SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
DIXIE NATIONAL CORPORATION
(Name of Issuer)
Common Stock
(Title of Class of Securities)
25255551-10-3
(CUSIP Number)
G. Thomas Reed
107 Executive Center
Hilton Head, South Carolina 29928
(803) 785-7850
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
4/2/96
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [X]. (A fee
is not required only if the reporting persons: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1, and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed wit
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liability of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 5
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CUSIP No. 25255551-10-3
1) Names of Reporting Persons: S.S. or I.R.S. Identification No. of
Above Persons:
CONSTANCE LOUISE GAMBLE; ###-##-####
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions) PF
5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization UNITED STATES
Number of (7) Sole Voting Power 2,065,000 shares
Shares Bene-
ficially (8) Shared Voting Power
Owned by
Each Report- (9) Sole Dispositive Power 2,065,000 shares
ing Person
With (10) Shared Dispositive Power
11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,065,000 shares
-----------------
12) Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions).
13) Percent of Class Represented by Amount in Row (11)
15.8%
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14) Type of Reporting Person (See Instructions) IN
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Item 1. Security and Issuer.
This statement relates to the Common Stock, $1.00 par value (the
"Common Stock") of Dixie National Corporation ("Dixie"), a corporation organized
and existing under the laws of the State of Mississippi, with its principal
executive offices at 107 Executive Center, Hilton Head Island, South Carolina,
29928.
Item 2. Identity and Background.
Constance L. Gamble: Ms. Gamble, whose address is 200 Executive Way,
Ponte Vedra Beach, Florida, 32082, is the Director of Marketing and Sales
of Text Retrieval Systems, Inc. ("Text Retrieval"), a wholly-owned subsidiary of
Dixie National Corporation. During the past five years, she has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the past five years, she has not been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree, or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws. She is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate amount of funds used by Ms. Gamble in acquiring the
2,065,000 shares of Dixie comes from 890 shares of common stock of Text
Retrieval, previously held by Ms. Gamble. Ms. Gamble's Text Retrieval shares
were exchanged for the 2,065,000 shares of Common Stock of Dixie in a
transaction whereby Dixie acquired all the common stock of Text Retrieval, in
exchange for shares of Dixie Common Stock.
Item 4. Purpose of Transaction.
Ms. Gamble has acquired her shares of Dixie solely for investment
purposes. Although Ms. Gamble has no present plans to immediately dispose of any
Common Stock, she may, depending on the availability and price of the Common
Stock, purchase or sell additional shares now owned or hereafter acquired of
Common Stock either in the open market, or in private, negotiated transactions.
Ms. Gamble has no present plan or porposal which relates to or would
result in: (a) the acquisition by any person of additional securities of Dixie,
or the disposition of securities of Dixie; (b) an extraordinary corporate
transaction, such as a merger, reorganization, or liquidation, involving Dixie
or any of its subsidiaries; (c) a sale or transfer of a material amount of
assets of Dixie or any of its subsidiaries; (d) any change in the present Board
of Directors or management of Dixie, including any plans or proposals to change
the number or term of directors or to fill any existing vacancies on the board;
(e) any material change in the present capitalization or dividend policy of
Dixie; (f) any other material change in Dixie's business or corporate structure,
including but not limited to, any plans or proposals to make any changes in its
investment policy; (g) changes in Dixie's charter, bylaws, or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the issuer by any person; (h) causing a class of securities of Dixie
to be delisted from a national securities exchange or cease to be authorized to
be quoted in an interdealer quotation system of a registered national securities
association; (i) a class of equity securities of Dixie becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act; or (j) any
action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) As of April 30, 1996, Ms. Gamble has direct beneficial ownership of
2,065,000 shares of Common Stock constituting approximately 15.8% of the Common
Stock outstanding.
(b) Ms. Gamble has the sole power to vote or direct the vote or to
dispose of or direct the disposition of the Common Stock of which she is the
beneficial owner.
(c) Ms. Gamble acquired all 2,065,000 of her beneficially owned shares
of Common Stock pursuant to the terms of the Option Agreement, on April 2, 1996.
There have been no other transactions in Dixie's shares by Ms. Gamble within the
last sixty (60) days.
Page 3 of 5
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Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
Dixie and Text Retrieval had previously entered into a lending
agreement whereby Dixie provided Text Retrieval with a $750,000 loan, and in
exchange Dixie acquired 35% of the outstanding common stock of Text Retrieval
and received an option to acquire the remainder of the outstanding shares of
common stock of Text Retrieval. Subsequent to that loan, Dixie agreed to provide
Text Retrieval with accounts receivable financing in an amount not to exceed
$500,000, in exchange for an additional 5% of the outstanding common stock of
Text Retrieval, and other conditions, which are contained in the Amended and
Restated Option Agreement (the "A&R Option Agreement"), entered into on February
26, 1996, among Dixie, Text Retrieval, and the stockholders of Text Retrieval
(except Dixie, which already owned 35% of Text Retrieval). The A&R Option
Agreement is attached as Exhibit 1 to this statement.
The A&R Option Agreement provides that upon exercise of the option to
acquire the remaining Text Retrieval stock, Dixie shall provide holders of Text
Retrieval stock with 2,500,000 shares of Common Stock (the "Early Exercise
Shares," as such term is defined in the A&R Option Agreement), which shall be
distributed to the Text Retrieval stockholders depending on each stockholder's
ownership percentage of Text Retrieval stock. All Early Exercise Shares shall
bear a forfeiture legend. The Early Exercise Shares shall, depending upon
subsequent calculation of a formula set forth in the A&R Option Agreement,
constitute all or a portion of the Common Stock due in connection with the
exercise of Dixie's option; however, the Early Exercise Shares received by each
individual Text Retrieval stockholder are subject to forfeiture to the extent
the number of such stockholder's Early Exercise Shares exceed a quotient
obtained from certain formulas, as enumerated in the A&R Option Agreement, using
criteria such as Text Retrieval's pre-tax income, various multipliers, and the
value of Dixie's Common Stock over a six-month period.
Upon calculation of the aforementioned quotient at a time determined
under the A&R Option Agreement, either: (i) the Early Exercise Shares will be
sufficient and no further shares of Common Stock shall change hands; (ii) some
shares of the Early Exercise Shares shall promptly be tendered to Dixie, or
(iii) Dixie shall promptly tender to each Text Retrieval stockholder shares of
Common Stock equal to the difference. Upon conclusion of the transaction
referred to in this paragraph, full and complete tender of all Common Stock to
stockholders of Text Retrieval shall be deemed to have occurred. Therefore,
under the A&R Option Agreement, when the aforementioned quotient is determined,
Ms. Gamble may be required to tender some of her shares of Common Stock back to
Dixie; or she may receive more shares of Common Stock; or her holding of shares
of Common Stock may remain the same. At all times, Ms. Gamble has the sole and
exclusive right to vote her shares of Common Stock, and to receive any dividends
and other distributions on her shares of Common Stock.
