issue scrip or pay cash in lieu of fractional
interests. Any fractional interest shall be eliminated by
rounding any fraction up to the next full share or Warrant, as
the case may be, or other securities, properties or rights.
SECTION 5. Reservation of Shares, Listing, Payment of
Taxes, etc.
(a) The Company covenants that it will at all times
reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the exercise of Warrants,
such number of shares of Common Stock as shall then be issuable
upon the exercise of all outstanding Warrants. The Company
covenants that, upon exercise of the Warrants and payment of the
Purchase Price for the shares of Common Stock underlying the
Warrants, all shares of Common Stock which shall be issuable upon
such exercise shall be duly and validly issued, fully paid,
non-assessable, free from all preemptive or similar rights, and
free from all taxes, liens and charges with respect to the
issuance thereof, and that upon issuance such shares shall be
listed or quoted on each securities exchange, if any, on which
the other shares of outstanding Common Stock are then listed or
quoted, or if not then so listed or quoted on each place (whether
the Nasdaq Stock Market, Inc., the NASD OTC Electronic Bulletin
Board, the National Quotation Bureau "pink sheets" or otherwise)
on which the other shares of outstanding Common Stock are listed
or quoted.
(b) The Company covenants that if any securities
reserved for the purpose of exercise of Warrants hereunder
require registration with, or approval of, any governmental
authority under any federal securities law before such securities
may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal
securities laws or a post-effective amendment to a registration
statement, use its best efforts to cause the same to become
effective, keep such registration statement current while any of
the Warrants are outstanding and deliver a prospectus which
complies with Section 10(a)(3) of the Act, to the Registered
Holder exercising the Warrant (except, if in the opinion of
counsel to the Company, such registration is not required under
the federal securities law or if the Company receives a letter
from the staff of the Commission stating that it would not take
any enforcement action if such registration is not effected). The
Company will use its best efforts to obtain appropriate approvals
or registrations under the state "blue sky" securities laws of
all states in which Registered Holders reside. Warrants may not
be exercised by, nor may shares of Common Stock be issued to, any
Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or
similar taxes and other governmental charges that may be imposed
with respect to the issuance of Warrants, or the issuance or
delivery of any shares of Common Stock upon exercise of the
Warrants; provided, however, that if shares of Common Stock are
to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being
exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of
transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized
as the Transfer Agent to requisition from time to time
certificates representing shares of Common Stock or other
securities required upon exercise of the Warrants, and the
Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other
Warrant Certificates representing an equal aggregate number of
Warrants or may be transferred in whole or in part. Warrant
Certificates to be so exchanged shall be surrendered to the
Warrant Agent at its Corporate Office, and the Company shall
execute and the Warrant Agent shall countersign, issue and
deliver in exchange therefor the Warrant Certificate or
Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office,
books in which, subject to such reasonable regulations as it may
prescribe, it shall register Warrant Certificates and the
transfer thereof. Upon due presentment for registration of
transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to
the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented
for registration of transfer, or for exchange or exercise, the
subscription or assignment form, as the case may be, on the
reverse thereof shall be duly endorsed or be accompanied by a
written instrument or instruments of subscription or assignment,
in form satisfactory to the Company and the Warrant Agent, duly
executed by the Registered Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any exchange
or registration of transfer of Warrant Certificates. However, the
Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection
therewith.
(e) All Warrant Certificates surrendered for exercise
or for exchange shall be promptly cancelled by the Warrant Agent.
(f) Prior to due presentment for registration or
transfer thereof, the Company and the Warrant Agent may deem and
treat the Registered Holder of any Warrant Certificate as the
absolute owner thereof of each Warrant represented thereby
(notwithstanding any notations of ownership or writing thereon
made by anyone other than the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the
contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the
Company and the Warrant Agent of evidence satisfactory to them of
the ownership of and the loss, theft, destruction or mutilation
of any Warrant Certificate and (in the case of loss, theft or
destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall countersign and deliver
in lieu thereof a new Warrant Certificate representing an equal
number of Warrants. Applicants for a substitute Warrant
Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant
Agent may prescribe.
SECTION 8. Adjustments to Purchase Price and Number of
Securities.
(a) Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of
Common Stock, the Purchase Price shall forthwith be
proportionately decreased in the case of subdivision or increased
in the case of combination.
(b) Stock Dividends and Distributions. In case the
Company shall pay dividend in, or make a distribution of, shares
of Common Stock or of the Company's capital stock convertible
into Common Stock, the Purchase Price shall forthwith be
proportionately decreased. An adjustment made pursuant to this
Section 8(b) shall be made as of the record date for the subject
stock dividend or distribution.
(c) Adjustment in Number of Securities. Upon each
adjustment of the Purchase Price pursuant to the provisions of
this Section 8, the number of Warrant Securities issuable upon
the exercise at the adjusted Purchase Price of each Warrant shall
be adjusted to the nearest whole number by multiplying a number
equal to the Purchase Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon
exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Purchase Price.
(d) Definition of Common Stock. For the purpose of
this Agreement, the term "Common Stock" shall mean (i) the class
of stock designated as Common Stock in the Amended and Restated
Certificate of Incorporation of the Company as may be amended or
restated as of the date hereof, or (ii) any other class of stock
resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from
par value to no par value, or from no par value to par value. In
the event the Company shall after the date hereof issue Common
Stock with greater or superior voting rights than the shares of
Common Stock outstanding as of the date hereof, each Holder, at
its option, may receive upon exercise of any Warrant either
shares of Common Stock or a like number of such securities with
greater or superior voting rights.
(e) Merger or Consolidation or Sale.
(i) In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger
which does not result in any reclassification or change of the
outstanding Common Stock), the corporation formed by such
consolidation or surviving such merger shall execute and deliver
to the Holder a supplemental warrant agreement providing that the
holder of each Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, the kind and
amount of shares of stock and other securities and property
receivable upon such consolidation, merger, sale or transfer by a
Holder of the number of shares of Common Stock of the Company for
which such Warrant might have been exercised immediately prior to
such consolidation, merger, sale or transfer. Such supplemental
warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The
above provision of this subsection shall similarly apply to
successive consolidations or mergers.
(ii) In the event of (A) the sale by the Company
of all or substantially all of its assets, or (B) the engagement
by the Company or any of its affiliates in a "Rule 13e-3
transaction" as defined in paragraph (a)(3) of Rule 13e-3 of the
General Rules and Regulations under the Exchange Act or (C) a
distribution to the Company's stockholders of any cash, assets,
property, rights, evidences of indebtedness, securities or any
other thing of value, or any combination thereof, the Holders of
the unexercised Warrants shall receive notice of such sale,
transaction or distribution twenty (20) days prior to the date of
such sale or the record date for such transaction or
distribution, as applicable, and, if they exercise such Warrants
prior to the date of such transaction or distribution, they shall
be treated as holders of Common Stock of the Company upon the
consummation of such transaction or distribution.
(f) No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made if the amount
of said adjustment shall be less than ten cents per share of
Common Stock, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least ten cents per share of
Common Stock.
SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date,
the Company may (but only with the prior written consent of the
Underwriter), on thirty (30) days' prior written notice, redeem
all of the Warrants, in whole and not in part, at a redemption
price of fifteen cents ($.15) per Warrant; provided, however,
that before any such call for redemption of Warrants can take
place, the (i) average closing bid quotation for the Common
Stock, as reported by the National Association of Securities
Dealers Automated Quotation System, or (ii) if not so quoted, as
reported by any other recognized quotation system on which the
Common Stock is quoted, shall have for all twenty-five (25)
trading days ending on the third trading day prior to the date on
which the notice contemplated by Sections 9(b) and 9(c) hereof is
given, equalled or exceeded 150% of the $5.50 per share initial
public offering price for shares of Common Stock in the Offering
(subject to adjustment in the event of any stock splits or other
similar events as provided in Section 8 hereof).
(b) In case the Company shall exercise its right to
redeem all of the Warrants, it shall give or cause to be given
notice to the Registered Holders of the Warrants, by mailing to
such Registered Holders a notice of redemption, first class,
postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly
given whether or not the Registered Holder receives such notice.
Not less than five (5) business days prior to the mailing to the
Registered Holders of the Warrants of the notice of redemption,
the Company shall deliver or cause to be delivered to the
Underwriter or its successors or assigns a similar notice
telephonically and confirmed in writing, together with a list of
the Registered Holders (including their respective addresses and
number of Warrants beneficially owned by them) to whom such
notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the
redemption price, (ii) the date fixed for redemption, which shall
in no event be less than thirty (30) days after the date of
mailing of such notice, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price shall be
paid, and (iv) that the Underwriter is the Company's exclusive
warrant solicitation agent and shall receive the commission
contemplated by Section 4(b) hereof and (v) that the right to
exercise the Warrant shall terminate at 5:00 p.m. (New York time)
on the business day fixed for redemption. The date fixed for the
redemption of the Warrants shall be the "Redemption Date" for
purposes of this Agreement. No failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a
holder (A) to whom notice was not mailed or (B) whose notice was
defective. An affidavit of the Warrant Agent or the Secretary or
Assistant Secretary of the Company that notice of redemption has
been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at
5:00 p.m. (New York time) on the Redemption Date. The redemption
price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the Underwriter and
each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or
otherwise, arising from the registration statement or prospectus
referred to in Section 5(b) hereof to the same extent and with
the same effect (including the provisions regarding contribution)
as the provisions pursuant to which the company has agreed to
indemnify the Underwriter contained in Section 7 of the
Underwriting Agreement.
(f) The Company shall as soon as practicable after the
Redemption Date, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which
need not be audited) complying with Section 11(a) of the Act and
covering a period of at least 12 consecutive months beginning
after the Redemption Date.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the Underwriter, and its
duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or value or authorization of
the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of
any Warrant or whether any stock issued upon exercise of any
Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under
any duty or responsibility to any holder of Warrant Certificates
to make or cause to be made any adjustment of the Purchase Price
provided in this Agreement, or to determine whether any fact
exists which may require any such adjustment, or with respect to
the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not
(i) be liable for any recital or statement of fact contained
herein or for any action taken, suffered or omitted by it in
reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be
responsible for any failure on the part of the Company to comply
with any of its covenants and obligations contained in this
Agreement or in any Warrant Certificate, or (iii) be liable for
any act or omission in connection with this Agreement except for
its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with
counsel satisfactory to it (who may be counsel for the Company or
the Underwriter) and shall incur no liability or responsibility
for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request,
direction, order or demand of the Company shall be sufficiently
evidenced by an instrument signed by the Chairman of the Board of
Directors, President or any Vice President (unless other evidence
in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered
or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent
reasonable compensation for its services hereunder and to
reimburse it for its reasonable expenses hereunder; the Company
further agrees to indemnify the Warrant Agent and hold it
harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses and liabilities arising
as a result of the Warrant Agent's gross negligence or willful
misconduct.
(f) The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder
(except liabilities arising as a result of the Warrant Agent's
own gross negligence or willful misconduct), after giving thirty
(30) days' prior written notice to the Company. At least fifteen
(15) days prior to the date such resignation is to become
effective, the Warrant Agent shall cause a copy of such notice of
resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation the
Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of
thirty (30) days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered
Holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its
stockholders, of not less than ten million dollars ($10,000,000)
or a stock transfer company doing business in New York, New York.
After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent
shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the
warrant agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and
shall be legally and validly executed and delivered by the
resigning Warrant Agent. Not later than the effective date of any
such appointment, the Company shall file notice thereof with the
resigning Warrant Agent and shall forthwith cause a copy of such
notice to be mailed to the Registered Holder of each Warrant
Certificate.
(g) Any corporation into which the Warrant Agent or
any new warrant agent may be converted or merged, any corporation
resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent
or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such
corporation is eligible for appointment as successor to the
Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and
affiliates, and any of its or their officers or directors, may
buy and hold or sell Warrants or other securities of the Company
and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other
legal entity.
