SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Cox Technologies, Inc.
----------------------
(Name of Issuer)
Common Stock
------------------------------
(Title of Class of Securities)
224056101
------------------------------
(CUSIP Number)
Brian D. Fletcher
191 Bridgeport Drive
Mooresville, North Carolina 28117
(704)896-0241
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 10, 2000
-------------------------------------------------------
(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(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. Seess.240.13d-7(b) for other
parties to whom copies are to be sent.
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 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act.
<PAGE>
CUSIP NO.: 224056101 Page 2 of 9 Pages
- ------------------- ------------------------------------------------------------
1 NAME OF REPORTING PERSON
Brian D. Fletcher
- ------------------- ------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [ ]
- ------------------- ------------------------------------------------------------
3 SEC USE ONLY
- ------------------- ------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- ------------------- ------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------- ------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- ------------------- ----------- ------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
----------- ------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
2,703,000
----------- ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
----------- ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,703,000
- ------------------- ------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,703,000
- ------------------- ------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
- ------------------- ------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.19%
- ------------------- ------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- ------------------- ------------------------------------------------------------
<PAGE>
CUSIP NO.: 224056101 Page 3 of 9 Pages
- ------------------- ------------------------------------------------------------
1 NAME OF REPORTING PERSON
Kurt C. Reid
- ------------------- ------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [ ]
- ------------------- ------------------------------------------------------------
3 SEC USE ONLY
- ------------------- ------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- ------------------- ------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------- ------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- ------------------- ----------- ------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
----------- ------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
2,700,000
----------- ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
----------- ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,700,000
- ------------------- ------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,700,000
- ------------------- ------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------- ------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.18%
- ------------------- ------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- ------------------- ------------------------------------------------------------
<PAGE>
CUSIP NO.: 224056101 Page 4 of 9 Pages
- ------------------- ------------------------------------------------------------
1 NAME OF REPORTING PERSON
Technology Investors, LLC
- ------------------- ------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [ ]
- ------------------- ------------------------------------------------------------
3 SEC USE ONLY
- ------------------- ------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- ------------------- ------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------- ------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
North Carolina
- ------------------- ----------- ------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
----------- ------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
2,000,000
----------- ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
----------- ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,000,000
- ------------------- ------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000
- ------------------- ------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------- ------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.75%
- ------------------- ------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- ------------------- ------------------------------------------------------------
<PAGE>
Page 5 of 9 Pages
EXPLANATORY NOTE:
Technology Investors, LLC ("Technology Investors" or the "Company") is
the sole record holder of a 10% subordinated convertible promissory note (the
"Note") issued by Cox Technologies, Inc. ("Cox"). The principal amount of the
Note and interest accrued thereon are convertible, at the option of the holder
into shares of Cox's common stock, no par value ("Common Stock"), at a
conversion price of $1.25 per share. Kurt C. Reid ("Reid") and Brian D. Fletcher
("Fletcher") serve as managers of Technology Investors and, as such, share
voting and dispositive power with respect to the Common Stock issuable upon
conversion of the Note. In connection with Technology Investors' purchase of the
Note, Reid and Fletcher each received an option to purchase notes with terms
substantially similar to those of the Note having an aggregate principal amount
of up to $500,000 (the "Note Options"). Also in connection with the transaction,
Reid and Fletcher each were retained as consultants to Cox and received
immediately exercisable options to purchase 300,000 shares of Common Stock (the
"Stock Options"). Fletcher and Reid serve as the sole managers of Technology
Investors. Therefore Reid, Fletcher and Technology Investors may be deemed, for
the purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to have formed a "group".
<PAGE>
Page 6 of 9 Pages
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock of Cox, an Arizona
corporation. The principal executive offices of Cox are located at 69
McAdenville Road, Belmont, North Carolina 28012.
ITEM 2. IDENTITY AND BACKGROUND
(A) - (C) AND (F) This statement is being filed on behalf of Fletcher,
Reid, and Technology Investors (collectively, the "Reporting Persons") as a
result of the transactions described under Items 3 and 5.
Brian D. Fletcher, a United States citizen, is a self-employed
professional investor. His address is 191 Bridgeport Drive, Mooresville, North
Carolina 28117.