Under the A&R Option Agreement, upon the exercise of Dixie's Option,
all remaining Text Retrieval stock is to be transferred to an escrow agent,
designated by Dixie and approved by Text Retrieval, and held in escrow pursuant
to an escrow agreement. Dixie, Text Retrieval, the holders of common stock of
Text Retrieval as of February 26, 1996 (except Dixie), and McGuire, Woods,
Battle & Boothe, LLP ("McGuire, Woods"), as the escrow agent, entered into the
Document Escrow Agreement (the "Escrow Agreement") on April 1, 1996. The
remaining Text Retrieval Stock is to be held in escrow until such time as all of
Dixie's Common Stock has been distributed to Text Retrieval stockholders
pursuant to the A&R Option Agreement. While held in escrow, the Escrow Agreement
provides, among other things, that the stockholders of Text Retrieval retain a
security interest in the remaining Text Retrieval stock; and that Dixie has the
full right, power and authority to vote the remaining Text Retrieval stock on
any matters requiring approval of the stockholders of Text Retrieval. The Escrow
Agreement is attached as Exhibit 2 to this statement.
On April 2, 1996, Dixie exercised its option under the A&R Option
Agreement, and the remaining shares of Text Retrieval stock were placed in
escrow pursuant to the A&R Option Agreement and the Escrow Agreement.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: The A&R Option Agreement, dated February 26, 1996, by and
between Dixie, Text Retrieval, and the holders of common stock of Text
Retrieval.
Exhibit 2: The Escrow Agreement, dated April 1, 1996, by and between
Dixie, Text Retrieval, the holders of common stock of Text Retrieval as of
February 26, 1996 (except Dixie), and McGuire, Woods.
Page 4 of 5
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Signature.
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete, and correct.
/s/ Constance L. Gamble May 7, 1996
Constance L. Gamble Date
EXHIBIT 1
AMENDED AND RESTATED OPTION AGREEMENT
DATED AS OF FEBRUARY 26, 1996
AMONG
DIXIE NATIONAL CORPORATION
AND
TEXT RETRIEVAL SYSTEMS, INC.
AND
HOLDERS OF THE COMMON STOCK OF
TEXT RETRIEVAL SYSTEMS, INC.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1.
RECITALS; DEFINITIONS............................................ 2
Section 1.1. Incorporation of Recitals................................................... 2
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Section 1.2. Definitions................................................................. 2
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ARTICLE 2.
THE DNC OPTION................................................ 8
Section 2.1. Grant of Option............................................................. 8
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Section 2.2. Term........................................................................ 8
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Section 2.3. Exercise.................................................................... 8
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Section 2.4. Consideration for Grant of DNC Option....................................... 8
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Section 2.5. Exercise Consideration...................................................... 9
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Section 2.6. Early Exercise.............................................................. 9
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Section 2.7. Transfer in Escrow.......................................................... 10
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Section 2.8. Discretion to Choose Form of Payment........................................ 10
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ARTICLE 3.
THE DNC PUT OPTION.............................................. 10
Section 3.1. Grant of Option. ........................................................... 10
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Section 3.2. Exercise.................................................................... 11
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Section 3.3. Payment..................................................................... 11
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Section 3.4. Escrow...................................................................... 11
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Section 3.5. Expiration Upon Early Exercise of DNC Option................................ 11
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ARTICLE 4.
THE CONTINGENT REDEMPTION OF AR FINANCING STOCK............................... 12
Section 4.1. Grant of Option. ........................................................... 12
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Section 4.2. Payment..................................................................... 12
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Section 4.3. Escrow...................................................................... 12
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Section 5.1. Corporate Existence and Power; TRS Shares Outstanding....................... 13
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Section 5.2. Due Authorization; Contravention............................................ 13
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Section 5.3. Binding Effect.............................................................. 13
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Section 5.4. Litigation.................................................................. 13
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Section 5.5. Filings..................................................................... 14
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ARTICLE 6.
MISCELLANEOUS................................................ 14
Section 6.1. Notices..................................................................... 14
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Section 6.2. No Waivers.................................................................. 14
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Section 6.3. Amendments and Waivers...................................................... 14
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Section 6.4. Successors and Assigns...................................................... 14
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Section 6.5. Governing Law............................................................... 15
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Section 6.6. Counterparts; Facsimile Signatures; Effectiveness........................... 15
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Section 6.7. Entire Agreement............................................................ 15
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Section 6.8. Covenant Regarding Transfers of TRS Stock................................... 15
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Section 6.9. Ratification................................................................ 16
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</TABLE>
ii
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AMENDED AND RESTATED OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT (as further amended,
supplemented or modified from time to time, this "Agreement") is dated as of
February 26, 1996 and is by and among Dixie National Corporation, a Mississippi
corporation ("DNC"), Text Retrieval Systems, Inc., a Florida corporation
("TRS"), and all of the holders of the common stock of TRS as of February 26,
1996, except DNC (collectively, the "TRS Stockholders").
RECITALS
A. DNC entered into a Credit Agreement dated as of October
16, 1995 (the "Credit Agreement"), pursuant to which DNC agreed to provide TRS
with a $750,000.00 working capital loan (the "Working Capital Loan").
B. Pursuant to the Credit Agreement, DNC received four
hundred fifty-five (455) shares of TRS common stock, constituting thirty-five
percent (35%) of the issued and outstanding capital stock in TRS (the "Working
Capital Loan Inducement Stock").
C. As a condition to DNC entering into the Credit Agreement
and committing to make the Working Capital Loan, TRS and each of the TRS
Stockholders agreed to enter into a written Option Agreement dated as of October
16, 1995 (the "Option Agreement"), granting DNC an option (the "DNC Option") to
acquire the Remaining TRS Stock (hereinafter defined) and an option (the "DNC
Put Option") to require TRS to redeem the Working Capital Loan Inducement Stock
in the event DNC elects not to exercise the DNC Option.
D. Subsequent to providing the Working Capital Loan, DNC
agreed to provide TRS with accounts receivable financing in an amount not to
exceed $500,000.00 (the "Financing Loan"), pursuant to terms and conditions set
forth in an Accounts Receivable Financing Agreement dated as of even date
herewith (the "AR Financing Agreement").
E. The Financing Loan is evidenced by a certain Accounts
Receivable Financing Note (the "AR Financing Note") dated February 26, 1996.
F. Pursuant to the AR Financing Agreement, DNC shall receive
shares of TRS common stock constituting five percent (5%) of the issued and
outstanding shares
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of TRS capital stock (the "Financing Loan Inducement Stock") and, if DNC does
not first exercise the DNC Option: (i) in the event the February Receivable
Collections (hereinafter defined) do not equal or exceed an amount which is
equal to fifty-six percent (56%) of the TRS Accounts Receivable generated during
the period from February 1, 1996 through February 29, 1996, DNC shall receive
shares of TRS common stock constituting an additional five percent (5%) of the
issued and outstanding shares of TRS capital stock (the "February Stock"), and
(ii) in the event the March Receivable Collections (hereinafter defined) do not
equal or exceed an amount equal to the product of the New Benchmark Rate
(hereinafter defined) and TRS Accounts Receivable generated during the period
from March 1, 1996 through March 31, 1996, DNC shall receive shares of TRS
common stock constituting an additional ten percent (10%) of the issued and
outstanding shares of TRS capital stock (the "March Stock").
G. As a condition to DNC entering into the AR Financing Agreement and
committing to make the Financing Loan, TRS and each of the TRS Stockholders
agreed that TRS shall redeem (the "Contingent Redemption") the AR Financing
Stock (hereinafter defined) in the event DNC exercises the DNC Put Option and
TRS fails to timely pay all amounts due under the AR Financing Note.