(i) The Warrant Agent shall retain for a period of two
(2) years from the date of exercise any Warrant Certificate
received by it upon such exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental
agreement make any changes or corrections in this Agreement (a)
that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest
mistake or error herein contained, or (b) that they may deem
necessary or desirable and which shall not adversely affect the
interests of the holders of Warrant Certificates; provided,
however, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in
writing of the Registered Holders holding not less than sixty-six
and two-thirds percent (66-2/3%) of the Warrants then
outstanding; provided, further, that no change in the number or
nature of the securities purchasable upon the exercise of any
Warrant, and no change that increases the Purchase Price of any
Warrant, other than such changes as are specifically set forth in
this Agreement as originally executed, shall be made without the
consent in writing of each Registered Holders affected by such
change. In addition, this Agreement may not be modified, amended
or supplemented without the prior written consent of the
Underwriter or its successors or assigns, other than to cure any
ambiguity or to correct any defective or inconsistent provision
or manifest mistake or error herein contained or to make any such
change that the Warrant Agent and the Company deem necessary or
desirable and which shall not adversely affect the interests of
the Underwriter or its successors or assigns.
SECTION 12. Notices.
All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed
to have been made when delivered or mailed first-class postage
prepaid or delivered to a telegraph office for transmission, if
to the Registered Holder of a Warrant Certificate, at the address
of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company at Medley Credit Acceptance
Corp., 10910 N.W. South River Drive, Miami, Florida 33178,
Attention: President, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if
to the Warrant Agent, at its Corporate Office. Copies of any
notice delivered pursuant to this Agreement shall be delivered to
the Underwriter, PCM Securities Limited, L.P., 32 Old Slip, 9th
Floor, New York, NY 10005, Attention: Chief Executive Officer or
at such other address as may have been furnished to the Company
and the Warrant Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to conflicts of laws rules or principals.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the
benefit of the Company, the Warrant Agent and their respective
successors and assigns and the holders from time to time of
Warrant Certificates or any of them. Except as hereinafter
stated, nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or
claim or to impose upon any other person any duty, liability or
obligation. The Underwriter is, and shall at all times
irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the
rights granted to it hereunder.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts,
which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
MEDLEY CREDIT ACCEPTANCE CORP. AMERICAN STOCK TRANSFER
& TRUST COMPANY
As Warrant Agent
By:___________________________ By:___________________________
Name: Robert D. Press Name:
Title: President Title:
<PAGE>
EXHIBIT A
No. W- VOID AFTER JUNE . , 2002
--------------------------
_________________ WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO PURCHASE SHARES OF COMMON STOCK
MEDLEY CREDIT ACCEPTANCE CORP.
CUSIP 58501J 11 8
THIS CERTIFIES THAT, FOR VALUE RECEIVED _________________________
or registered assigns (the "Registered Holder") is the owner of
the number of Redeemable Warrants (the "Warrants") specified
above. One Warrant initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this
Certificate and the Warrant Agency Agreement (as hereinafter defined),
one fully paid and non-assessable share of common stock, $.01 par
value per share (the "Common Stock"), of Medley Credit Acceptance
Corp., a Delaware corporation (the "Company"), at any time from
June . , 1998 and prior to 5:00 p.m. on the Expiration Date (as
hereinafter defined) upon the presentation and surrender of this
Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, at the corporate office of American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005,
as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $ 5.75 per share, subject to adjustment
(the "Purchase Price"), in lawful money of the United States of
America in cash or by check made payable to the Warrant Agent for
the account of the Company.
This Warrant Certificate, and each Warrant represented
hereby, is issued pursuant to and are subject in all respects to
the terms and conditions set forth in the Warrant Agency Agreement
(the "Warrant Agency Agreement") dated June . , 1997 by and between
the Company and the Warrant Agent.
In the event of certain contingencies provided for in
the Warrant Agency Agreement, the Purchase Price and the number of
shares of Common Stock subject to purchase upon the exercise of
each Warrant represented hereby are subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the
option of the Registered Holder, but no fractional interests will
be issued. In the case of the exercise of less than all of the
Warrants represented hereby, the Company shall cancel this
Warrant Certificate upon the surrender hereof and shall execute
and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New
York time) on June . , 2002. If such date shall in the State of
New York be a holiday or a day on which banks are authorized to
close, then the Expiration Date shall mean 5:00 p.m. (New York
time) on the next day which in the State of New York is not a
holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any
securities pursuant to the exercise of this Warrant unless a
registration statement under the Securities Act of 1933, as
amended (the "Act"), with respect to such securities is effective
or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement
under the Federal securities laws, use its best efforts to cause
the same to become effective, to keep such registration statement
current, if required under the Act, while any of the Warrants are
outstanding, and deliver a prospectus which complies with Section
10(a)(3) of the Act to the Registered Holder exercising this
Warrant. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the
surrender hereof by the Registered Holder at the corporate office
of the Warrant Agent, for a new Warrant Certificate or Warrant
Certificates of like tenor representing an equal aggregate number
of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and
payment of any tax or other charge imposed in connection
therewith or incident thereto, for registration of transfer of
this Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal
aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the
Warrant Agency Agreement.
Prior to the exercise of any Warrant represented
hereby, the Registered Holder shall not be entitled to any rights
of a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant
Agency Agreement.
Subject to the provisions of the Warrant Agency Agreement,
this Warrant may be redeemed at the option of the Company, in
whole and not in part, at a redemption price of $.15 per Warrant,
at any time commencing June . , 1998 provided that (i) the
average closing bid price for the Company's Common Stock, as
reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so quoted, as reported by
any other recognized quotation system on which the price of the
Common Stock is quoted), shall have, for all twenty-five (25)
trading days ending on the third (3rd) trading day prior to the
date on which the Notice of Redemption (as defined below) is
given, equalled or exceeded 150% of the $5.50 per share initial
public offering price for shares of the Company's Common Stock
(subject to adjustment in the event of any stock splits or other
similar events) and (ii) the Company has obtained the prior
written consent of PCM Securities Limited, L.P. Notice of
redemption (the "Notice of Redemption") shall be given not later
than the thirtieth (30th) day before the date fixed for
redemption, all as provided in the Warrant Agency Agreement. On and
after the date fixed for redemption, the Registered Holder shall
have no rights with respect to this Warrant except to receive the
$.15 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer
hereof, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each
Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary,
except as provided in the Warrant Agency Agreement.
This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of New York
without giving effect to conflicts of laws.
This Warrant Certificate is not valid unless
countersigned by the Warrant Agent.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two
of its officers thereunto duly authorized and a facsimile of its
corporate seal to be imprinted hereon.
Dated:_______________, 1997
MEDLEY CREDIT ACCEPTANCE CORP.
{SEAL}
By:_____________________________________
Name: Robert D. Press
Title: President
ATTEST:
By:_____________________________________
Name: Steven L. Edelson
Title: Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:______________________________
Authorized Officer
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably
elects to exercise Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the
exercise of such Warrants, and requests that certificates for
such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
_________________________
_________________________
_________________________
_________________________
(please print or type name and address)
and be delivered to
_________________________
_________________________
_________________________
_________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants
evidenced by this Warrant Certificate, that a new Warrant
Certificate for the balance of such Warrants be registered in the
name of, and delivered to, the Registered Holder at the address
stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was
solicited by PCM Securities Limited,
L.P., please check the following box { }
2. The exercise of this Warrant was
solicited by ____________________ { }
3. If the exercise of this Warrant was
not solicited, please check the following
box { }
Dated:___________________ X__________________________________
___________________________________
Address
___________________________________
Social Security or Taxpayer
Identification Number
___________________________________
Signature Guaranteed
___________________________________
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ______________________________,
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
___________________________________
___________________________________
___________________________________
(please print or type name and address)
_________________________ of the Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and
appoints _______________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full
power of substitution in the premises.
Dated: _______________________ X______________________________
_______________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST
CORRESPOND TO THE NAME(S) AS WRITTEN UPON THE FACE OF THIS
WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN
STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
REID & PRIEST LLP
40 West 57th Street
New York, NY 10019-4097
Telephone 212 603-2000
Fax 212 603-2001
(212) 603-2275
New York, New York
June 10, 1997
Medley Credit Acceptance Corp.
10910 N.W. South River Drive
Miami, Florida 33178
Re: Medley Credit Acceptance Corp.
Registration Statement on Form SB-2;
Registration No. 333-24937
------------------------------------
Gentlemen:
As counsel for Medley Credit Acceptance Corp., a
Delaware corporation (the "Company"), we have been requested to
furnish our opinion as to the matters hereinafter set forth
relating to the proposed offering to the public by the Company
pursuant to the registration statement of the Company on Form SB-2,
Registration No. 333-24937, as amended (collectively, the
"Registration Statement") of a minimum of 1,200,000 shares of
common stock, $.01 par value per share, of the Company (the
"Common Stock") (of which 1,000,000 shares are being offered by
the Company and 200,000 shares are being offered by Medley Group,
Inc., a Delaware corporation and the Company's parent ("Group")
and redeemable warrants to purchase a minimum of 1,200,000 shares
of Common Stock (the "Warrants"), and a maximum of 1,600,000
shares of Common Stock (of which 1,400,000 shares are being
offered by the Company and 200,000 shares are being offered by
Group) and Warrants to purchase 1,600,000 shares of Common Stock,
at an offering price of $5.50 per share of Common Stock and $0.15
per Warrant (the "Offering").
In connection therewith, we have examined, among other
things, the Amended and Restated Certificate of Incorporation and
By-Laws of the Company, the underwriting agreement to be entered
into between the Company and PCM Securities Limited, L.P., the
underwriter of the Offering (the "Underwriter") in the form filed
as Exhibit 1.1 to the Registration Statement (the "Underwriting
Agreement"), and the Warrant Agency Agreement to be entered into
between the Company and American Stock Transfer & Trust Company
in the form filed as Exhibit 4.3 to the Registration Statement
(the "Warrant Agency Agreement"). We have also reviewed the
various proceedings taken by the Company in connection with the
filing of the Registration Statement and the proposed issuance
and sale, pursuant to the Registration Statement, of the Common
Stock and Warrants. In addition, we have examined such other
agreements, documents, certificates and instruments, and made such
further investigations as we have deemed necessary as a basis for
the opinions set further below. In our examinations of all such
agreements, documents, certificates and instruments, we have assumed
the genuineness of all signatures and the authenticity of all
agreements, documents, signatures and instruments submitted to
us as originals and the conformity with the originals of all
agreements, instruments, documents and certificates submitted to
us as copies.
Based upon the foregoing, and having regard for such
legal considerations as we deem relevant, we are of the opinion
that:
1. The Company is a corporation duly incorporated and
existing in good standing under the laws of the State of
Delaware.
2. The shares of Common Stock being issued and sold
to the Underwriter by the Company and Group pursuant to the
Underwriting Agreement have been duly authorized and, when issued
and delivered upon payment therefor in accordance with the terms
and conditions of the Underwriting Agreement, will be validly
issued, fully paid and non-assessable.
3. The shares of Common Stock issuable upon exercise
of the Warrants have been duly authorized and reserved for
issuance and, when issued and delivered upon payment therefor in
accordance with the terms and conditions of the Warrant Agency
Agreement, will be validly issued, fully paid and non-assessable.
4. The Warrants, when issued and delivered in
accordance with the terms and conditions of the Underwriting
Agreement and the Warrant Agency Agreement, will be valid
obligations of the Company.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the references to us
contained therein under the heading "Legal Matters." In giving
the foregoing consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
David R. Hardy, Esq., a partner of this firm, is the beneficial
owner of 34,095 shares of common stock of Group, 40,000 shares of
preferred stock of Group and warrants to purchase up to an
additional 10,000 shares of common stock of Group.