Kurt C. Reid, a United states citizen, is a self-employed professional
investor. His address is 102 La Bellvue Street, Morganton, North Carolina 28655.
Technology Investors is a private investment company organized as a
North Carolina manager-managed limited liability company. The address of its
registered office is 191 Bridgeport Drive, Mooresville, North Carolina 28117.
(D) AND (E) During the last five years, none of the Reporting Persons
have (i) been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) 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
further violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violations with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On March 10, 2000, Technology Investors purchased the Note for
$2,500,000 using funds raised in a private offering from approximately twelve
accredited investors, as such term is defined under Rule 501(a) promulgated
under the Securities Act of 1933, as amended (the "Note Purchase Transaction").
To the knowledge of the Reporting Persons, each member of Technology Investors
used personal funds to purchase units of membership interest in the Company. In
connection with the Note Purchase Transaction, Reid and Fletcher received the
Note Options, which permit them to purchase notes with terms substantially
similar to those of the Note having an aggregate principal amount of up to
$500,000. Pursuant to their respective consulting agreements with Cox, Reid and
Fletcher received the Stock Options. It is anticipated that Reid and Fletcher
will use personal funds to exercise the Note Options and the Stock Options.
<PAGE>
Page 7 of 9 Pages
ITEM 4. PURPOSE OF TRANSACTION
All shares of Common Stock acquired by the Reporting Persons have been
acquired for general investment purposes. The Reporting Persons may from time to
time seek to increase, reduce or dispose of their investment in the Company in
open market or privately negotiated transactions or otherwise. The determination
to effect any such transactions will depend on, among other things, the market
price of the Common Stock, availability of funds, borrowing costs, market
conditions, tax considerations, developments affecting Cox and the Reporting
Persons, other investment opportunities available to the Reporting Persons and
other considerations. In connection with Technology Investors' purchase of the
Note, Reid and Fletcher received the Note Options, were named directors of Cox
for a three-year term, were appointed to the board's executive committee, were
retained as consultants to Cox, and received the Stock Options. From time to
time and by virtue of their consulting capacity, Reid and Fletcher, in their
respective individual capacities or on behalf of Technology Investors, may hold
discussions with third parties or with management of Cox in which Reid and
Fletcher may suggest or take a position with respect to potential changes in the
operations, management or capital structure of Cox. Such suggestions or
positions may relate to one or more of the transactions specified in clauses (a)
through (j) of Item 4 of Schedule 13D. Except as set forth above, the Reporting
Persons do not have any present plans or proposals that relate to or would
result in any of the actions required to be described in Item 4. Each of the
Reporting Persons may, at any time, review or reconsider his or its position
with respect to Cox and formulate plans or proposals with respect to any of such
matters, but has no present intention of doing so.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(A)-(B) Technology Investors beneficially owns 2,000,000 shares of
Common Stock. These shares are issuable upon conversion of the Note.
Fletcher beneficially owns 2,703,000 shares of Common Stock. This
amount includes the 2,000,000 shares issuable upon conversion of the Note,
400,000 shares issuable upon purchase and conversion of the entire principal
amount of notes covered by the Note Options, 300,000 shares issuable upon
exercise of the Stock Option held by Fletcher, and 3,000 shares held of record
by Fletcher. By virtue of his status as a manager of Technology Investors,
Fletcher shares voting and dispositive power with respect to the shares issuable
upon conversion of the Note.
Reid beneficially owns 2,700,000 shares of Common Stock. This amount
includes the 2,000,000 shares issuable upon conversion of the Note, 400,000
shares issuable upon purchase and conversion of the entire principal amount of
notes covered by the Note Options, and 300,000 shares issuable upon exercise of
the Stock Option held by Reid. By virtue of his status as a manager of
Technology Investors, Reid shares voting and dispositive power with respect to
the shares issuable upon conversion of the Note.
(C) The Reporting Persons have not effected any transactions in Cox
common stock during the past 60 days.
(D) Not applicable.