H. In connection with TRS and DNC entering into the AR Financing
Agreement, DNC, TRS and the TRS Stockholders desire to amend and restate the
Option Agreement to clarify the terms governing the Contingent Redemption and
the exercise of the DNC Put Option and to evidence the consent of the TRS
Stockholders to (i) the transfer of the AR Financing Stock to DNC and (ii) any
future transfers of TRS capital stock to DNC pursuant to the terms of agreements
between TRS and DNC subsequent to the date hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Option Agreement is
hereby amended and restated to read as follows:
ARTICLE 1.
RECITALS; DEFINITIONS
SECTION 1.1. INCORPORATION OF RECITALS.
The foregoing recitals and statements are made a part of this Agreement.
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SECTION 1.2. DEFINITIONS. Whenever used
in this Agreement, the following terms shall be read as herein provided:
SECTION 1.2.1. "Applicable Multiplier" shall
mean either a multiplier of ten (10) or, instead, a multiplier of eight (8),
depending upon the amount of TRS Pre-Tax Income; such that if TRS Pre-Tax Income
equals or exceeds Projected TRS Pre-Tax Income, the Applicable Multiplier shall
be ten (10), but if TRS Pre-Tax Income does not equal or exceed Projected TRS
Pre-Tax Income, the Applicable Multiplier shall instead be eight (8).
SECTION 1.2.2. "AR Financing Agreement"
shall mean that certain Accounts Receivable Financing Agreement dated as of
February 26, 1996, setting forth the terms and conditions of the Financing Loan.
SECTION 1.2.3. "AR Financing Note" shall
mean that certain Accounts Receivable Financing Note dated February 26, 1996,
made by TRS for the benefit of DNC, evidencing amounts advanced by DNC to TRS
pursuant to the Financing Loan.
SECTION 1.2.4. "AR Financing Stock" shall
mean the collective reference to the Financing Loan Inducement Stock and, if
transferred to DNC pursuant to the terms of this Agreement, the February Stock
and the March Stock.
SECTION 1.2.5. "Contingent Redemption"
shall mean the redemption by TRS of the AR Financing Stock, which shall occur in
the event DNC exercises the DNC Put Option and TRS fails to timely pay all
amounts due under the AR Financing Note.
SECTION 1.2.6. "DNC Exercise Shares" shall
mean a certain, but currently undetermined, number of shares of DNC common stock
which may, at the election of DNC, be conveyed to TRS Stockholders in exchange
for the Remaining TRS Stock in the event DNC exercises the DNC Option.
SECTION 1.2.7. "DNC Grant Shares" shall
mean 100,000 shares of DNC common stock conveyed to TRS Stockholders in
connection with the Working Capital Loan.
SECTION 1.2.8. "DNC Option" shall mean that
certain option granted to DNC by the TRS Stockholders, providing DNC with the
option to acquire all of the TRS Remaining Stock.
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SECTION 1.2.9. "DNC Option Exercise Date"
shall mean the date, if any, on which DNC elects, by written notice to TRS, to
exercise the DNC Option.
SECTION 1.2.10. "DNC Option Exercise Period"
shall mean the period between October 16, 1995 and the DNC Option Expiration
Date.
SECTION 1.2.11. "DNC Option Expiration
Date" shall mean that date which is thirty (30) days after DNC's receipt of
audited financial statements satisfactory to DNC, as required by Section 5.1 of
the Credit Agreement, for TRS's fiscal year ending June 30, 1997.
SECTION 1.2.12. "DNC Put Option" shall mean
that certain option granted to DNC by TRS, providing DNC with the option to
require TRS to redeem all of the Working Capital Loan Inducement Stock in the
event the DNC Option is not exercised, for a redemption price and upon terms set
forth below in Article 3.
SECTION 1.2.13. "DNC Put Option Exercise
Date" shall mean the date, if any, on which DNC elects, by written notice to
TRS, to exercise the DNC Put Option.
SECTION 1.2.14. "Early Exercise Shares
Per TRS Stockholder" shall differ for each of the TRS Stockholders and, for each
TRS Stockholder, shall mean the number of DNC Early Exercise Shares received by
an individual TRS Stockholder, which number shall mean the product obtained by
multiplying 2,500,000 by a fraction the numerator of which is the number of
shares of TRS capital stock held by such stockholder on the DNC Option Exercise
Date and the denominator of which is the total number of shares of TRS capital
stock outstanding on the DNC Option Exercise Date.
SECTION 1.2.15. "Early Exercise Shares"
shall mean 2,500,000 shares of DNC common stock which shall be conveyed to TRS
Stockholders promptly upon DNC's exercise of the DNC Option, provided the DNC
Option Exercise Date is a date occurring prior to January 1, 1997.
SECTION 1.2.16. "Earnings Period" shall
mean the twelve month period beginning July 1, 1996 and concluding June 30,
1997.
SECTION 1.2.17. "Enterprise Value" shall
mean the product obtained by multiplying TRS Earnings by the Applicable
Multiplier.
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SECTION 1.2.18. "Exercise Consideration
Per TRS Stockholder" shall differ for each of the TRS Stockholders and, for each
individual TRS Stockholder, shall mean the product obtained by multiplying
Enterprise Value by a fraction the numerator of which is the number of shares of
TRS capital stock held by such stockholder on the DNC Option Exercise Date and
the denominator of which is the total number of shares of TRS capital stock
outstanding on the DNC Option Exercise Date.
SECTION 1.2.19. "Fair Market Value of DNC
Stock" shall mean that value equal to the average NASDAQ closing bid price of
DNC stock for a six-month period, beginning January 1, 1997 and ending June 30,
1997, adjusted to give effect to any stock dividend, stock split or reverse
stock split.
SECTION 1.2.20. "February Receivable
Collections" shall mean the amount of TRS Accounts Receivable generated during
the period from February 1, 1996 through February 29, 1996, which have been
submitted to DNC as provided in Section 1.2 of the AR Financing Agreement and
collected by TRS as of the close of business on April 29, 1996.
SECTION 1.2.21. "February Stock" shall
mean the number of shares of TRS capital stock equal to five percent (5%) of the
total number of shares of TRS capital stock issued and outstanding as of the
close of business on April 29, 1996, which shares shall be transferred to DNC as
additional consideration for DNC making the Financing Loan only in the event
February Receivable Collections do not meet or exceed an amount equal to
fifty-six percent (56%) of the TRS Accounts Receivable generated during the
period from February 1, 1996 through February 29, 1996.
SECTION 1.2.22. "Financing Loan" shall
mean that certain accounts receivable financing loan in the maximum principal
amount of $500,000 provided by DNC to TRS pursuant to the terms of the AR
Financing Agreement, and evidenced by the AR Financing Note.
SECTION 1.2.23. "Financing Loan Inducement
Stock" shall mean the number of shares of TRS capital stock equal to five
percent (5%) of the total number of shares of TRS capital stock issued and
outstanding on February 26, 1996, which shares are to be transferred to DNC in
consideration of DNC making the Financing Loan.
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SECTION 1.2.24. "Forfeiture Legend" shall
mean a legend set forth on each stock certificate representing DNC Early
Exercise Shares, which shall read as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER
HEREOF, ARE SUBJECT TO FORFEITURE PROVISIONS SET FORTH IN AN
AMENDED AND RESTATED OPTION AGREEMENT DATED AS OF FEBRUARY 26,
1996, A COPY OF WHICH IS ON FILE AND MAY BE EXAMINED AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
SECTION 1.2.25. "Forfeiture Shares", if
any, shall differ for each TRS Stockholder and, for each TRS Stockholder shall
mean the number of shares of DNC common stock held by such stockholder equal to
the difference between such stockholder's Early Exercise Shares Per TRS
Stockholder and the quotient obtained by such stockholder's Exercise
Consideration Per TRS Stockholder by the Fair Market Value of DNC Stock.