Very truly yours,
/s/ Reid & Priest LLP
REID & PRIEST LLP
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of December, 1996 by and between
ROBERT D. PRESS, an individual residing at 1000 Island Blvd. #2512, Miami,
Florida 33163 (the "Employee"), and MEDLEY REFRIGERATION, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, prior to the execution of this Agreement, the Employee
served as the President of the Company and the Company desires to continue
such employment arrangement (the "Existing Employment Arrangement") with
the Employee effective on the date hereof.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto intending to be legally bound hereby agree
as follows:
1. Employment. Subject to the terms and conditions hereinafter
----------
set forth, the Company hereby agrees to employ the Employee, and the
Employee hereby agrees to serve as President of the Company, effective as
of the date first written above (such date being referred to herein as the
"Effective Date"). The Employee agrees to perform such services customary
to such office as shall from time to time be assigned to him in the sole
reasonable discretion of the Company's Board of Directors. The Employee
further agrees to use his best efforts, energies and skill to promote the
interests of the Company and to devote a minimum of forty (40) hours per
week during normal weekday business hours during the first six (6) months
of the Initial Term (as defined herein) and thereafter, a minimum of thirty
(30) hours per week during normal weekday business hours (or as otherwise
agreed to by the Company's Chief Executive Officer), on a consistent basis,
to the business and affairs of the Company in accordance with the
directions and orders of the Board of Directors of the Company.
2. Term of Employment. The term of employment of the Employee
------------------
pursuant to this Agreement (including any renewal periods hereof, the
"Employment Term") shall commence on the Effective Date and shall terminate
upon the earlier of (a) December 31, 1997 (such period being referred to as
the "Initial Term"), unless this Agreement is automatically renewed as
provided below in this Section 2, or (b) the date on which the employment
of the Employee is terminated pursuant to Section 4 hereof. Commencing on
the thirty-first of December, 1997, and on each subsequent anniversary date
thereafter, the Employment Term hereunder shall be renewed for successive
periods of one (1) year (each such period being referred to herein as a
"Renewal Term"), unless either the Company or the Employee elects not to
renew such term by giving written notice thereof at least sixty (60) days
prior to the Expiration Date (as herein defined). For purposes hereof, the
last day of the Initial Term or of each Renewal Term, if any, shall be
deemed the "Expiration Date".
3. Compensation and Other Related Matters.
--------------------------------------
3.1. Annual Salary. As compensation for the services
rendered by the Employee hereunder, the Company shall pay, or shall cause
to be paid, to the Employee, and the Employee shall accept, compensation at
the rate of Sixty Thousand Dollars ($60,000.00) per annum (the "Annual
Salary"). The Company's obligation to pay the Annual Salary shall not
accrue or be payable until the Company consummates its public offering of
securities. The Annual Salary shall be paid in accordance with the
Company's customary payroll practices which are in effect from time to time
during the Employment Term. The Employee's Annual Salary shall be subject
to all applicable withholding and other taxes. The Company, by action of
the Board of Directors, may, in its sole discretion, increase the Annual
Salary at any time during the Employment Term.
3.2. Other Employment Benefits. During the Employment Term,
-------------------------
the Employee shall be entitled to the following employment benefits:
(a) two (2) weeks of paid vacation in each fiscal year of
the Company while the Employee is employed hereunder and sick leave in
accordance with the Company's policies from time to time in effect for
executive officers of the Company; provided, that vacation and/or sick
leave time not used in any year may not be carried over or transferred from
one year to another or converted to cash;
(b) participation, subject to qualification requirements,
in medical, life or other insurance or hospitalization plans and long-term
disability policies which are presently in effect or hereinafter instituted
by the Company and applicable to its employees generally; and
(c) participation, subject to classification requirements
and continued maintenance thereof by the Company in other employee benefit
plans, such as stock option, pension and profit sharing plans, which are
from time to time applicable to the Company's employees generally.
3.3. Expenses. During the Employment Term, the Employee
--------
shall be entitled to receive prompt reimbursement from the Company of all
travel, entertainment and out-of-pocket expenses which are reasonably and
necessarily incurred by the Employee in the performance of his duties
hereunder; provided, that, the Employee properly accounts therefor in
accordance with the Company's policies as in effect from time to time and
that such expenses are approved by the Company's Board of Directors.
4. Termination.
-----------
4.1. Disability. (a) In the event that at any time during
----------
the Employment Term, the Employee, due to physical or mental injury,
illness, disability or incapacity, including "disability" within the
meaning of the disability plan which the Company then has in effect
entitling the Employee to benefits thereunder, shall fail to perform
satisfactorily and continuously the duties assigned to him and the services
to be performed by him hereunder for a period of three (3) consecutive
months or for a non-consecutive period of five (5) months within any twelve
(12) month period, the Company may terminate his employment for
"Disability" upon not less than thirty (30) days prior written notice (such
notice referred to herein as a "Termination Notice") to the Employee.
(b) During any period (the "Disability Period") that the
Employee, due to physical or mental injury, illness, disability or
incapacity, including "disability" within the meaning of the disability
plan which the Company then has in effect entitling the Employee to
benefits thereunder, fails to perform satisfactorily and continuously the
duties assigned to him and the services to be performed by him hereunder,
the Company shall continue to pay to the Employee (i) the Annual Salary (as
in effect at such time) in accordance with the provisions of Section 3.1
hereof, less any compensation payable to the Employee under the applicable
disability insurance plan of the Company during such Disability Period, and
(ii) the Commission Payment during the remainder of the Commission Period,
if any, payable in accordance with the provisions of Section 3.2 hereof.
Thereafter, if the Employee's employment hereunder is terminated pursuant
to Section 4.1(a) above, the Company shall have no further obligations
hereunder after the Termination Date other than the Commission Payment for
the remainder of the Commission Period, if any, payable to the Employee in
accordance with the provisions of Section 3.2 hereof, and the compensation
payable to the Employee under the applicable disability insurance plan of
the Company.
4.2. Death. The Employee's employment shall terminate
-----
immediately upon the death of the Employee. Upon termination of the
Employee's employment pursuant to this Section 4.2 as a result of the
Employee's death.
4.3. Cause. (a) The Company may, at any time and in its
-----
sole discretion, terminate the Employee's employment for Cause (as herein
defined) by delivery to the Employee of a Termination Notice specifying the
nature of such Cause, effective as of the date (such effective date
referred to herein as a "Termination Date") of such Termination Notice.
For purposes hereof, termination for "Cause" shall mean a termination based
upon (i) a conviction of, a plea of nolo contendere, a guilty plea or
---- ----------
confession by the Employee to an act of fraud, misappropriation or
embezzlement or to a felony; (ii) the commission of a fraudulent act or
practice by the Employee affecting the Company; (iii) the failure by the
Employee to follow the directions of the Board of Directors or the failure
to follow the policies of the Company applicable to employees and/or
executive officers generally; (iv) the engaging by the Employee in conduct
which is materially injurious to the Company, monetarily or otherwise;
(v) the Employee's habitual drunkenness as determined in the reasonable
discretion of the Board of Directors of the Company or use of illegal
substances; or (vi) the material breach by the Employee of this Agreement.
(b) If the Employee's employment is terminated by the
Company for Cause pursuant to Section 4.3(a) above, the Company shall have
no further obligations hereunder after the Termination Date other than the
payment to the Employee of the Annual Salary accrued and unpaid through the
Termination Date. The Company shall not be obligated to provide any of the
benefits set forth in Section 3.3 of this Agreement after the Termination
Date, except as may be required by applicable law.
5. Noncompetition and Nondisclosure. At all times during the
--------------------------------
pendency of this Agreement and for a period of two years following the
termination of this agreement, neither the Employee nor any persons
affiliated with the Employee shall directly or indirectly be engaged in or
employed by or otherwise have an interest in a business which competes
directly or indirectly with the business of the Company. The Employee
agrees to keep confidential all information obtained by him in his capacity
as employee including customer lists, financial data, business plans,
strategies, records and other information.
6. Breach by the Employee. Both parties recognize that the
----------------------
services to be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a breach by
Employee of the material terms and conditions of the obligations to be
performed by him hereunder, the Company shall be entitled, if it so elects,
to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach
of this Agreement, or to enforce the specific performance thereof by the
Employee. Without limiting the generality of the foregoing, the parties
acknowledge that a breach by the Employee of his material obligations under
Section 5 could cause the Company irreparable harm for which no adequate
remedy at law would be available in respect thereof and that therefore upon
proof of the same the Company would be entitled to seek injunctive relief
with respect thereto.
7. Insurance. The Employee acknowledges and agrees that the
---------
Company may obtain a life insurance policy on the life of the Employee with
the Company named as the beneficiary. If the Company so elects, the
Employee covenants and agrees to cooperate fully with the Company's efforts
to obtain such insurance policy.
8. Conflicting Agreements. The Employee hereby represents and
----------------------
warrants to the Company that (a) neither the execution of this Agreement by
the Employee nor the performance by the Employee of any of his obligations
or duties hereunder will conflict with or violate or constitute a breach of
the terms of any employment or other agreement to which the Employee is a
party or by which the Employee is bound, and (b) the Employee is not
required to obtain the consent of any person, firm, corporation or other
entity in order to enter into this Agreement or to perform any of his
obligations or duties hereunder.
9. Further Assurances. The Employee hereby agrees to execute
------------------
and deliver such agreements, certificates or other documents as may be
reasonably requested by the Company which may be necessary or are required
hereunder, including, the execution and delivery on the Closing Date of the
Purchase Agreement.
10. Miscellaneous.
-------------
10.1. Successors; Binding Agreement. This Agreement and
-----------------------------
all rights of the Employee hereunder shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives,
successors and assigns; provided, that the duties of the Employee hereunder
are personal to the Employee and may not be delegated or assigned by him.
10.2. Governing Law. This Agreement shall be governed
-------------
by and in accordance with the laws of the State of Florida without regard
to conflict of law rules thereof.
10.3. Waivers. The waiver of either party hereto of any
-------
right hereunder or of any failure to perform or breach by the other party
hereto shall not be deemed a waiver of any other right hereunder or of any
other failure or breach by the other party hereto, whether of the same or a
similar nature or otherwise. No waiver shall be deemed to have occurred
unless set forth in a writing executed by or on behalf of the waiving
party. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to
the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
10.4. Validity. The invalidity or unenforceability of
--------
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
otherwise remain in full force and effect. Moreover, if any one or more of
the provisions contained in this Agreement is held to be excessively broad
as to duration or scope, such provisions shall be construed by limiting and
reducing them so as to be enforceable to the maximum extent compatible with
applicable law.
10.5. Entire Agreement. This Agreement sets forth the
----------------
entire agreement and understanding of the parties in respect of the subject
matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties,
whether oral or written, by any officer, employee or representative of
either party in respect of said subject matter.
10.6 Headings Descriptive. The headings of the several
--------------------
paragraphs of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
10.7 Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
EMPLOYEE:
/s/Robert D. Press
----------------------------------------
Robert D. Press
MEDLEY REFRIGERATION, INC.
By: /s/Steven L. Edelson
-----------------------------------
Name: Steven L. Edelson
Title: Chairman
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of December, 1996 by
and between STEVEN L. EDELSON, an individual residing at 8706
Colonial Road, Brooklyn, NY (the "Employee"), and MEDLEY
REFRIGERATION, INC., a Delaware corporation (the "Company").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, prior to the execution of this Agreement, the
Employee served as the Chairman of the Board of the Company and
the Company desires to continue such employment arrangement (the
"Existing Employment Arrangement") with the Employee effective on
the date hereof.