<PAGE>
Page 8 of 9 Pages
(E) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
In connection with Technology Investors' purchase of the Note, Reid and
Fletcher received the Note Options, were named directors of Cox for a three-year
term, were appointed to the board's executive committee, were retained as
consultants to Cox, and received the Stock Options.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Joint Filing Agreement of Brian D. Fletcher, Kurt C. Reid
and Technology Investors, LLC pursuant to Rule 13d-1(k)
Exhibit 2: 10% Subordinated Convertible Promissory Note
Exhibit 3: Convertible Note Option Agreement
Exhibit 4: Non-Qualified Stock Option Agreement, dated March 10,
2000, by and between Cox and Kurt C. Reid
Exhibit 5: Non-Qualified Stock Option Agreement, dated March 10,
2000, by and between Cox and Brian D. Fletcher
<PAGE>
Page 9 of 9 Pages
SIGNATURES
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.
Dated: March 20, 2000
/S/ BRIAN D. FLETCHER
-------------------------------
Brian D. Fletcher
/S/ KURT C. REID
-------------------------------
Kurt C. Reid
TECHNOLOGY INVESTORS, LLC
By: /S/ BRIAN D. FLETCHER
----------------------------
Brian D. Fletcher, Manager
By: /S/ KURT C. REID
----------------------------
Kurt C. Reid, Manager
EXHIBIT 1
Joint Filing Agreement
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf of
each of them of a statement on Schedule 13D (including any amendments thereto)
with respect to the Common Stock, par value $.01 per share, of Cox Technologies,
Inc., an Arizona corporation, and further agree that this Joint Filing Agreement
be included as exhibit to such joint filings. In evidence thereof, the
undersigned parties, each being duly authorized, hereby execute this Agreement
on the 20th day of March 2000.
/S/ BRIAN D. FLETCHER
-----------------------------
Brian D. Fletcher
/S/ KURT C. REID
-----------------------------
Kurt C. Reid
TECHNOLOGY INVESTORS, LLC
By: /S/ BRIAN D. FLETCHER
--------------------------
Brian D. Fletcher, Manager
By: /S/ KURT C. REID
--------------------------
Kurt C. Reid, Manager
COX TECHNOLOGIES, INC.
10% SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE
DUE 2005
$2,500,000.00 Mooresville, North Carolina
March 10, 2000
FOR VALUE RECEIVED, the undersigned, COX TECHNOLOGIES, INC., an Arizona
corporation (the "Company"), promises to pay to TECHNOLOGY INVESTORS, LLC, a
North Carolina limited liability company, or its permitted assigns (the
"Holder"), the principal sum of TWO MILLION FIVE HUNDRED THOUSAND Dollars
($2,500,000) on March 10, 2005 (the "Maturity Date"), with interest thereon as
provided herein.
1. NOTE PURCHASE AGREEMENT. This senior subordinated promissory note
(this "Note") is the Note issued pursuant to the Note Purchase Agreement, dated
as of the date hereof (the "Note Purchase Agreement"), between the Company and
the purchaser named therein, and the Holder is subject to the terms and entitled
to the benefits of this Note and the Note Purchase Agreement and may enforce the
agreements of the Company contained herein and therein and exercise the remedies
provided for hereby and thereby or otherwise available in respect hereto and
thereto. CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION HAVE THE MEANINGS
ASSIGNED THERETO IN THE NOTE PURCHASE AGREEMENT.
2. INTEREST. Subject to the terms and conditions hereof, the Company
promises to pay interest on the principal amount of this Note at the rate of 10%
per annum, payable in arrears on the Maturity Date. Interest on this Note shall
accrue from the date of issuance until repayment of the principal and payment of
all accrued interest and premium in full, shall be computed on the basis of a
365-day year. The accrued interest shall compound annually.
3. OPTIONAL PREPAYMENT
(a) After March 10, 2002 and upon notice given to the Holder
as provided in Section 3(b), the Company, at its option, may at any
time prepay all or any portion of this Note, by paying an amount equal
to the outstanding principal amount of this Note, or the portion of
this Note called for prepayment, together with interest accrued and
unpaid thereon to the date fixed for prepayment, and all other amounts
due under this Note and the Note Purchase Agreement. No provision of
this Section 3(a) shall abridge or impair the Holder's ability to
exercise its conversion rights pursuant to Section 5 of this Note.