SECTION 1.2.26. "March Receivable
Collections" shall mean the amount of TRS Accounts Receivable generated during
the period from March 1, 1996 through March 31, 1996, which have been submitted
to DNC as provided in Section 1.2 of the AR Financing Agreement and collected by
TRS as of the close of business on June 3, 1996.
SECTION 1.2.27. "March Stock" shall
mean the number of shares of TRS capital stock equal to ten percent (10%) of the
total number of shares of TRS capital stock issued and outstanding as of the
close of business on June 3, 1996, which shares are to be transferred to DNC as
additional consideration for the Financing Loan only in the event March
Collections do not meet or exceed an amount equal to the product of the New
Benchmark Rate and the TRS Accounts Receivable generated during the period from
March 1, 1996 through March 31, 1996.
SECTION 1.2.28. "New Benchmark Rate"
shall be established only in the event the February Receivable Collections do
not meet or exceed an amount equal to fifty-six percent (56%) of the TRS
Accounts Receivable generated during the period from February 1, 1996 through
February 29, 1996 and, if established, shall mean a percentage rate of
collection equal to the actual percentage rate of collection, as of April 29,
1996, for TRS Accounts Receivable generated during the period from February 1,
1996 through February 29, 1996.
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SECTION 1.2.29. "Projected TRS Pre-Tax
Income" shall mean the sum of One Million Four Hundred Eighteen Thousand Dollars
($1,418,000).
SECTION 1.2.30. "Redemption Price - AR
Financing Stock" shall mean an amount equal to twice the amount of the
outstanding principal balance, plus accrued interest, if any, due and owing on
the AR Financing Note on that date which is thirty (30) days after the DNC Put
Option Exercise Date.
SECTION 1.2.31. "Redemption Price -
Working Capital Loan Inducement Stock" shall mean an amount equal to the
outstanding principal balance, plus accrued interest, if any, of the Working
Capital Loan on the date of renunciation or expiration of the DNC Option.
SECTION 1.2.32. "Remaining TRS Stock"
shall mean all of the capital stock of TRS which is not owned by DNC on the DNC
Option Exercise Date.
SECTION 1.2.33. "TRS Accounts Receivable"
shall mean gross accounts receivable generated by TRS for services provided
and/or products delivered to TRS customers during a period beginning February 1,
1996 and ending February 21, 1997, without any adjustment for bad debts,
non-collectable amounts or non-payment by TRS customers.
SECTION 1.2.34. "TRS Earnings" shall mean
TRS Pre-Tax Income reduced by an agreed-upon amount equal to forty percent (40%)
of TRS PreTax Income, pursuant to the agreement among the parties that the
foregoing forty percent (40%) reduction shall constitute an assumed combined
federal and state tax rate.
SECTION 1.2.35. "TRS Pre-Tax Income" shall
mean gross income received by TRS during the Earnings Period, as determined by
generally accepted accounting principles consistently applied, less deductions
for depreciation and amortization accrued during the Earnings Period and
calculated on a straight-line basis pursuant to conventions and asset useful
lives provided by applicable Treasury Regulations, and less deductions for
interest paid during the Earnings Period; provided, however, that net operating
losses incurred by TRS shall be excluded from the calculation of TRS Pre-Tax
Income.
SECTION 1.2.36. "Working Capital Loan" shall
mean that certain working capital loan in the maximum principal amount of
$750,000 provided by DNC to TRS pursuant to the terms of the Credit Agreement.
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SECTION 1.2.37. "Working Capital Loan
Inducement Stock" shall mean 455 shares of TRS capital stock transferred to DNC
as consideration for DNC making the Working Capital Loan.
SECTION 1.2.38. "Working Capital Loan Note"
shall mean that certain Note dated October 16, 1995 made by TRS for the benefit
of DNC evidencing the Working Capital Loan.
ARTICLE 2.
THE DNC OPTION
SECTION 2.1. GRANT OF OPTION. Each of the undersigned TRS
Stockholders jointly and severally grant to DNC, subject to the terms and
conditions set forth in this Article 2, the option to purchase all of the
Remaining TRS Stock immediately upon exercise of the DNC Option.
SECTION 2.2. TERM. The DNC Option may be
exercised by DNC for all, but not less than all, of the Remaining TRS Stock at
any time prior to the DNC Option Expiration Date.
SECTION 2.3. EXERCISE. DNC may exercise the DNC Option during
the DNC Option Exercise Period by providing the TRS Stockholders with written
notice, at the notice addresses set forth on the signature pages of this
Agreement or otherwise specified pursuant to Section 6.1, dated not later than
the DNC Option Expiration Date. Within ten (10) days of the date of the written
notice of exercise, the TRS Stockholders or TRS, as the case may be, shall (i)
tender to DNC certificates evidencing all shares of TRS Remaining Stock, and
(ii) each TRS Stockholder who is a director of TRS shall tender to DNC a written
letter of resignation resigning from his or her position as director of TRS. In
the event DNC exercises the DNC Option, it may, at its sole and exclusive
option, terminate any agreements then in effect between TRS and Electronic
Reference Systems, Inc.
SECTION 2.4. CONSIDERATION FOR GRANT OF DNC OPTION. In
connection with the Working Capital Loan, prior to the date hereof, DNC conveyed
the DNC Grant Shares to the TRS Stockholders. All of the DNC Grant Shares were
evidenced by certificates duly executed by officers of DNC. Each TRS Stockholder
received a portion of the DNC Grant Shares equal to such stockholder's
proportionate interest in TRS as of October 16, 1995.
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SECTION 2.5. EXERCISE CONSIDERATION. The consideration which
DNC shall provide in order to acquire the Remaining TRS Stock upon exercise of
the DNC Option shall be the DNC Exercise Shares, with each TRS Stockholder
receiving a portion of the DNC Exercise Shares equal to such stockholder's
proportionate interest in TRS on the DNC Option Exercise Date. Each TRS
Stockholder shall receive a number of the DNC Exercise Shares equal to the
Exercise Consideration Per TRS Stockholder calculated with respect to each such
stockholder divided by the Fair Market Value of DNC Stock. By way of example,
the following calculation illustrates the number of DNC Exercise Shares that
would be received by a TRS Stockholder holding ten percent (10%) of TRS capital
stock on the DNC Option Exercise Date, assuming Five Dollars ($5.00) is the per
share Fair Market Value of DNC Stock and further assuming TRS Earnings of One
Million Five Hundred Thousand Dollars ($1,500,000):
1,500,000 x 10 = 10,500,000 [Enterprise Value]
10,500,000 x 10% = 1,500,000 [Exercise Consideration Per
(10%) TRS Stockholder]
1,500,000 / 5 = 300,000 [Number of DNC Exercise
Shares]
All DNC Exercise Shares shall be evidenced by certificates duly executed by
officers of DNC. The DNC Exercise Shares shall be conveyed by DNC to the TRS
Stockholders within forty-five (45) days following receipt by DNC of the
completed audited financial statement of TRS for the Earnings Period.