NOW, THEREFORE, in consideration of the foregoing and
of the respective covenants and agreements herein contained, and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
intending to be legally bound hereby agree as follows:
1. Employment. Subject to the terms and conditions
----------
hereinafter set forth, the Company hereby agrees to employ the
Employee, and the Employee hereby agrees to serve as Chairman of
the Board of the Company, effective as of the date first written
above (such date being referred to herein as the "Effective
Date"). The Employee agrees to perform such services customary
to such office as shall from time to time be assigned to him in
the sole reasonable discretion of the Company's Board of
Directors. The Employee further agrees to use his best efforts,
energies and skill to promote the interests of the Company and to
devote a minimum of forty (40) hours per week during normal
weekday business hours during the first six (6) months of the
Initial Term (as defined herein) and thereafter, a minimum of
thirty (30) hours per week during normal weekday business hours
(or as otherwise agreed to by the Company's Chief Executive
Officer), on a consistent basis, to the business and affairs of
the Company in accordance with the directions and orders of the
Board of Directors of the Company.
2. Term of Employment. The term of employment of the
------------------
Employee pursuant to this Agreement (including any renewal
periods hereof, the "Employment Term") shall commence on the
Effective Date and shall terminate upon the earlier of (a)
December 31, 1997 (such period being referred to as the "Initial
Term"), unless this Agreement is automatically renewed as
provided below in this Section 2, or (b) the date on which the
employment of the Employee is terminated pursuant to Section 4
hereof. Commencing on the thirty-first of December, 1997, and on
each subsequent anniversary date thereafter, the Employment Term
hereunder shall be renewed for successive periods of one (1) year
(each such period being referred to herein as a "Renewal Term"),
unless either the Company or the Employee elects not to renew
such term by giving written notice thereof at least sixty (60)
days prior to the Expiration Date (as herein defined). For
purposes hereof, the last day of the Initial Term or of each
Renewal Term, if any, shall be deemed the "Expiration Date".
3. Compensation and Other Related Matters.
--------------------------------------
3.1. Annual Salary. As compensation for the
services rendered by the Employee hereunder, the Company shall
pay, or shall cause to be paid, to the Employee, and the
Employee shall accept, compensation at the rate of Thirty
Thousand Dollars ($30,000.00) per annum (the "Annual Salary").
The Company's obligation to pay the Annual Salary shall not
accrue or be payable until the Company consummates its initial
public offering of securities. The Annual Salary shall be paid
in accordance with the Company's customary payroll practices
which are in effect from time to time during the Employment Term.
The Employee's Annual Salary shall be subject to all applicable
withholding and other taxes. The Company, by action of the Board
of Directors, may, in its sole discretion, increase the Annual
Salary at any time during the Employment Term.
3.2. Other Employment Benefits. During the
-------------------------
Employment Term, the Employee shall be entitled to the following
employment benefits:
(a) two (2) weeks of paid vacation in each fiscal
year of the Company while the Employee is employed hereunder and
sick leave in accordance with the Company's policies from time to
time in effect for executive officers of the Company; provided,
that vacation and/or sick leave time not used in any year may not
be carried over or transferred from one year to another or
converted to cash;
(b) participation, subject to qualification
requirements, in medical, life or other insurance or
hospitalization plans and long-term disability policies which are
presently in effect or hereinafter instituted by the Company and
applicable to its employees generally; and
(c) participation, subject to classification
requirements and continued maintenance thereof by the Company in
other employee benefit plans, such as stock option, pension and
profit sharing plans, which are from time to time applicable to
the Company's employees generally.
3.3. Expenses. During the Employment Term, the
--------
Employee shall be entitled to receive prompt reimbursement from
the Company of all travel, entertainment and out-of-pocket
expenses which are reasonably and necessarily incurred by the
Employee in the performance of his duties hereunder; provided,
that, the Employee properly accounts therefor in accordance with
the Company's policies as in effect from time to time and that
such expenses are approved by the Company's Board of Directors.
4. Termination.
-----------
4.1. Disability. (a) In the event that at any
----------
time during the Employment Term, the Employee, due to physical or
mental injury, illness, disability or incapacity, including
"disability" within the meaning of the disability plan which the
Company then has in effect entitling the Employee to benefits
thereunder, shall fail to perform satisfactorily and continuously
the duties assigned to him and the services to be performed by
him hereunder for a period of three (3) consecutive months or for
a non-consecutive period of five (5) months within any twelve (12)
month period, the Company may terminate his employment for
"Disability" upon not less than thirty (30) days prior written
notice (such notice referred to herein as a "Termination Notice")
to the Employee.
(b) During any period (the "Disability Period")
that the Employee, due to physical or mental injury, illness,
disability or incapacity, including "disability" within the
meaning of the disability plan which the Company then has in
effect entitling the Employee to benefits thereunder, fails to
perform satisfactorily and continuously the duties assigned to
him and the services to be performed by him hereunder, the
Company shall continue to pay to the Employee (i) the Annual
Salary (as in effect at such time) in accordance with the
provisions of Section 3.1 hereof, less any compensation payable
to the Employee under the applicable disability insurance plan of
the Company during such Disability Period, and (ii) the
Commission Payment during the remainder of the Commission Period,
if any, payable in accordance with the provisions of Section 3.2
hereof. Thereafter, if the Employee's employment hereunder is
terminated pursuant to Section 4.1(a) above, the Company shall
have no further obligations hereunder after the Termination Date
other than the Commission Payment for the remainder of the
Commission Period, if any, payable to the Employee in accordance
with the provisions of Section 3.2 hereof, and the compensation
payable to the Employee under the applicable disability insurance
plan of the Company.
4.2. Death. The Employee's employment shall
-----
terminate immediately upon the death of the Employee. Upon
termination of the Employee's employment pursuant to this Section
4.2 as a result of the Employee's death.
4.3. Cause. (a) The Company may, at any time
-----
and in its sole discretion, terminate the Employee's employment
for Cause (as herein defined) by delivery to the Employee of a
Termination Notice specifying the nature of such Cause, effective
as of the date (such effective date referred to herein as a
"Termination Date") of such Termination Notice. For purposes
hereof, termination for "Cause" shall mean a termination based
upon (i) a conviction of, a plea of nolo contendere, a guilty
---- ----------
plea or confession by the Employee to an act of fraud,
misappropriation or embezzlement or to a felony; (ii) the
commission of a fraudulent act or practice by the Employee
affecting the Company; (iii) the failure by the Employee to
follow the directions of the Board of Directors or the failure to
follow the policies of the Company applicable to employees and/or
executive officers generally; (iv) the engaging by the Employee
in conduct which is materially injurious to the Company,
monetarily or otherwise; (v) the Employee's habitual drunkenness
as determined in the reasonable discretion of the Board of
Directors of the Company or use of illegal substances; or (vi)
the material breach by the Employee of this Agreement.
(b) If the Employee's employment is terminated by
the Company for Cause pursuant to Section 4.3(a) above, the
Company shall have no further obligations hereunder after the
Termination Date other than the payment to the Employee of the
Annual Salary accrued and unpaid through the Termination Date.
The Company shall not be obligated to provide any of the benefits
set forth in Section 3.3 of this Agreement after the Termination
Date, except as may be required by applicable law.
5. Noncompetition and Nondisclosure. At all times
--------------------------------
during the pendency of this Agreement and for a period of two
years following the termination of this agreement, neither the
Employee nor any persons affiliated with the Employee shall
directly or indirectly be engaged in or employed by or otherwise
have an interest in a business which competes directly or
indirectly with the business of the Company. The Employee agrees
to keep confidential all information obtained by him in his
capacity as employee including customer lists, financial data,
business plans, strategies, records and other information.
6. Breach by the Employee. Both parties recognize
----------------------
that the services to be rendered under this Agreement by the
Employee are special, unique and extraordinary in character, and
that in the event of a breach by Employee of the material terms
and conditions of the obligations to be performed by him
hereunder, the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for
any breach of this Agreement, or to enforce the specific
performance thereof by the Employee. Without limiting the
generality of the foregoing, the parties acknowledge that a
breach by the Employee of his material obligations under Section
5 could cause the Company irreparable harm for which no adequate
remedy at law would be available in respect thereof and that
therefore upon proof of the same the Company would be entitled to
seek injunctive relief with respect thereto.
7. Insurance. The Employee acknowledges and agrees
---------
that the Company may obtain a life insurance policy on the life
of the Employee with the Company named as the beneficiary. If
the Company so elects, the Employee covenants and agrees to
cooperate fully with the Company's efforts to obtain such
insurance policy.
8. Conflicting Agreements. The Employee hereby
----------------------
represents and warrants to the Company that (a) neither the
execution of this Agreement by the Employee nor the performance
by the Employee of any of his obligations or duties hereunder
will conflict with or violate or constitute a breach of the terms
of any employment or other agreement to which the Employee is a
party or by which the Employee is bound, and (b) the Employee is
not required to obtain the consent of any person, firm,
corporation or other entity in order to enter into this Agreement
or to perform any of his obligations or duties hereunder.
9. Further Assurances. The Employee hereby agrees to
------------------
execute and deliver such agreements, certificates or other
documents as may be reasonably requested by the Company which may
be necessary or are required hereunder, including, the execution
and delivery on the Closing Date of the Purchase Agreement.
10. Miscellaneous.
-------------
10.1. Successors; Binding Agreement. This
-----------------------------
Agreement and all rights of the Employee hereunder shall inure to
the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns; provided, that
the duties of the Employee hereunder are personal to the Employee
and may not be delegated or assigned by him.
10.2. Governing Law. This Agreement shall be
-------------
governed by and in accordance with the laws of the State of
Florida without regard to conflict of law rules thereof.
10.3. Waivers. The waiver of either party
-------
hereto of any right hereunder or of any failure to perform or
breach by the other party hereto shall not be deemed a waiver of
any other right hereunder or of any other failure or breach by
the other party hereto, whether of the same or a similar nature
or otherwise. No waiver shall be deemed to have occurred unless
set forth in a writing executed by or on behalf of the waiving
party. No such written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future or as to any act other than that specifically waived.
10.4. Validity. The invalidity or
--------
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall otherwise remain in full force and
effect. Moreover, if any one or more of the provisions contained
in this Agreement is held to be excessively broad as to duration
or scope, such provisions shall be construed by limiting and
reducing them so as to be enforceable to the maximum extent
compatible with applicable law.
10.5. Entire Agreement. This Agreement sets
----------------
forth the entire agreement and understanding of the parties in
respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or
written, by any officer, employee or representative of either
party in respect of said subject matter.
10.6 Headings Descriptive. The headings of
--------------------
the several paragraphs of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
10.7 Counterparts. This Agreement may be
------------
executed in one or more counterparts, each of which shall be deemed
to be an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EMPLOYEE:
/s/Steven L. Edelson
-----------------------------------
Steven L. Edelson
MEDLEY REFRIGERATION, INC.
By: /s/Robert D. Press
------------------------------
Name:
Title:
MANAGEMENT AGREEMENT
--------------------
MANAGEMENT AGREEMENT, dated as of October 31, 1996, by and
between Performance Capital Management, Inc., a New York corporation
("MANAGER"), and Medley Credit Acceptance Corp., a Delaware corporation
(the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires that Manager designate up to four
(4) representatives with financial and/or management expertise to serve on
the Board of Directors of the Company, and Manager desires to designate
such representatives to serve on the Board of Directors of the Company, on
the terms and conditions contained herein, and that such representatives
render counsel, guidance and managerial assistance to the Company while
serving on the Company's Board of Directors (the "Director Services"); and
-----------------
WHEREAS, the Company further desires that Manager provide the
Company with services of Mr. Robert Press ("Press") to act as president and
chief executive officer of the Company (the "Executive Services").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, hereto,
intending to be legally bound hereby, agree as follows:
1. EFFECTIVE DATE. This Agreement shall be effective as of
--------------
the date first above written (the "Effective Date").