(b) The Company shall give written notice of prepayment of
this Note or any portion thereof pursuant to Section 3(a) not less than
90 days prior to the date fixed for such prepayment. Upon the giving of
notice of prepayment by the Company, the Company covenants and agrees
that it will prepay, on the date therein fixed for prepayment, this
Note or the portion hereof so called for prepayment, by paying an
amount equal to the outstanding principal amount hereof or the portion
hereof so called for prepayment together with interest accrued and
unpaid thereon to the date fixed for such prepayment, and all other
amounts due under this Note and the Note Purchase Agreement.
(c) All optional prepayments under Section 3 of this Note
shall be applied first to any amount other than accrued interest and
principal that are payable hereunder and under the Note Purchase
Agreement, if any, then to payment of accrued interest and thereafter
to payment of principal.
4. MANDATORY PREPAYMENTS
(a) If, at any time while this Note is outstanding, any of the
following events occurs (each such event, a "Mandatory Prepayment
Event"), then, at the option of the Holder, the Company shall make a
mandatory prepayment of this Note in whole or in part at the time of
such Mandatory Prepayment Event:
<PAGE>
(i) the consummation of any Organic Change; or
(ii) the occurrence of a Change of Control.
(b) The Company shall give written notice to the Holder of any
of the Mandatory Prepayment Events described in this Section 4 not less
than 15 nor more than 60 days prior to the proposed closing date
thereof describing in reasonable detail such transaction and the
proposed closing date. Upon receipt of such notice, the Holder shall
have a period of 10 days in which to notify the Company of the
principal amount of this Note or portion thereof to be prepaid. Upon
receipt of such notice from the Holder, the Company covenants and
agrees it will prepay, on the closing date of such transaction, this
Note or the portion thereof subject to prepayment by paying an amount
equal to the outstanding principal amount hereof subject to prepayment
together with interest accrued and unpaid thereon. Each such prepayment
shall be applied as provided in Section 3(c) hereof.
(c) No provision of this Section 4 shall abridge or impair the
Holder's ability to exercise its conversion rights pursuant to Section
5 of this Note.
5. CONVERSION
(a) General. The Holder may convert the principal amount of
this Note and interest accrued thereon into Common Stock of the Company at any
time on or before the close of business on March 10, 2005. If this Note is to be
prepaid pursuant to Section 3 of this Note, the Holder may convert all or a
portion of it at any time prior to the close of business on the date fixed for
such prepayment. If this Note is to be prepaid because of a Mandatory Prepayment
Event pursuant to Section 4 of this Note, the Holder may convert all or a
portion of it at any time prior to the date on which the Holder makes
notification to the Company pursuant to Section 4 of this Note.
(b) Conversion Rate. This Note may be converted into a number
of shares of Common Stock computed by dividing (i) the aggregate principal
amount of the Note and interest accrued thereon by (ii) the Conversion Price
then in effect. The Company shall deliver cash or a check in lieu of any
fractional share of Common Stock.
(c) Conversion Price. The initial conversion price for the
Note (the "Conversion Price") shall be $1.25. In order to prevent dilution of
the conversion rights granted under this Section 5, the initial Conversion Price
shall be subject to adjustment from time to time pursuant to Sections 5(h) and
5(i) of this Note.
(d) Conversion Procedures. To convert this Note a Holder must
(1) complete and manually sign the conversion notice in the form attached to
this Note (or complete and manually sign a facsimile of such notice) and deliver
such notice to the Company at the office maintained by the Company for such
purpose, (2) surrender this Note to the Company, (3) furnish appropriate
endorsements and transfer documents if required by the Company and (4) pay any
transfer or similar tax, if required. The date on which the Holder of this Note
satisfies all of the preceding requirements is the conversion date (the
"Conversion Date"). As soon as practicable, but in no event later than the
seventh Business Day, after the Conversion Date the Company shall deliver to the
Holder a certificate for the number of full shares of Common Stock issuable upon
the conversion and cash in lieu of any fractional share determined pursuant to
Section 5(e) of this Note. The Person in whose name the certificate is
registered shall be treated as a shareholder of record on and after the
Conversion Date. Upon conversion of this Note, such Person shall no longer be a
Holder of such Note. Upon surrender of a Note that is converted in part, the
Company shall execute and deliver to the Holder a new Note in an authorized
denomination equal in principal amount of the unconverted portion of the Note
surrendered. If the last day on which a Note may be converted is not a Business
Day, the Note may be surrendered on the next succeeding Business Day.