SECTION 2.6. EARLY EXERCISE. In the event DNC exercises the
DNC Option prior to January 1, 1997, DNC shall tender the Early Exercise Shares,
with each individual TRS Stockholder entitled to receive a number of the Early
Exercise Shares equal to such stockholder's Early Exercise Shares Per TRS
Stockholder. All Early Exercise Shares shall bear the Forfeiture Legend. The
Early Exercise Shares shall, depending upon subsequent calculation of the
formula set forth in Section 2.5, constitute all or a portion of the DNC
Exercise Shares due in connection with the exercise of the DNC Option; provided,
however, that the Early Exercise Shares received by each individual TRS
Stockholder are subject to forfeiture to the extent the number of such
stockholder's Early Exercise Shares Per TRS Stockholder exceed the quotient
obtained by dividing such stockholder's Exercise Consideration Per TRS
Stockholder by the Fair Market Value of DNC Stock. Upon calculation of the
aforementioned quotient, either (i) any Forfeiture Shares shall promptly be
tendered to DNC, or (ii) if, however, the quotient obtained by dividing each
individual TRS Stockholder's Exercise Consideration Per TRS Stockholder by the
Fair Market Value of DNC Stock exceeds such stockholder's Early Exercise Shares
Per TRS
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Stockholder, then DNC shall promptly tender to each TRS Stockholder shares of
DNC common stock equal to the difference. Upon conclusion of the transaction
referred to in the preceding sentence, full and complete tender of all Exercise
Shares shall be deemed to have occurred.
SECTION 2.7. TRANSFER IN ESCROW. Upon exercise of the DNC
Option, the Remaining TRS Stock shall be transferred to an Escrow Agent
designated by DNC and approved by TRS and held in escrow pursuant to an escrow
agreement containing such terms and conditions as are mutually agreeable to DNC
and TRS until such time as all of the DNC Exercise Shares have been distributed
to the TRS Stockholders pursuant to this Article 2. While held in escrow, the
TRS Stockholders shall retain a security interest in the Remaining TRS Stock
until such time as all of the DNC Grant Shares have been distributed. The escrow
agreement shall provide, among other things, that DNC shall have the full right,
power and authority to vote the Remaining TRS Stock on any matters requiring
approval of the stockholders of TRS.
SECTION 2.8. INVESTMENT REPRESENTATION. Each TRS Stockholder
acknowledges and agrees that neither the DNC Grant Shares nor the DNC Exercise
Shares, which include but are not limited to the Early Exercise Shares, have not
been registered under the Securities Act of 1933 (the "1933 Act"), but that the
transfer thereof to the TRS Stockholders pursuant to this Agreement is intended
to be exempt from registration thereunder pursuant to Section 4(2) thereof and
Regulation D thereunder. In agreeing to accept such shares of DNC stock, each
TRS Stockholder hereby represents and warrants to DNC that such stockholder is
acquiring the all such shares of DNC stock solely for his or her own account and
not for resale or distribution. Each TRS Stockholder also acknowledges and
agrees that a restrictive legend shall be placed on any certificates or other
document evidencing the DNC Grant Shares and the DNC Exercise Shares, which
include but are not limited to the Early Exercise Shares, received by such
stockholder. The legend shall appear on all such certificates or other documents
as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY SIMILAR PROVISIONS OF THE LAWS
OF ANY STATE AND HAVE NOT BEEN ACQUIRED WITH A VIEW TO, OR IN
CONNECTION WITH, ANY SALE OR OTHER DISTRIBUTION THEREOF. NO SUCH SALE,
DISTRIBUTION OR OTHER TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING TO SUCH SHARES OR AN OPINION OF COUNSEL
SATISFACTORY TO THE BOARD OF DIRECTORS OF THE CORPORATION THAT
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SUCH REGISTRATION IS NOT REQUIRED. THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY."
SECTION 2.9. DISCRETION TO CHOOSE FORM OF PAYMENT. The
foregoing provisions notwithstanding, the parties hereto acknowledge and agree
that at its option DNC may substitute cash or cash equivalents for all or any
portion of the DNC Exercise Shares.
ARTICLE 3.
THE DNC PUT OPTION
SECTION 3.1. GRANT OF OPTION. TRS hereby grants to DNC,
subject to the terms and conditions set forth in this Article 3, the option to
require TRS to redeem the Working Capital Loan Inducement Stock for an amount
equal to the Redemption Price - Working Capital Loan Inducement Stock. DNC's
exercise of the DNC Put Option shall have no effect upon TRS's obligation to
repay the Working Capital Loan pursuant to the terms of the Credit Agreement and
the Working Capital Loan Note.
SECTION 3.2. EXERCISE. DNC may exercise the DNC Put Option by
providing TRS with written notice dated on or after the date of renunciation or
termination of the DNC Option. Exercise of the DNC Put Option provided for in
this Article 3 shall cause all amounts evidenced by the AR Financing Note to
become due and payable as provided in Section 4.1 of this Agreement.
SECTION 3.3. PAYMENT. Payment in full of the Redemption Price
Working Capital Loan shall be due by the later of (i) January 2, 1997, or (ii)
that date which is thirty (30) days after the date of the written notice
provided for under Section 3.2 hereof; provided, however, that upon receipt of a
written request from TRS, DNC and TRS shall prepare and execute a written note
which evidences TRS's obligation to pay the Redemption Price - Working Capital
Loan Inducement Stock to DNC, provides for extension of such payment obligation
over a period of seven (7) years in equal monthly installments bearing interest
at the rate of ten percent (10%) per annum, with the initial monthly installment
payment due exactly one month after the date of renunciation or termination of
the DNC Option and the remaining payments due on the first day of each month
thereafter until the note is fully paid, and cross collateral and cross default
provisions with respect to the Working Capital Loan Note
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and the note evidencing TRS's obligation to pay the Redemption Price - AR
Financing Stock pursuant to Section 4.2 hereof.
SECTION 3.4. ESCROW. During the extended seven year payment
period provided for in Section 3.3 hereof, the Working Capital Loan Inducement
Stock shall be transferred to an Escrow Agent designated by DNC and approved by
TRS and held in escrow pursuant to an escrow agreement containing such terms and
conditions as are mutually agreeable to DNC and TRS until such time as the note
evidencing TRS's obligation to pay the Redemption Price - Working Capital Loan
Inducement Stock has been paid in full, including all accrued interest. While
held in escrow, DNC shall retain a security interest in the Working Capital Loan
Inducement Stock until such time as the note evidencing TRS's obligation to pay
the Redemption Price - Working Capital Loan Inducement Stock has been paid in
full. The escrow agreement shall provide, among other things, that DNC shall
have the full right, power and authority to vote the Working Capital Loan
Inducement Stock on any matters requiring approval of the stockholders of TRS.
SECTION 3.5. EXPIRATION UPON EARLY EXERCISE OF DNC OPTION. In
the event DNC exercises the DNC Option prior to January 1, 1997, the DNC Put
Option shall be deemed to have expired without exercise.
ARTICLE 4.
THE CONTINGENT REDEMPTION OF AR FINANCING STOCK
SECTION 4.1. GRANT OF OPTION. In the event the DNC Put Option
is exercised, all amounts advanced pursuant to the Financing Loan and evidenced
by the AR Financing Note shall be due and payable, with interest, thirty (30)
days after the DNC Put Option Exercise Date. In the event the DNC Put Option is
exercised and TRS fails to repay all amounts advanced pursuant to the Financing
Loan and evidenced by the AR Financing Note, prior to the end of the thirty (30)
day period provided for in the preceding sentence, TRS shall be required to
redeem the AR Financing Stock for an amount equal to the Redemption Price - AR
Financing Stock.