--------------
2. SERVICES. Manager hereby agrees to provide Director
--------
Services to the Company as follows: Manager shall cause up to four (4) of
its employees, directors or designees (the "Manager Directors") with
-----------------
financial and/or management expertise to serve on the Company's Board of
Directors. The Manager Directors shall provide guidance, counsel and
managerial assistance to the Company in providing such Director Services
and shall devote such time and attention as is reasonably necessary to
provide the Director Services. Manager will also provide the Executive
Services to the Company from time to time as requested by the Company. The
Executive Services may be rendered both through the Manager Directors and
by Press.
3. COMPENSATION. (a) Subject to Section 4 below, as full
------------
payment for the Director Services and Executive Services to be rendered by
the Manager Directors and Press to the Company hereunder, the Company shall
pay to Manager an annual fee (the "Manager Fee") equal to $15,000 for
-----------
fiscal 1996, increasing to $90,000 for each subsequent annual period, such
increase to become effective upon the consummation of the Company's initial
public offering of securities. Except as otherwise provided in Section
3(c) below, the Manager Fee shall be payable in equal quarterly
installments during each year of this Agreement, in advance, on the first
day of each quarterly period.
(b) Concurrent with, and as a condition to, the closing of any
Business Combination or Asset Sale, the Company shall pay to Manager, in a
lump sum payment, an amount equal to the aggregate Manager Fee which would
otherwise be payable by the Company through the completion of the then-
remaining Initial Term or Renewal Term, as the case may be. It shall be a
condition of the Company's making such payment that this Agreement shall
automatically terminate and be of no further force and effect upon the
making of such payment.
4. TERM. Subject to the final sentence of Section 3(b) hereof,
----
the term of this Agreement shall commence on the first date first written
above and shall terminate upon the earlier of (a) December 31, 1996 (such
period being referred to herein as the "Initial Term"), unless this
------------
Agreement is automatically renewed as provided below in this Section 4, or
(b) the date on which this Agreement is terminated for cause as provided in
Section 6 below. Notwithstanding the foregoing, commencing on December 1,
1996, and on the 1st day of each December thereafter, the term of this
Agreement will automatically be extended annually for an additional yearly
period (each such period being referred to herein as a "Renewal Term") if
------------
written notice of termination of this Agreement has not been given by
Manager or the Company to the other. Each Renewal Term shall be deemed to
commence immediately after the then-existing last day of the term hereof.
In consideration for its Director Services and Management Services with
respect to the Renewal Terms, the Company shall pay to Manager the amount
previously agreed upon for each year or such other amount as the parties
shall agree.
5. RIGHT TO ENGAGE IN OTHER ACTIVITIES. The Director Services
-----------------------------------
provided herein are not to be deemed exclusive. Nothing contained herein
shall restrict Manager or any of its shareholders, directors, officers,
employees or agents from engaging in any other business or devoting time
and attention to the management, investment, involvement or other aspects
of any other business, including becoming an officer or director thereof,
or rendering services of any kind to any other corporation, firm,
individual or association.
6. TERMINATION FOR CAUSE. This Agreement may be terminated for
---------------------
cause by the party whose conduct is not the cause for such termination if
(a) either party commits an act of criminal misconduct or gross malfeasance
in any material respect of its obligations as set forth herein, or
(b) either party files a voluntary petition in bankruptcy or is adjudicated
as bankrupt or insolvent, or such party files a petition under any chapter
of the United States Bankruptcy Code or any other present or future
applicable Federal, state or other statute or law regarding bankruptcy,
insolvency or other relief for debtors, or any party seeks, or consents to,
or acquiesces in the appointment of, any trustee, receiver, conservator or
liquidator of itself or of all or any substantial portion of its property.
7. ASSIGNMENT. Neither Manager nor the Company may assign this
----------
Agreement or any of their respective rights or obligations hereunder,
except that either of them may assign or transfer this Agreement to any
other person who or which acquires all or substantially all of their
respective property, business and assets, provided that, in the case of
--------
Manager, the successor to its business employs substantially the same
personnel to provide Director Services hereunder.
8. SEVERABILITY. The invalidity or unenforceability of any
------------
provision of this Agreement shall not in any manner or way affect any other
provision hereof, and this Agreement shall be construed, if possible, as if
amended to conform to legal requirements, failing which it shall be
construed as if any such offending provision were omitted.
9. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of New
York, without giving effect to the conflicts of law principles thereof.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
understanding of the parties hereto with respect to the subject matter
hereof.
11. BINDING NATURE. Subject to the restrictions on
--------------
assignability contained herein, each and all of the covenants, terms,
conditions, provisions and agreements herein contained shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors, heirs and permitted assigns.
12. AMENDMENT, ETC. The provisions of this Agreement may not be
--------------
amended, waived, modified or changed except by an instrument in writing
signed by all of the parties hereto. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or subsequent
breach or condition, whether of like or different nature.
13. COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their representatives thereunto duly authorized on the
date first above written.
PERFORMANCE CAPITAL MANAGEMENT, INC.
a New York corporation
By: /s/ Steven L. Edelson
--------------------------------
Name: Steven L. Edelson
Title:
MEDLEY CREDIT ACCEPTANCE CORP.
By: /s/ Robert D. Press
-------------------------------
Name: Robert D. Press
Title: President
AGREEMENT
THIS AGREEMENT is made and entered into by and between
MEDLEY CREDIT ACCEPTANCE CORP., a Delaware corporation,
(hereinafter referred to as "Company"), and MEDLEY GROUP, INC., a
Delaware corporation (herein referred to as "Group").
(Throughout this agreement, Company and Group may be referred to
collectively as parties for convenience).
W I T N E S S E T H
WHEREAS, Company has filed a registration statement with the
Securities and Exchange Commission to conduct a public offering
in connection with the sale of the Company's common stock and
warrants to purchase common stock ("Public Offering"), and
WHEREAS, the Public Offering will register in addition to
the Common Stock of the Company, two hundred thousand shares
(200,000) of the Common Stock owned by Group; and
WHEREAS, Medley Refrigeration, Inc., a majority owned
subsidiary of Group is indebted to Company; and
WHEREAS, it is in the best interest of Company and Group
that the proceeds derived from the sale in the Public Offering of
Group's common stock in the Company be utilized to satisfy the
debt owed by Medley Refrigeration, Inc. to Company; and
WHEREAS, the parties desire to memorialize their agreement
into a written instrument.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
1. The above and foregoing recitals are true and correct
and are incorporated herein.
2. Provided the sale of common stock and warrants in the
Company's Public Offering meets the Minimum Offering requirements
described in the Company's Prospectus for use in connection with
the Public Offering, Group hereby authorizes and directs that the
proceeds from the sale of Group's 200,000 shares of common stock
in the Public Offering ($990,000.00) be paid directly by
SunTrust/South Florida National Association, the escrow agent for
the Public Offering, to the Company to satisfy all debt then due
the Company by Medley Refrigeration, Inc.
3. Group acknowledges that its obligations hereunder have
an immeasurable value to the Company. Group further acknowledges
that any breach or threatened breach by it of any of the
provisions hereof will result in irreparable and continuing harm
to the Company for which the Company would have no adequate
remedy at law. Therefore, in addition to any other remedy which
the Company may have at law or in equity, the Company shall be
entitled to specific performance, injunctive relief or other
equitable remedies in the event of any such breach or threatened
breach.
IN WITNESS WHEREOF the parties have hereunto set their hands
and seals.
Dated this 23rd day of May, 1997.
MEDLEY CREDIT ACCEPTANCE CORP.
BY: /s/ Robert D. Press
--------------------------------
ROBERT D. PRESS, PRESIDENT
MEDLEY GROUP, INC.
BY: /s/ Robert D. Press
--------------------------------
ROBERT D. PRESS, PRESIDENT
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT is made and entered into this ___ day
of June, 1997, by and between MEDLEY CREDIT ACCEPTANCE CORP., a
Delaware corporation having its principal office at 10910 N.W.
South River Drive, Miami, Florida 33187, (hereinafter referred to
as "Company"), MEDLEY GROUP, INC., a Delaware Corporation
(hereinafter referred to as "Group"), PCM SECURITIES LIMITED,
L.P., (hereinafter referred to as the "Underwriter"), and
SUNTRUST/SOUTH FLORIDA, NATIONAL ASSOCIATION, with its office
located at 501 East Los Olas Boulevard, Ft. Lauderdale, Florida
33301 (hereinafter referred to as "Escrow Agent").
WITNESSETH
WHEREAS, the Company has filed a registration statement with
the Securities and Exchange Commission for a public offering (the
"Public Offering") of a minimum of One Million Two Hundred
Thousand (1,200,000) shares of common stock at $5.50 per share
and redeemable warrants to purchase a minimum of One Million Two
Hundred Thousand (1,200,000) shares of common stock at $.15 per
warrant on a best efforts,all or none basis (the "Minimum
Offering"), and a maximum of One Million Six Hundred Thousand
(1,600,000) shares of common stock and warrants to purchase One
Million Six Hundred Thousand (1,600,000) shares of common stock
on a best effort basis (the "Maximum Offering"), and
WHEREAS, to close on the Minimum Offering and disburse the
escrowed funds,the Escrow Agent must receive the sum of Six
Million Seven Hundred Eighty Thousand Dollars ($6,780,000.00)
from the sale of shares and warrants in the Minimum Offering for
deposit into Escrow, and
WHEREAS, the ownership of the shares of Common Stock (the
"Common Shares") to be sold in the Minimum Offering are owned as
follows:
(1) Company 1,000,000
(2) Group 200,000
, and
WHEREAS, as a condition to closing on the Minimum Offering,
Group has agreed on behalf of Medley Refrigeration, Inc., Group's
majority owned subsidiary, to remit directly to Company the
proceeds from the sale of Group's 200,000 shares of common stock
in the Minimum Offering ($990,000) for the express purpose of
satisfying in their entirety all receivables then outstanding
from Medley Refrigeration, Inc. to the Company, and
WHEREAS, pending the sale of the Minimum Offering, the
proceeds of the sale are required to be held in escrow so that in
the event within 30 days from the offering's effective date the
Minimum Offering is not sold, all monies received will be
refunded to the subscribers in full, and
WHEREAS, provided the funds from subscriptions for the
Minimum Offering in the sum of Six Million Seven Hundred Eighty
Thousand Dollars ($6,780,000.00) have been received by the Escrow
Agent, timely, the Escrow Agent will be responsible for paying
the proceeds of said subscriptions as required by this Agreement,
and
WHEREAS, the Company, Group, Underwriter and Escrow Agent
desire to memorialize their agreement concerning the escrow into
a written instrument.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable
consideration, the parties agree as follows:
1. RECITALS: The above and foregoing recitals are true
--------
and correct and are incorporated herein.
2. ESCROW: The Escrow Agent agrees to accept all funds
------
delivered to it derived from the sale of common stock and
redeemable warrants arising from the Minimum Offering of the
Company and to hold and disburse said funds in furtherance of the
terms of this agreement. The Escrow Agent shall acknowledge to
the Company the receipt of all funds received by it for deposit
into escrow by 5:00 p.m. of each business day during the 30 day
sale period or until this escrow is terminated by the receipt of
the Minimum Offering funds, whichever date shall occur first.
The Escrow Agent shall furnish the Company with an escrow receipt
evidencing each deposit, which receipt shall contain the date of
receipt, the amount received, and the name of the subscriber from
whom the funds are received.
3. REQUIREMENTS FOR DISBURSEMENTS OF ESCROWED FUNDS: The
------------------------------------------------
Escrow Agent shall disburse and pay over all funds held in escrow
upon the satisfaction of the following conditions:
a. Escrow Agent shall have received Six Million Seven
Hundred Eighty Thousand Dollars ($6,780,000.00).
b. Escrow Agent shall have received written
confirmation from the Underwriter, that subscriptions and
subscription funds representing the Minimum Offering have been
sold and received.