(e) Cash Payments in Lieu of Fractional Shares. The Company
shall not issue a fractional share of Common Stock upon conversion of a Note.
Instead the Company shall deliver cash for the fractional share
2
<PAGE>
at a value of $1.25 per share. Such value shall be subject to adjustment in
certain events described in Sections 5(h) and 5(i) of this Note.
(f) Taxes on Conversion. If a Holder converts this Note, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion.
(g) Company to Provide Stock. All shares of Common Stock
delivered upon conversion of this Note shall be (i) newly issued shares or
treasury shares, (ii) duly authorized, validly issued and fully paid and
nonassessable; (iii) free from preemptive rights; (iv) free of any Lien or
adverse claim; and (iv) free of any restriction on transfer other than transfer
restrictions, if any, imposed by the Securities Act.
(h) Common Stock Subdivision or Combination. If the Company at
any time subdivides (by a stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to the subdivision
shall be proportionately reduced; and if the Company at any time combines (by
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
the combination shall be proportionately increased. Any adjustment of the
Conversion Price under this Section 5(h) shall become effective as and when the
subdivision or combination becomes effective. If the Company declares and pays
any cash dividend on its Common Stock, then on the payment date for such
dividend, the Holder shall receive a cash payment equal in amount to the cash
dividend that would have been paid on the shares of Common Stock issuable upon
conversion of the Note immediately prior to such payment date.
(i) Organic Change. Prior to the consummation of any Organic
Change with respect to which the Holder has elected not to require a mandatory
prepayment pursuant to Section 4 of this Note, the Company shall make
appropriate provisions (in form and substance satisfactory to Holder) to ensure
that each Holder shall have the right to receive upon conversion of the Note, in
lieu of the shares of Common Stock that the Holder otherwise would have been
entitled to receive upon conversion, the stock, securities or assets that the
Holder would have received in connection with the Organic Change if the Holder
had converted the Holder's Note immediately prior to the Organic Change. The
Company shall also make appropriate provisions (in form and substance
satisfactory to Holder) to insure that the provisions of Section 5 of this Note
will continue to be applicable to the Note (including, in the case of any
Organic Change in which the successor or purchasing corporation is other than
the Company, an immediate adjustment of the Conversion Price to the value of the
Common Stock reflected by the terms of the Organic Change, if the value so
reflected is less than the Conversion Price in effect immediately prior to the
Organic Change). The Company shall not effect any Organic Change unless, prior
to the consummation of the Organic Change, the successor corporation (if other
than the Company) or the purchasing corporation assumes by written instrument
(in form and substance reasonably satisfactory to Holder) the obligation to
deliver to the Holder such shares of stock, securities or assets that the Holder
is entitled to receive in accordance with this Section 5(i).
(j) Notices. Immediately upon any adjustment of the Conversion
Price, the Company shall give written notice of the adjustment to the holder of
the Note. The Company shall also give written notice to the holder of the Note
at least 20 days prior to the date on which the Company closes its books or
takes a record (i) with respect to the payment of any dividend or distribution
to stockholders, (ii) with respect to any pro rata subscription offer to holders
of Common Stock or (iii) for determining rights to vote with respect to any
liquidation, dissolution, winding up of the Company or Organic Change.