SECTION 4.2. PAYMENT. Payment in full of the Redemption Price
- - AR Financing Stock shall be due by the later of (i) January 2, 1997, or (ii)
that date which is sixty (60) days after the DNC Put Option Exercise Date;
provided, however, that upon receipt of a written request from TRS, DNC and TRS
shall prepare and execute a written note which evidences TRS's obligation to pay
the Redemption Price - AR Financing Stock to DNC, provides for extension of such
payment obligation over a period of seven (7) years in equal monthly
installments bearing interest at the rate of
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ten percent (10%) per annum, with the initial monthly installment payment due on
that date which is sixty (60) days after the DNC Put Option Exercise Date and
the remaining payments due on the first day of each month thereafter until the
note is fully paid, and cross collateral and cross default provisions with
respect to the Working Capital Loan Note and the note evidencing TRS's
obligation to pay the Redemption Price - Working Capital Loan Inducement Stock.
SECTION 4.3. ESCROW. During the extended seven year payment
period provided for in Section 4.2 hereof, the AR Financing Stock shall be
transferred to an Escrow Agent designated by DNC and approved by TRS and held in
escrow pursuant to an escrow agreement containing such terms and conditions as
are mutually agreeable to DNC and TRS until such time as the note evidencing
TRS's obligation to pay the Redemption Price - AR Financing Stock has been paid
in full, including all accrued interest. While held in escrow, DNC shall retain
a security interest in the AR Financing Stock until such time as the note
evidencing TRS's obligation to pay the Redemption Price - AR Financing Stock has
been paid in full. The escrow agreement shall provide, among other things, that
DNC shall have the full right, power and authority to vote the AR Financing
Stock on any matters requiring approval of the stockholders of TRS.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
TRS and each of the TRS Stockholders, jointly and severally
represent and warrant that:
SECTION 5.1. CORPORATE EXISTENCE AND POWER; TRS SHARES
OUTSTANDING. TRS is a corporation duly incorporated, validly existing and in
good standing under the laws of the Florida, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. TRS is duly qualified as a
foreign corporation, licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate,
could have a material adverse effect on the business, financial position,
results of operations or properties of TRS. As of the date hereof, TRS has
issued and outstanding 1,300 shares of common stock of a single class. All of
the shares of issued and outstanding stock in TRS are duly authorized, validly
issued, fully paid and nonassessable.
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SECTION 5.2. DUE AUTHORIZATION; CONTRAVENTION. The execution,
delivery and performance by TRS of this Agreement is within its corporate power,
has been duly authorized by all necessary corporate action, requires no action
by or in respect of, or filing with, any governmental body, agency or official
and does not contravene, or constitute (with or without the giving of notice or
lapse of time or both) a default under, any provision of applicable law or of
the articles of incorporation or bylaws of TRS or of any agreement, judgment,
injunction, order, decree or other instrument binding upon or affecting TRS and
will not result in the creation or imposition of any lien (other than the lien
of the Security Agreement, as amended) on any of its assets.
SECTION 5.3. BINDING EFFECT. This Agreement constitutes a
valid and binding agreement of TRS and of each of the TRS Stockholders and when
executed and delivered, will constitute a valid and binding obligation of TRS
and of each of the TRS Stockholders, enforceable against TRS and of each of the
TRS Stockholders in accordance with its terms.
SECTION 5.4. LITIGATION. There is no action, suit or
proceeding pending against, or to the knowledge of TRS threatened against or
affecting, TRS before any federal, state or local government, authority, agency,
court or other body, officer or entity, or before any arbitrator with authority
to bind a party at law, in which there is a reasonable possibility of a decision
which could materially adversely affect the business, financial position,
results of operations or properties of TRS or which in any manner draws into
question the validity of this Agreement, and there is no basis known to TRS for
any such action, suit or proceeding.
SECTION 5.5. FILINGS. All actions by or in respect of, and all
filings with, any governmental body, agency or official required in connection
with the execution, delivery and performance of this Agreement, or necessary for
the validity or enforceability hereof or for the protection or perfection of the
rights and interests of DNC hereunder, will, prior to the date of delivery
hereof, have been duly taken or made, as the case may be, and will at all times
thereafter remain in full force and effect.
ARTICLE 6.
MISCELLANEOUS
SECTION 6.1. NOTICES. All notices, requests and other
communications to a party hereunder shall be in writing and shall be given to
such party at its address set forth on the signature pages hereof or such other
address as such party may hereafter specify for that purpose by notice to the
other. Each such notice, request or other
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<PAGE>
communication shall be effective (i) if given by U.S. Mail, 72 hours after such
communication is deposited in the U.S. Mail with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means, when delivered at
the address specified in this Section 6.1.
SECTION 6.2. NO WAIVERS. No failure or delay by DNC in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 6.3. AMENDMENTS AND WAIVERS. Any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by TRS, each of the TRS
Stockholders and DNC.
SECTION 6.4. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither TRS nor any of
the TRS Stockholders may assign or otherwise transfer any of its or their rights
under this Agreement without the prior written consent of DNC.
SECTION 6.5. GOVERNING LAW. This Agreement and
the Note shall be deemed to be contracts made under seal and shall be governed
by and construed in accordance with the laws of the Mississippi, except as
otherwise provided herein.
SECTION 6.6. COUNTERPARTS; FACSIMILE SIGNATURES;
EFFECTIVENESS. This Agreement may be signed in counterparts by facsimile or
original signature, each of which shall be effective as an original, with the
same effect as if the signatures thereto and hereto were upon a single, original
copy of this Agreement. This Agreement shall become effective when DNC shall
have received original or facsimile counterparts hereof signed by all parties.
SECTION 6.7. ENTIRE AGREEMENT. This Agreement, the Credit
Agreement, the Note, the AR Financing Agreement, and the AR Financing Note set
forth the entire agreement of the parties with respect to the subject matter
hereof and thereof and supersede all previous understandings, written or oral,
in respect thereof.
SECTION 6.8. COVENANT REGARDING TRANSFERS OF TRS
STOCK. TRS and/or each of the TRS Stockholders, as the case may be, promise to
promptly transfer to DNC (i) the AR Financing Stock in accordance with the terms
of the AR
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Financing Agreement and (ii) any additional shares of TRS capital stock which
may the transfer of which may be required pursuant to the terms of any
agreements between TRS and DNC subsequent to the date hereof.
SECTION 6.9. RATIFICATION. TRS and each TRS
Stockholder ratifies and affirms all of the terms and provisions of, and all of
his or her obligations under, the Option Agreement, as hereby amended and
restated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ATTEST/WITNESS: DIXIE NATIONAL CORPORATION
/s/ THERESA D. HARTER By: /s/ G. THOMAS REED [SEAL]
Name: G. Thomas Reed, President
Title: 107 Executive Center
Hilton Head Island, South Carolina 29928
TEXT RETRIEVAL SYSTEMS, INC.
/s/ KATHY L. HOWE By: /s/ BRUCE GROWELL [SEAL]
Name: Bruce Grewell, President
Title: 200 Executive Way
Ponte Vedra Beach, Florida 32082
WITNESS: STOCKHOLDERS
/s/ KATHY L HOWE /s/ CONNIE GAMBLE GREWELL [SEAL]
Name: Connie Gamble Grewell
c/o Text Retrieval Systems, Inc.