In the event the foregoing requirements are not satisfied
prior to 30 days from the effective date of the offering, and
said date has not been extended by the written agreement of the
Company and Underwriter, delivered to the Escrow Agent on or
before the close of business on the 28th day following the
effective date, all monies received by Escrow Agent will be
refunded and returned to the subscribers in full.
4. INTEREST ON ESCROWED FUNDS: All interest accruing on
--------------------------
the escrowed funds from the date of deposit to disbursement shall
belong to the Company.
5. DISBURSEMENT OF ESCROWED FUNDS: Provided the
------------------------------
requirement for disbursement set forth in Section 3 above have
been satisfied, Escrow Agent shall disburse the escrowed funds as
follows:
a. The escrowed funds due Group in the sum of
$990,000.00 shall be paid directly to the Company by the Escrow
Agent pursuant to the terms of this Agreement.
b. The balance of the escrowed funds shall be
disbursed pursuant to a closing statement delivered to the Escrow
Agent on the day of closing executed by the Company and
Underwriter.
6. CLOSING DATE: The closing of this Escrow and the
------------
disbursement of the escrowed funds shall take place within 72
hours of the Escrow Agent's receipt of the requirements set forth
in Section 3 above.
7. INVESTMENTS: Funds held in escrow under this Escrow
-----------
Agreement shall be invested in short term U.S. Government
Securities, money market funds or such other similar short term,
highly liquid investments as authorized by the Company.
Investment income derived on the funds held in escrow shall
accrue and be deposited into a separate escrow fund for
accounting purposes.
8. ESCROW AGENT'S RIGHT TO RELY; DUTIES: All funds
------------------------------------
deposited with the Escrow Agent shall be accepted, subject to
clearance. The Escrow Agent may act in reliance upon any writing
or instrument or signature which it, in its sole discretion,
believes to be genuine; may assume the validity and accuracy of
any statements or assertions contained in such writing or
instrument; and may assume that any person purporting to give any
writing, notice, advice,or instruction in connection with
provisions hereof, has been duly authorized to do so. The Escrow
Agent shall not be liable to any party to this Escrow Agreement,
or to any other individual or entity in any manner for the
sufficiency or correctness as to form, manner of execution, or
validity of any written instructions delivered to it, nor as to
the identity, authority, or rights of any person executing the
same. The Escrow Agent undertakes to perform only such duties as
are expressly set forth herein, and no implied duties or
obligations shall be read into this Escrow Agreement as against
the Escrow Agent.
9. INDEMNIFICATION: The Escrow Agent may consult with
---------------
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by
it hereunder in good faith and in accordance with the opinion of
such counsel. The Escrow Agent shall otherwise not be liable for
any mistakes of fact or error of judgment, or for any acts of
omissions of any kind unless caused by its willful misconduct or
gross negligence and the Company agrees to indemnify and hold
harmless the Escrow Agent from any claims, demands, causes of
action, liabilities, damages or judgments, including the cost of
defending any action against it, together with any reasonable
attorney's fees of any nature (including appeal) incurred
therewith in connection with Escrow Agent's undertakings pursuant
to the terms and conditions of the Escrow Agreement, unless such
act or omission is a result of the willful misconduct or gross
negligence of the Escrow Agent.
10. INTERPLEADER: If disagreement arises about the
------------
interpretation of this Escrow Agreement, or about the rights and
obligations or the propriety of any action contemplated by the
Escrow Agent hereunder,Escrow Agent may, at its sole discretion,
file an action in interpleader to resolve the said disagreement.
The Escrow shall be indemnified by the Company for all costs,
including reasonable attorneys' fees of any nature (including
appeal) in connection with any aforesaid interpleader action and
the Escrow Agent shall be fully protected in suspending all or a
part of its activities under this Escrow Agreement until a final
judgment in the interpleader action shall have been rendered by
the appropriate judicial body.
11. COMPENSATION: The Escrow Agent shall receive
------------
compensation in accordance with its schedule of fees attached
hereto as "Exhibit A" and incorporated herein as part of this
Escrow Agreement. The fee schedule may be modified from time to
time, provided however, that all parties hereto shall be given 30
days notice prior to the effective date of any fee increase.
12. RESIGNATION: The Escrow Agent may resign at any time
-----------
for any reason upon the giving of 30 days' written notice to the
Company. If a notice of appointment of a successor Escrow Agent
is not delivered to the Escrow Agent within 30 days after notice
of resignation, the Escrow Agent may petition any court of
competent jurisdiction (the "Court") to name a successor escrow
agent, and the Escrow Agent herein shall be fully relieved of all
liability to any and all parties upon the transfer of all cash or
property in its possession under the Escrow Agreement to the
successor escrow agent either designated or appointed by the
Court.
13. GOVERNING LAW: This Escrow Agent shall be construed
-------------
and enforced according to the laws of the State of Florida.
14. ENTIRE AGREEMENT: This Escrow Agreement represents the
----------------
entire agreement between SunTrust/South Florida, N.A., as Escrow
Agent, and all other parties to this Escrow Agreement, with
respect to the subject matter of this Escrow Agreement, and shall
be binding upon the parties, their respective successions and
assigns.
15. COUNTERPARTS: This Agreement may be executed through
------------
the use of separate signature pages or in any number of
counterparts, and each of such counterparts shall, for all
purposes, constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same
counterpart.
16. NOTICES: Any notices and communication required or
-------
permitted hereunder shall be sufficiently given if sent by first-
class mail, postage prepaid, addressed as follows:
(a) If to Company addressed to:
Medley Credit Acceptance Corp.
Attn: Robert D. Press, President
10910 N.W. South River Drive
Miami, Florida 33178
with a copy to: Maynard J. Hellman, Esq.
Hellman & Maas
1100 Ponce de Leon Blvd.
Coral Gables, Florida 33134
(b) If to the Escrow Agent, addressed to:
SunTrust/South Florida, N.A.
501 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attn: Corporate Asset Management
Division
Trust and Investment Management
Group
(c) If to GROUP addressed to:
Medley Group, Inc.
Attn: Robert D. Press, President
10910 N.W. South River Drive
Miami, Florida 33178
(d) If to Underwriter addressed to:
PCM Securities Limited, L.P.
32 Old Slip, 9th Floor
New York, New York 10005
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder set
their hands and seals as of the day and year first above written.
COMPANY:
MEDLEY CREDIT ACCEPTANCE CORP.
BY:
--------------------------------
ROBERT D. PRESS, PRESIDENT
GROUP:
MEDLEY GROUP, INC.
BY:
--------------------------------
ROBERT D. PRESS, PRESIDENT
UNDERWRITER:
PCM SECURITIES LIMITED, L.P.
BY:
--------------------------------
ESCROW AGENT:
SUNTRUST/SOUTH FLORIDA, N.A.
BY:
--------------------------------
MEDLEY CREDIT ACCEPTANCE CORP.
1997 STOCK OPTION PLAN
----------------
EFFECTIVE AS OF JANUARY 9 , 1997
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP.
1997 STOCK OPTION PLAN
INTRODUCTION
Medley Credit Acceptance Corp., a Delaware corporation
(hereinafter referred to as the "Corporation"), hereby
establishes an incentive compensation plan to be known as the
"Medley Credit Acceptance Corp. 1997 Stock Option Plan"
(hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Non-Qualified Stock
Options and Incentive Stock Options. The Plan shall become
effective on January 9, 1997.
The purpose of the Plan is to promote the success and
enhance the value of the Corporation by linking the personal
interests of Participants to those of the Corporation's
stockholders by providing Participants with an incentive for
outstanding performance. The Plan is further intended to assist
the Corporation in its ability to motivate, and retain the
services of, Participants upon whose judgment, interest and
special effort the successful conduct of the Corporation's
operations is largely dependent.
<PAGE>
DEFINITIONS
For purposes of this Plan, the following terms shall be
defined as follows unless the context clearly indicates
otherwise:
(a) "Award Agreement" shall mean the written
----------------
agreement, executed by an appropriate officer of the Corporation,
pursuant to which a Plan Award is granted.
(b) "Board of Directors" shall mean the Board of
-------------------
Directors of the Corporation.
(c) "Code" shall mean the Internal Revenue Code of
-----
1986, as amended, and the rules and regulations thereunder.
(d) "Committee" shall mean the Board of Directors of
----------
the Corporation or any committee of two or more persons
designated by the Board of Directors to serve as the Committee.
(e) "Common Stock" shall mean the common stock, par
-------------
value $.01 per share, of the Corporation.
(f) "Consultant" shall mean an individual who is in a
-----------
Consulting Relationship with the Corporation or any Parent of
Subsidiary.
(g) "Consulting Relationship" shall mean the
------------------------
relationship that exists between an individual and the
Corporation (or any Parent or Subsidiary) if (i) such individual
or (ii) any entity of which such individual is an executive
officer or owns a substantial equity interest has entered into a
written consulting contract with the Corporation or any Parent or
Subsidiary.
(h) "Corporation" shall mean Medley Credit Acceptance
------------
Corp., a Delaware corporation.
(i) "Disability" shall have the same meaning as the
-----------
term "permanent and total disability" under Section 22(e)(3) of
the Code.
(j) "Employee" shall mean a common-law employee of the
---------
Company or of any Parent or Subsidiary.
(k) "Exchange Act" shall mean the Securities Exchange
-------------
Act of 1934, as amended, and the rules and regulations
thereunder.
(l) "Executive" means an employee of the Corporation
----------
or of any Parent or Subsidiary whose compensation is subject to
the deduction limitations set forth under Code Section 162(m).
(m) "Fair Market Value" of the Corporation's Common
------------------
Stock on a Trading Day shall mean the last reported sale price
for Common Stock or, in case no such reported sale takes place on
such Trading Day, the average of the closing bid and asked prices
for the Common Stock for such Trading Day, in either case on the
principal national securities exchange on which the Common Stock
is listed or admitted to trading, or if the Common Stock is not
listed or admitted to trading on any national securities
exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, if no sale is publicly
reported, the average of the closing bid and asked quotations for
the Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or any
comparable system or, if the Common Stock is not listed on NASDAQ
or a comparable system, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the
closing bid and asked prices, as furnished by two members of the
National Association of Securities Dealers, Inc. who make a
market in the Common Stock selected from time to time by the
Corporation for that purpose. In addition, for purposes of this
definition, a "Trading Day" shall mean, if the Common Stock is
listed on any national securities exchange, a business day during
which such exchange was open for trading and at least one trade
of Common Stock was effected on such exchange on such business
day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market,
a business day during which the over-the-counter market was open
for trading and at least one "eligible dealer" quoted both a bid
and asked price for the Common Stock. An "eligible dealer" for
any day shall include any broker-dealer who quoted both a bid and
asked price for such day, but shall not include any broker-dealer
who quoted only a bid or only an asked price for such day. In
the event the Corporation's Common Stock is not publicly traded,
the Fair Market Value of such Common Stock shall be determined by
the Committee in good faith.
(n) "Good Cause" shall mean (i) a Participant's
-----------
willful or gross misconduct or willful or gross negligence in the
performance of his duties for the Corporation or for any Parent
or Subsidiary after prior written notice of such misconduct or
negligence and the continuance thereof for a period of 30 days
after receipt by such Participant of such notice, (ii) a
Participant's intentional or habitual neglect of his duties for
the Corporation or for any Parent or Subsidiary after prior
written notice of such neglect, (iii) a Participant's theft or
misappropriation of funds of the Corporation or of any Parent or
Subsidiary or commission of a felony or (iv) the direct or
indirect breach by the Participant of the terms of a related
consulting contract with the Corporation or any Parent or
Subsidiary.
(o) "Incentive Stock Option" shall mean a stock option
-----------------------
satisfying the requirements for tax-favored treatment under
Section 422 of the Code.