200 Executive Way
Ponte Vedra Beach, Florida 32082
17
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WITNESS:
/s/ DAVID A. SPURIA [SEAL]
Name: David A. Spuria
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, TX 75201-6950
______________________ /s/ ANTHONY SPURIA [SEAL]
Name: Anthony Spuria
Marcon
200 Executive Way
Ponte Vedra Beach, FL 32082
______________________ /s/ ROBERT ROWE [SEAL]
Name: Robert Rowe
Plastics Manufacturing, Inc.
4685 Highway 49, Box 579
Harrisburg, NC 28075
______________________ /s/ WADE MOYER [SEAL]
Name: Wade Moyer
A La Carte
4400 Stuart Andrew Blvd., Suite K
Charlotte, NC 28217
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<PAGE>
WITNESS:
______________________ /s/ WILLIAM ZACHARY, JR. [SEAL]
Name: William Zachary, Jr.
Zachary & Seagraves
1000 Commerce Drive
Decatur, GA 30030
______________________ /s/ GEORGE KANNAN [SEAL]
Name: George Kannan
c/o Makshoff Services (Europe)
Limited
Kensington Centre
66 Hammersmith Road
London England W14 8YT
______________________ /s/ WILLIAM SALLADIN [SEAL]
Name: William Salladin
All Risk, LTD.
1020 Cromwell Bridge Road
Towson, MD 21286
______________________ /s/ NICK CORTEZI [SEAL]
Name: Nick Cortezi
All Risk, LTD.
1020 Cromwell Bridge Road
Towson, MD 21286
19
<PAGE>
WITNESS:
______________________ /s/ J.D. GREWELL [SEAL]
Name: J.D. Grewell
9001 16th Street
Silver Spring, MD 20910
______________________ /s/ CHRISTINE GREWELL [SEAL]
Name: Christine Grewell
9001 16th Street
Silver Spring, MD 20910
20
EXHIBIT 2
DOCUMENT ESCROW AGREEMENT
THIS DOCUMENT ESCROW AGREEMENT (this "DOCUMENT ESCROW AGREEMENT") is
entered into as of the 1st day of April, 1996 by and between DIXIE NATIONAL
CORPORATION, a Mississippi corporation ("DNC"), TEXT RETRIEVAL SYSTEMS, INC., a
Florida corporation ("TRS"), and HOLDERS OF THE COMMON STOCK OF TRS AS OF
FEBRUARY 26, 1996, EXCEPT DNC (collectively, the "TRS Stockholders"), and
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P. (the "Document Escrow Agent").
R E C I T A L S
A. DNC, TRS, and the TRS Stockholders are parties to that certain
Amended and Restated Option Agreement dated as of February 26, 1996 (the
"Agreement").
B. Unless otherwise defined herein, defined terms used in this
Escrow Agreement shall have the meanings assigned to them in the Agreement.
C. Pursuant to terms of the Agreement, certificates (the
"Certificates") have been delivered to the Document Escrow Agent by TRS
representing 780 shares of TRS common stock (identified in the Agreement as the
"Remaining TRS Stock") to be held by the Document Escrow Agent in accordance
with the terms and provisions of this Document Escrow Agreement.
D. DNC, TRS, and the TRS Stockholders (collectively, the
"Parties") have engaged the Document Escrow Agent to hold the Certificates in
escrow pursuant to the terms and conditions of this Document Escrow Agreement.
E. It is the express intent of the Parties that the Certificates duly
endorsed and delivered to the Document Escrow Agent by Remaining TRS
Stockholders or their affiliates FOR delivery to DNC pursuant to the terms
hereof shall not be deemed delivered to DNC until all of the conditions to such
delivery provided for herein have been met and such certificates have, in fact,
been delivered to DNC pursuant to the terms hereof.
A G R E E M E N T
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Engagement of Document Escrow Agent. The Parties hereby
engage the Document Escrow Agent to serve as escrow agent with respect to the
Certificates, and the Document Escrow Agent hereby accepts such engagement on
the terms and subject to the conditions set forth herein.
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2. Voting of Remaining TRS Stock . During period that the
Certificates are held in escrow hereunder, DNC shall have the full right, power
and authority to vote the Remaining TRS Stock on any matters requiring approval
of the stockholders of TRS.
3. Release from Escrow When Consideration Received. In the
event that the TRS Stockholders receive the Exercise Consideration Per TRS
Stockholder as provided in the Agreement, Connie Gamble Grewell, on behalf of
all TRS Stockholders, will give written notice to the Document Escrow Agent
within two business days following the TRS Stockholders' receipt of the Exercise
Consideration Per TRS Stockholder. Such notice shall certify that all of the TRS
Stockholders received the Exercise Consideration Per TRS Stockholder on a
specified date. Promptly upon the Document Settlement Agent's receipt of such
notice, the Document Settlement Agent is authorized to and shall deliver the
Certificates to DNC.
4. Release from Escrow if Consideration Not Received. In the
event that, on or before December 1, 1997, the TRS Stockholders do not receive
all of the Exercise Consideration Per TRS Stockholder as provided in the
Agreement, Connie Gamble Grewell, on behalf of all TRS Stockholders, will give
written notice to the Document Escrow Agent not later than December 3, 1997.
Such notice shall certify that the TRS Stockholders did not receive the full
amount of the Exercise Consideration Per TRS Stockholder on or before December
1, 1997. Promptly upon the Document Settlement Agent's receipt of such notice,
the Document Settlement Agent is authorized to and shall redeliver the
Certificates to the TRS Stockholders. In the event the TRS Stockholders do not
receive all of the Exercise Consideration Per TRS Stockholder on or before
December 1, 1997 and Connie Gamble Grewell fails to provide the Document Escrow
Agent with the notice required by this paragraph, the Document Escrow Agent
shall deposit the Certificates into a court of competent jurisdiction in the
State of Maryland, and interplead DNC, TRS and the TRS Stockholders and,
thereafter, the Document Escrow Agent shall have no further obligations
hereunder.
5. Dispute. In the event at any time (i) of a dispute
regarding the Certificates held in escrow by the Document Escrow Agent, (ii) of
a dispute regarding the performance by the Parties under the Agreement, (iii) of
a dispute regarding the performance by DNC, TRS, the TRS Stockholders or the
Document Escrow Agent under this Document Escrow Agreement, or (iv) the Document
Escrow Agent shall receive conflicting demands or instructions under this
Document Escrow Agreement, all parties hereto agree that, at the sole option of
the Document Escrow Agent, (A) all documents then held in escrow by the Document
Escrow Agent shall remain in escrow until resolution of the dispute, or (B) the
Document Escrow Agent shall be entitled to deposit all such documents into a
court of competent jurisdiction in the State of Maryland and to interplead DNC,
TRS, and the TRS Stockholders (or such of the TRS Stockholders as may be
appropriate) in connection therewith, and DNC, TRS, and the TRS Stockholders
hereby consent to the jurisdiction of such court in connection with any such
dispute.
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2
6. Non-Liability of Document Escrow Agent. The Document
Escrow Agent shall not be liable to any party for any damage, liability or loss
arising out of or in connection with
the services rendered by the Document Escrow Agent pursuant to this Document
Escrow Agreement except for damage, liability or loss resulting from the willful
misconduct or gross negligence of the Document Escrow Agent. The Document Escrow
Agent may rely on the written notices, communications, orders or instructions
given by any party hereto to the extent that such notices, communications,
orders or instructions do not violate any other provision hereof and do not
conflict with the written communications of another party hereto.
7. Notices. All notices and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature pages hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) if given by U.S. Mail, 72
hours after such communication is deposited in the U.S. Mail with first class
postage prepaid, addressed as aforesaid or (ii) if given by any other means,
when delivered at the address specified in this Paragraph 6.
8. No Modification. The instructions contained herein
may not be modified, amended or altered in any way except by a writing signed by
all of the Parties.
9. Substitution of Document Escrow Agent. The Parties
reserve the right, at any time and from time to time, to substitute a new
mutually acceptable escrow agent in the place
of the Document Escrow Agent.
10. Resignation of Document Escrow Agent. The Document Escrow
Agent reserves the right to resign hereunder effective thirty (30) days after
written notice to the Parties. Upon receipt of such notice, the Parties shall
have ten (10) days to agree upon a new mutually acceptable escrow agent to serve
as substitute Document Escrow Agent pursuant to the terms of this Document
Escrow Agreement. In the event the Parties cannot agree upon a substitute
Document Escrow Agent within such ten (10) day period, DNC shall have the right,
on or before the effective date of such resignation, to designate a substitute
Document Escrow Agent to serve as substitute document escrow agent pursuant to
the terms of this Document Escrow Agreement. Prior to the effective date of such
resignation, DNC shall provide written notice to the Document Escrow Agent and
the Parties of its designation of the substitute Document Escrow Agent. If such
notice is not received by the Document Escrow Agent on or before the effective
date of such resignation, the Document Escrow Agent shall promptly give
additional notice of that fact to DNC and to the Parties and the Document Escrow
Agent shall continue to serve as interim Document Escrow Agent hereunder for an
additional sixty (60) days, during which time the TRS Stockholders shall have
the right to designate an independent substitute Document Escrow Agent. Prior to
the expiration of such sixty (60) day period, the TRS Stockholders shall provide
DNC and the Document Escrow Agent written notice of their designation of the
substitute Document Escrow Agent. On or at any time within three (3) days after
such resignation becomes effective, the Document Escrow Agent shall deliver the
Escrow Documents to the substitute Document Escrow Agent. From and after the
effective date of such resignation and the delivery of the
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Escrow Documents to the substitute Document Escrow Agent, the Escrow Agent shall
have no further liability under this Document Escrow Agreement.
11. Indemnification. Except as otherwise herein expressly
provided, the Parties agree to indemnify, protect, save and hold harmless the
Document Escrow Agent, its affiliates, partners, employees, successors, assigns
and agents from all liabilities, obligations, losses, damages, claims, actions,
suits, costs and expenses (including without limitation, reasonable attorneys'
fees) of whatever kind or nature, imposed on, incurred by or asserted against
the Document Escrow Agent which are in any way related to or arise out of the
execution and delivery of this Document Escrow Agreement and/or any action taken
hereunder by the Document Escrow Agent; provided however, that the Parties shall
have no such obligation to indemnify, save and hold harmless the Document Escrow
Agent for any liability incurred by, imposed under or asserted against the
Document Escrow Agent for or as a result of its own gross negligence or willful
misconduct. The Parties shall indemnify the Document Escrow Agent for reasonable
attorneys' fees incurred by the Document Escrow Agent in any dispute among the
Parties.
12. Standard of Conduct of Document Escrow Agent. The Document
Escrow Agent shall not be required to take any action hereunder except as
expressly set forth herein. The Document Escrow Agent shall have no duty or
obligation to make any independent or special investigation concerning the
authenticity of the signature of any person signing such written instruction or
the authority of any such person; provided, however, that nothing herein shall
relieve the Document Escrow Agent from the duty and obligation to act in good
faith in performing its obligations hereunder.
13. Fees. The Document Escrow Agent shall charge the Parties,
at the effective hourly rates for its partners and employees, including without
limitation associate attorneys, for services rendered hereunder. The Parties
shall pay all charges of the Document Escrow Agent in acting hereunder, and such
reasonable attorneys' fees, expenses and other costs as may be incurred by the
Document Escrow Agent in connection with the negotiation, preparation and
administration of this Document Escrow Agreement.
14. Governing Law. This Document Escrow Agreement shall
be governed by and construed in accordance with the laws of the State of
Maryland. Any provision hereof which may prove unenforceable under any law of
the State of Maryland shall not affect the validity of any other provision
hereof.
14. Successors and Assigns. This Document Escrow
Agreement shall be binding upon and inure to the benefit of the undersigned and
their respective successors and
assigns.
15. Termination. This Document Escrow Agreement shall
terminate December 31, 1997.
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WITNESS the following signatures and seals, the parties intending that
this be an instrument under seal.
ATTEST/WITNESS: DIXIE NATIONAL CORPORATION
/s/ THERESA D. HARTER By: /s/ G. THOMAS REED [SEAL]
Name: G. Thomas Reed, President
Title: 107 Executive Center
Hilton Head Island, South Carolina 29928
TEXT RETRIEVAL SYSTEMS, INC.
/s/ KATHY L. HOWE By:/s/ BRUCE GREWELL [SEAL]
Name: Bruce Grewell, President
Title: 200 Executive Way
Ponte Vedra Beach, Florida 32082
STOCKHOLDERS
/s/ KATHY L. HOWE CONNIE GAMBLE GREWEL [SEAL]
Name: Connie Gamble Grewell
c/o Text Retrieval Systems, Inc.
200 Executive Way
Ponte Vedra Beach, Florida 32082
/s/ CRAIG AOAS DAVID A. SPURIA [SEAL]
Name: David A. Spuria
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, TX 75201-6950
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/s/ KATHY L. HOWE /s/ ANTHONY SPURIA [SEAL]
Name: Anthony Spuria
Marcon
200 Executive Way
Ponte Vedra Beach, FL 32082
/s/ FRANCES M. MCDONALD /s/ ROBERT ROWE [SEAL]
Name: Robert Rowe
Plastics Manufacturing, Inc.
4685 Highway 49, Box 579
Harrisburg, NC 28075
/s/ LANIA W. FREEMAN /s/ WADE MOYER [SEAL]
Name: Wade Moyer
A La Carte
4400 Stuart Andrew Blvd., Suite K
Charlotte, NC 28217
/s/ SUZANNA A. SLIGH /s/ WILLIAM ZACHARY, JR. [SEAL]
Name: William Zachary, Jr.
Zachary & Seagraves
1000 Commerce Drive
Decatur, GA 30030
/s/ ANDREW HOMAN /s/ GEORGE KANNAN [SEAL]
Name: George Kannan
c/o Makshoff Services (Europe)
Limited
Kensington Centre
66 Hammersmith Road
London England W14 8YT
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______________________ /s/ WILLIAM SALLADIN [SEAL]
Name: William Salladin
All Risk, LTD.
1020 Cromwell Bridge Road
Towson, MD 21286
______________________ /s/ NICK CORTEZI [SEAL]
Name: Nick Cortezi
All Risk, LTD.
1020 Cromwell Bridge Road
Towson, MD 21286
/s/ WUTYI TUN /s/ J. D. GREWELL [SEAL]
Name: J.D. Grewell
9001 16th Street
Silver Spring, MD 20910
/s/ WUTYI TUN /s/ CHRISTINE GREWELL [SEAL]
Name: Christine Grewell
9001 16th Street
Silver Spring, MD 20910
DOCUMENT ESCROW AGENT
MCGUIRE, WOODS, BATTLE & BOOTHE L.L.P.
By: /s/ JOHN J. WOLOSZYN [SEAL]
John J. Woloszyn, Partner
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