(p) "Non-Qualified Option" shall mean a stock option
---------------------
which does not satisfy the requirements for, or which is not
intended to be eligible for, tax-favored treatment under Section
422 of the Code.
(q) "Option" shall mean an Incentive Stock Option or a
-------
Non-Qualified Stock Option granted pursuant to the provisions of
Section V hereof.
(r) "Optionee" shall mean a Participant who is
---------
granted an Option under the terms of this Plan.
(s) "Outside Directors" shall mean members of the
------------------
Board of Directors of the Corporation who are classified as
"outside directors" under Section 162(m) of the Code.
(t) "Parent" shall mean a parent corporation of the
-------
Corporation within the meaning of Section 424(e) of the Code.
(u) "Participant" shall mean any Employee or other
------------
person participating under the Plan.
(v) "Plan Award" shall mean an Option granted pursuant
-----------
to the terms of this Plan.
(w) "Securities Act" shall mean the Securities Act of
---------------
1933, as amended, and the rules and regulations thereunder.
(x) "Subsidiary" shall mean a subsidiary corporation
-----------
of the Corporation within the meaning of Section 424(f) of the
Code.
(y) "Termination of Consulting Relationship" shall
---------------------------------------
mean the cessation, abridgement or termination of a Consultant's
Consulting Relationship with the Corporation or any Parent or
Subsidiary as a result of (i) the Consultant's death or
Disability (ii) the cancellation, annulment, expiration,
termination or breach of the written consulting contract between
the Corporation (or any Parent or Subsidiary) and the Consultant
(or any other entity) giving rise to the Consulting Relationship
or (iii) if the written consulting contract is not directly
between the Corporation (or any Parent or Subsidiary) and the
Consultant, the Consultant's termination of service with, or sale
of all or substantially all of his equity interest in, the entity
which has entered into the written consulting contract with the
Corporation, Parent or Subsidiary.
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which
shall be composed solely of at least two Non-Employee Directors,
as defined in Rule 16b-3(b)(3) promulgated under the Exchange
Act, and who also qualify as "Outside Directors". Subject to the
provisions of the Plan, the Committee may establish from time to
time such regulations, provisions, proceedings and conditions of
awards which, in its sole opinion, may be advisable in the
administration of the Plan. A majority of the Committee shall
constitute a quorum, and, subject to the provisions of Section IV
of the Plan, the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing
by a majority of the Committee, shall be the acts of the
Committee as a whole.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of
the Plan, the aggregate number of shares of the Common Stock
which may be granted for all purposes under the Plan shall be
500,000 shares. Shares of Common Stock underlying awards of
securities (derivative or not) and shares of Common Stock awarded
hereunder (whether or not on a restricted basis) shall be counted
against the limitation set forth in the immediately preceding
sentence and may be reused to the extent that the related Plan
Award to any individual is settled in cash, expires, is
terminated unexercised, or is forfeited. Common Stock granted to
satisfy Plan Awards under the Plan may be authorized and unissued
shares of the Common Stock, issued shares of such Common Stock
held in the Corporation's treasury or shares of Common Stock
acquired on the open market.
SECTION III
ELIGIBILITY
Officers and key employees of the Corporation, or of
any Parent or Subsidiary, who are regularly employed on a
salaried basis as common law employees, and Consultants and
directors of the Corporation or of any Parent or Subsidiary who
are not Employees, shall be eligible to participate in the Plan.
Where appropriate under this Plan, directors who are not
Employees shall be referred to as "employees" and their service
as directors as "employment".
SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the
direction of, the Committee, which shall administer the Plan so
as to comply at all times with Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder, to the extent
such compliance is required, and shall otherwise have plenary
authority to interpret the Plan and to make all determinations
specified in or permitted by the Plan or deemed necessary or
desirable for its administration or for the conduct of the
Committee's business. All interpretations and determinations of
the Committee may be made on an individual or group basis and
shall be final, conclusive and binding on all interested parties.
Subject to the express provisions of the Plan, the Committee
shall have authority, in its discretion, to determine the persons
to whom Plan Awards shall be granted, the times when such Plan
Awards shall be granted, the number of Plan Awards, the purchase
price or exercise price of each Plan Award (if applicable), the
period(s) during which a Plan Award shall be exercisable (whether
in whole or in part), the restrictions to be applicable to Plan
Awards and the other terms and provisions thereof (which need not
be identical). In addition, the authority of the Committee shall
include, without limitation, the following:
(a) Financing. The arrangement of temporary financing
---------
for an Optionee by registered broker-dealers, under the rules and
regulations of the Federal Reserve Board, for the purpose of
assisting an Optionee in the exercise of an Option, such
authority to include the payment by the Corporation of the
commissions of the broker-dealer;
(b) Procedures for Exercise of Option. The
---------------------------------
establishment of procedures for an Optionee (i) to exercise an
Option by payment of cash, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise
of an Option that number of shares having a Fair Market Value,
which, together with such cash as shall be paid in respect of
fractional shares, shall equal the Option exercise price of the
total number of shares of Common Stock to be acquired, (iii) to
exercise all or a portion of an Option by delivering that number
of shares of Common Stock already owned by him having a Fair
Market Value which shall equal the Option exercise price for the
portion exercised and, in cases where an Option is not exercised
in its entirety, and subject to the requirements of the Code, to
permit the Optionee to deliver the shares of Common Stock thus
acquired by him in payment of shares of Common Stock to be
received pursuant to the exercise of additional portions of such
Option, the effect of which shall be that an Optionee can in
sequence utilize such newly acquired shares of Common Stock in
payment of the exercise price of the entire Option, together with
such cash as shall be paid in respect of fractional shares and
(iv) to engage in any form of "cashless" exercise.
(c) Withholding. The establishment of a procedure
-----------
whereby a number of shares of Common Stock or other securities
may be withheld from the total number of shares of Common Stock
or other securities to be issued upon exercise of an Option or
for the tender of shares of Common Stock owned by any Participant
to meet any obligation of withholding for taxes incurred by the
Participant upon such exercise.
SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its
discretion, to grant Incentive Stock Options or to grant
Non-Qualified Stock Options or to grant both types of Options.
Notwithstanding anything contained herein to the contrary, an
Incentive Stock Option may be granted only to common law
employees of the Corporation or of any Parent or Subsidiary now
existing or hereafter formed or acquired, and not to any director
or officer who is not also such a common law employee. The terms
and conditions of the Options shall be determined from time to
time by the Committee; provided, however, that the Options
-------- -------
granted under the Plan shall be subject to the following:
(a) Exercise Price. The Committee shall establish the
--------------
exercise price at the time any Option is granted at such amount
as the Committee shall determine; provided, however, that the
-------- -------
exercise price for each share of Common Stock purchasable under
any Incentive Stock Option granted hereunder shall be such amount
as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock at the date the Option is granted; and
provided, further, that in the case of an Incentive Stock Option
granted to a person who, at the time such Incentive Stock Option
is granted, owns shares of stock of the Corporation or of any
Parent or Subsidiary which possess more than ten percent (10%) of
the total combined voting power of all classes of shares of stock
of the Corporation or of any Parent or Subsidiary, the exercise
price for each share of Common Stock shall be such amount as the
Committee, in its best judgment, shall determine to be not less
than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The
exercise price will be subject to adjustment in accordance with
the provisions of Section VI of the Plan.
(b) Payment of Exercise Price. The price per share of
-------------------------
Common Stock with respect to each Option shall be payable at the
time the Option is exercised. Such price shall be payable in
cash or pursuant to any of the methods set forth in Sections
IV(a) or (b) hereof, as determined by the Participant. Shares of
Common Stock delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the
Common Stock on the date preceding the date of the exercise of
the Option.
(c) Exercisability of Options. Except as provided in
-------------------------
Section V(e) hereof, each Option shall be exercisable in whole or
in installments, and at such time(s), and subject to the
fulfillment of any conditions on, and to any limitations on,
exercisability as may be determined by the Committee at the time
of the grant of such Options. The right to purchase shares of
Common Stock shall be cumulative so that when the right to
purchase any shares of Common Stock has accrued such shares of
Common Stock or any part thereof may be purchased at any time
thereafter until the expiration or termination of the Option.
(d) Expiration of Options. No Incentive Stock Option
---------------------
by its terms shall be exercisable after the expiration of ten
(10) years from the date of grant of the Option; provided,
--------
however, in the case of an Incentive Stock Option granted to a
-------
person who, at the time such Option is granted, owns shares of
stock of the Corporation or of any Parent or Subsidiary
possessing more than ten percent (10%) of the total combined
voting power of all classes of shares of stock of the Corporation
or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date
such Option is granted.
(e) Exercise Upon Optionee's Termination of Employment
--------------------------------------------------
or Termination of Consulting Relationship. If the employment of
-----------------------------------------
an Optionee by the Corporation or by any Parent or Subsidiary is
terminated for any reason other than death, any Incentive Stock
Option granted to such Optionee may not be exercised later than
three (3) months (one (1) year in the case of termination due to
Disability) after the date of such termination of employment. For
purposes of determining whether any Optionee has incurred a
termination of employment (or a Termination of Consulting
Relationship), an Optionee who is both an employee (or a
Consultant) and a director of the Corporation and/or any Parent
or Subsidiary shall (with respect to any Non-Qualified Option
that may have been granted to him) be considered to have incurred
a termination of employment (or a Termination of Consulting
Relationship) only upon his termination of service both as an
employee (or as a Consultant) and as a director. Furthermore,
(i) if an Optionee's employment (or Consulting Relationship) is
terminated by the Corporation or by any Parent or Subsidiary for
Good Cause or (ii) if an Optionee voluntarily terminates his
employment other than for Disability (or incurs a voluntary
Termination of Consulting Relationship other than for Disability)
with the Corporation or with any Parent or Subsidiary without the
written consent of the Committee, regardless of whether such
Optionee continues to serve as a director of the Corporation or
of any Parent or Subsidiary, then the Optionee shall, at the time
of such termination of employment (or Termination of Consulting
Relationship), forfeit his rights to exercise any and all of the
outstanding Option(s) theretofore granted to him.
(f) Maximum Amount of Incentive Stock Options. Each
-----------------------------------------
Plan Award under which Incentive Stock Options are granted shall
provide that to the extent the aggregate of the (i) Fair Market
Value of the shares of Common Stock (determined as of the time of
the grant of the Option) subject to such Incentive Stock Option
and (ii) the fair market values (determined as of the date(s) of
grant of the option(s) of all other shares of Common Stock
subject to incentive stock options granted to an Optionee by the
Corporation or any Parent or Subsidiary, which are exercisable
for the first time by any person during any calendar year,
exceed(s) one hundred thousand dollars ($100,000), such excess
shares of Common Stock shall not be deemed to be purchased
pursuant to Incentive Stock Options. The terms of the
immediately preceding sentence shall be applied by taking all
options, whether or not granted under this Plan, into account in
the order in which they are granted.
SECTION VI
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
(a) Recapitalization, Etc. In the event there is any
----------------------
change in the Common Stock of the Corporation by reason of any
reorganization, recapitalization, stock split, stock dividend or
otherwise, there shall be substituted for or added to each share
of Common Stock theretofore appropriated or thereafter subject,
or which may become subject, to any Option, the number and kind
of shares of stock or other securities into which each
outstanding share of Common Stock shall be so changed or for
which each such share shall be exchanged, or to which each such
share be entitled, as the case may be, and the per share price
thereof also shall be appropriately adjusted. Notwithstanding
the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section
424(a) of the Code and (ii) in no event shall any adjustment be
made which would render any Incentive Stock Option granted
hereunder to be other than an incentive stock option for purposes
of Section 422 of the Code.
(b) Merger, Consolidation or Change in Control of
---------------------------------------------
Corporation. Upon (i) the merger or consolidation of the
------------
Corporation with or into another corporation (pursuant to which
the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger
or consolidation, own a beneficial interest in shares of voting
securities of the corporation surviving such merger or
consolidation having at least a majority of the combined voting
power of such corporation's then outstanding securities), if the
agreement of merger or consolidation does not provide for (1) the
continuance of the Options, Stock Appreciation Rights and shares
of Restricted Stock granted hereunder or (2) the substitution of
new options for Options granted hereunder, or for the assumption
of such Options by the surviving corporation, (ii) the
dissolution, liquidation, or sale of all or substantially all the
assets of the Corporation to a person unrelated to the
Corporation or to a direct or indirect owner of a majority of the
voting power of the Corporation's then outstanding voting
securities (such sale of assets being referred to as an "Asset
Sale") or (iii) the Change in Control of the Corporation, (1) the
holder of any such Option theretofore granted and still
outstanding (and not otherwise expired) shall have the right
immediately prior to the effective date of such merger,
consolidation, dissolution, liquidation, Asset Sale or Change in
Control of the Corporation to exercise such Option(s) in whole or
in part without regard to any installment provision that may have
been made part of the terms and conditions of such Option(s) and
(2) all restrictions regarding transferability and forfeiture on
shares of Restricted Stock shall be removed immediately prior to
the effective date of such merger, consolidation, dissolution,
liquidation, Asset Sale or Change in Control of the Corporation;
provided that any conditions precedent to the exercise of such
Option(s), other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give advance notice
to affected Optionees of such merger, consolidation, dissolution,
liquidation, Asset Sale or Change in Control of the Corporation.
All such Options which are not so exercised shall be forfeited as
of the effective time of such merger, consolidation, dissolution,
liquidation or Asset Sale (but not in the case of a Change in
Control of the Corporation).
(c) Definition of Change in Control of the
--------------------------------------
Corporation. As used herein, a "Change in Control of the
-----------
Corporation" shall be deemed to have occurred if any person
(including any individual, firm, partnership or other entity)
together with all Affiliates and Associates (as defined under
Rule 12b-2 of the General Rules and Regulations promulgated under
the Exchange Act) of such person (but excluding (i) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Corporation or any subsidiary of the Corporation, (ii) a
corporation owned, directly or indirectly, by the stockholders of
the Corporation in substantially the same proportions as their
ownership of the Corporation, (iii) the Corporation or any
subsidiary of the Corporation or (iv) only as provided in the
immediately following sentence, a Participant together with all
Affiliates and Associates of the Participant) is or becomes the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 40% of more of the combined voting power
of the Corporation's then outstanding securities. The provisions
of clause(iv) of the immediately preceding sentence shall apply
only with respect to the Option(s) held by the Participant who,
together with his Affiliates or Associates, if any, is or becomes
the direct or indirect Beneficial Owner of the percentage of
securities set forth in such clause.
SECTION VII
MISCELLANEOUS PROVISIONS
(a) Administrative Procedures. The Committee may
-------------------------
establish any procedures determined by it to be appropriate in
discharging its responsibilities under the Plan. All actions and
decisions of the Committee shall be final.
(b) Assignment or Transfer. No grant or award of any
----------------------
Plan Award (other than a Non-Qualified Option) or any rights or
interests therein shall be assignable or transferable by a
Participant except by will or the laws of descent and
distribution or pursuant to a domestic relations order. During
the lifetime of a Participant, Incentive Stock Options granted
hereunder shall be exercisable only by the Participant.
(c) Investment Representation. In the case of Plan
-------------------------
Awards paid in shares of Common Stock or other securities, or,
with respect to shares of Common Stock received pursuant to the
exercise of an Option, the Committee may require, as a condition
of receiving such securities, that the Participant furnish to the
Corporation such written representations and information as the
Committee deems appropriate to permit the Corporation, in light
of the existence or nonexistence of an effective registration
statement under the Securities Act to deliver such securities in
compliance with the provisions of the Securities Act.
(d) Withholding Taxes. The Corporation shall have the
-----------------
right to deduct from all cash payments hereunder any federal,
state, local or foreign taxes required by law to be withheld with
respect to such payments. In the case of the issuance or
distribution of Common Stock or other securities hereunder,
either directly or upon the exercise of or payment upon any Plan
Award, the Corporation, as a condition of such issuance or
distribution, may require the payment (through withholding from
the Participant's salary, reduction of the number of shares of
Common Stock or other securities to be issued, or otherwise) of
any such taxes. Each Participant may satisfy the withholding
obligations by paying to the Corporation a cash amount equal to
the amount required to be withheld or by tendering to the
Corporation a number of shares of Common Stock having a value
equivalent to such cash amount, or by use of any available
procedure as described under Section IV(c) hereof.
(e) Costs and Expenses. The costs and expenses of
------------------
administering the Plan shall be borne by the Corporation and
shall not be charged against any award nor to any employee
receiving a Plan Award.
(f) Funding of Plan. The Plan shall be unfunded. The
---------------
Corporation shall not be required to segregate any of its assets
to assure the payment of any Plan Award under the Plan. Neither
the Participants nor any other persons shall have any interest in
any fund or in any specific asset or assets of the Corporation or
any other entity by reason of any Plan Award, except to the
extent expressly provided hereunder. The interests of each
Participant and former Participant hereunder are unsecured and
shall be subject to the general creditors of the Corporation.
(g) Other Incentive Plans. The adoption of the Plan
---------------------
does not preclude the adoption by appropriate means of any other
incentive plan for employees.
(h) Plurals and Gender. Where appearing in the Plan,
------------------
masculine gender shall include the feminine and neuter genders,
and the singular shall include the plural, and vice versa, unless
the context clearly indicates a different meaning.
(i) Headings. The headings and sub-headings in this
--------
Plan are inserted for the convenience of reference only and are
to be ignored in any construction of the provisions hereof.
(j) Severability. In case any provision of this Plan
------------
shall be held illegal or void, such illegality or invalidity
shall not affect the remaining provisions of this Plan, but shall
be fully severable, and the Plan shall be construed and enforced
as if said illegal or invalid provisions had never been inserted
herein.
(k) Payments Due Missing Persons. The Corporation
----------------------------
shall make a reasonable effort to locate all persons entitled to
benefits under the Plan; however, notwithstanding any provisions
of this Plan to the contrary, if, after a period of one (1) year
from the date such benefits shall be due, any such persons
entitled to benefits have not been located, their rights under
the Plan shall stand suspended. Before this provision becomes
operative, the Corporation shall send a certified letter to all
such persons at their last known addresses advising them that
their rights under the Plan shall be suspended. Subject to all
applicable state laws, any such suspended amounts shall be held
by the Corporation for a period of one (1) additional year and
thereafter such amounts shall be forfeited and thereafter remain
the property of the Corporation.
(l) Liability and Indemnification. (i) Neither the
-----------------------------
Corporation nor any Parent or Subsidiary shall be responsible in
any way for any action or omission of the Committee, or any other
fiduciaries in the performance of their duties and obligations as
set forth in this Plan. Furthermore, neither the Corporation nor
any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon
advice of their counsel provided that the Corporation and/or the
appropriate Parent or Subsidiary relied in good faith upon the
action of such agent or the advice of such counsel.
(ii) Except for their own gross negligence or
willful misconduct regarding the performance of the duties
specifically assigned to them under, or their willful breach of
the terms of, this Plan, the Corporation, each Parent and
Subsidiary and the Committee shall be held harmless by the
Participants, former Participants, beneficiaries and their
representatives against liability or losses occurring by reason
of any act or omission. Neither the Corporation, any Parent or
Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person
shall have any liability or responsibility with respect to this
Plan, except as expressly provided herein.
(m) Incapacity. If the Committee shall receive
----------
evidence satisfactory to it that a person entitled to receive
payment of any Plan Award is, at the time when such benefit
becomes payable, a minor, or is physically or mentally
incompetent to receive such Plan Award and to give a valid
release thereof, and that another person or an institution is
then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such
person shall have been duly appointed, the Committee may make
payment of such Plan Award otherwise payable to such person to
such other person or institution, including a custodian under a
Uniform Gifts to Minors Act, or corresponding legislation (who
shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a
valid and complete discharge for the payment of such Plan Award.
(n) Cooperation of Parties. All parties to this Plan
----------------------
and any person claiming any interest hereunder agree to perform
any and all acts and execute any and all documents and papers
which are necessary or desirable for carrying out this Plan or
any of its provisions.
(o) Governing Law. All questions pertaining to the
-------------
validity, construction and administration of the Plan shall be
determined in accordance with the laws of the State of New York.
(p) Nonguarantee of Employment or Consulting
----------------------------------------
Relationship. Nothing contained in this Plan shall be construed
-------------
as a contract of employment (or as a consulting contract) between
the Corporation (or any Parent or Subsidiary), and any employee
or Participant, as a right of any employee or Participant to be
continued in the employment of (or in a Consulting Relationship
with) the Corporation (or any Parent or Subsidiary), or as a
limitation on the right of the Corporation or any Parent or
Subsidiary to discharge any of its employees (or Consultants), at
any time, with or without cause.
(q) Notices. Each notice relating to this Plan shall
-------
be in writing and delivered in person or by certified mail to the
proper address. All notices to the Corporation or the Committee
shall be addressed to it at 10910 N.W. South River Drive, Miami,
Florida 33178, Attn: President. All notices to Participants,
former Participants, beneficiaries or other persons acting for or
on behalf of such persons shall be addressed to such person at
the last address for such person maintained in the Committee's
records.
(r) Written Agreements. Each Plan Award shall be
------------------
evidenced by a signed written agreement (the "Award Agreements")
between the Corporation and the Participant containing the terms
and conditions of the award.
SECTION VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have
the right to amend, suspend or terminate the Plan at any time,
provided that no amendment shall be made which shall increase
the total number of shares of the Common Stock of the Corporation
which may be issued and sold pursuant to Incentive Stock Options,
reduce the minimum exercise price in the case of an Incentive
Stock Option or modify the provisions of the Plan relating to
eligibility with respect to Incentive Stock Options unless such
amendment is made by or with the approval of the stockholders
within 12 months of the effective date of such amendment, but
only if such approval is required by any applicable provision of
law. The Board of Directors of the Corporation shall also be
authorized to amend the Plan and the Options granted thereunder
to maintain qualification as "incentive stock options" within the
meaning of Section 422 of the Code, if applicable. Except as
otherwise provided herein, no amendment, suspension or
termination of the Plan shall alter or impair any Plan Awards
previously granted under the Plan without the consent of the
holder thereof.
SECTION IX
TERM OF PLAN
The Plan shall automatically terminate on the day
immediately preceding the tenth anniversary of the date the Plan
was adopted by the Board of Directors of the Corporation, unless
sooner terminated by such Board of Directors. No Plan Awards may
be granted under the Plan subsequent to the termination of the
Plan.
June 4, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, DC 20549
Dear Sir/Madam:
We have read and agree with the comments in the Experts Section
of Form SB-2 of Medley Credit Acceptance Group regarding the
change in certified public accountants.
Sincerely,
/s/ Israeloff, Trattner & Co., CPAs, P.C.
Israeloff, Trattner & Co., CPAs, P.C.
AW:kg
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENTS
We consent to the use in this Registration Statement of Medley Credit
Acceptance Corp. on Form SB-2 of our report dated September 13, 1996,
except for Notes 3, 5 and 8 as to which date is December 6, 1996, appearing
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us as "Experts" in such Prospectus.
/s/ Israeloff, Trattner & Co. P.C.
Israeloff, Trattner & Co. P.C.
Valley Stream, New York
June 10, 1997
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form SB-2 of Medley
Credit Acceptance Corp. of our report dated March 31, 1997, appearing in
the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us as "Experts" in such Prospectus.
/s/ Daszkal, Bolton & Manela
Daszkal, Bolton & Manela
Boca Raton, Florida
June 10, 1997