3
<PAGE>
6. DEFAULTS AND REMEDIES
(a) Events of Default. An "Event of Default" shall occur hereunder if:
(i) the Company shall default in the payment of the
principal of this Note, when and as the same shall become due and
payable, whether on the Maturity Date or at a date fixed for
prepayment or by acceleration or otherwise; or
(ii) the Company shall default in the payment of
interest on this Note, when and as the same shall become due and
payable, whether on the Maturity Date or at a date fixed for
prepayment or by acceleration or otherwise; or
(iii) the Company shall default in the due
observance or performance of any covenant, condition or agreement to
be observed or performed pursuant to the terms of this Note or
pursuant to the terms of the Note Purchase Agreement and such default
is not remedied by the Company or waived by the Holder within 30 days
after receipt by the Company of notice from the Holder of such
default; or
(iv) any representation, warranty, certification or
statement made by or on behalf of the Company in the Note Purchase
Agreement or the Note shall have been incorrect in any material
respect when made; or
(v) the Company shall default (as principal or
guarantor) in the payment of any Indebtedness (other than this Note or
the indebtedness arising under the Credit Agreement) in an amount,
individually or in the aggregate, in excess of $2,500,000 when and as
the same shall become due and payable whether at stated or scheduled
maturity, by acceleration or otherwise, or the Company shall default
in the performance or observance of any covenant, condition or
agreement contained in any such Indebtedness, if, in each case, the
effect of such failure to pay or perform or observe is to cause or
permit the holder or holders thereof to cause such Indebtedness to
become or be declared, to be prepaid, redeemed, purchased or defeased
due prior to its stated maturity, whether or not such default is
waived by such holder or holders; or
(vi) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Company or of a
substantial part of its property or assets, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (B) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or a similar official for the Company or for
a substantial part of its property or assets, or (C) the winding up or
liquidation of the Company; and such proceeding or petition shall
continue undismissed for 60 days, or an order or decree approving or
ordering any of the foregoing shall be entered; or
(vii) the Company shall (A) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (B) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding for the filing of any petition
described in paragraph (vi) of this Section 6(a), (C) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company, or for
a substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (E) make a general assignment for the benefit of
creditors, (F) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (G) take any action
for the purpose of effecting any of the foregoing; or
4
<PAGE>
(viii) one or more judgments, writs or warrants of
attachment, executions or similar processes for the payment of money
in an aggregate amount in excess of $2,500,000 (to the extent not
covered by insurance) shall be rendered against the Company and the
same shall remain undischarged for a period of 30 days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties
of the Company to enforce any such judgment; or
(ix)the occurrence of a Change of Control; or
(x) any one or more licenses, permits,
accreditations or authorizations of the Company or any of its
Subsidiaries shall be suspended, limited or terminated or shall not be
renewed, or any other action shall be taken, by any Governmental
Authority in response to any alleged failure by the Company or any of
its Subsidiaries to be in compliance with applicable Requirements of
Law, and such action, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect; or
(xi) any one or more Environmental Claims shall have
been asserted against the Company or any of its Subsidiaries (or a
reasonable basis shall exist therefor); or the Company and its
Subsidiaries have incurred or would be reasonably likely to incur
liability as a result thereof; and such liability, individually or in
the aggregate, has or would be reasonably likely to have a Material
Adverse Effect; or
(xii) there shall occur (A) any uninsured damage to,
or loss, theft or destruction of, any properties of the Company and
its Subsidiaries having an aggregate fair market value in excess of
$2,500,000 or (B) any labor dispute, act of God or other casualty that
has or would be reasonably likely to have a Material Adverse Effect.
(b) Acceleration. If an Event of Default occurs under Section
6(a)(vi) or (vii), then the outstanding principal of and interest on
this Note shall automatically become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which
are expressly waived. If any other Event of Default occurs and is
continuing, the Holder by written notice to the Company, may declare the
principal of and interest on this Note to be due and payable
immediately. Upon any such declaration of acceleration, such principal,
interest and premium shall become immediately due and payable and,
subject to Section 7 hereof, the Holder shall be entitled to exercise
all of its rights and remedies hereunder and under the Note Purchase
Agreement whether at law or in equity.
7. SUBORDINATION. The Company, for itself and its successors and
assignees, covenants and agrees, and the Holder of this Note, by its acceptance
hereof, shall be deemed to have agreed, that the payment from whatever source of
the indebtedness of the Company evidenced by this Note, including the principal
hereof and interest hereon, shall only be subordinate and junior in right of
payment to the prior payment in full of the indebtedness outstanding under those
certain credit agreements (and related outstanding promissory notes) in effect
as of the date of this Note by and between Wachovia Bank, N.A. ("Wachovia") and
the Company and any refinancing thereof in the future by Wachovia or any other
bank ("Bank Debt"). The Company, for itself and its successors and assignees,
covenants and agrees that any Indebtedness other than Bank Debt now existing or
arising after the date of this Note shall be, except as expressly agreed to in
advance by the Holder, subordinate and junior in right of payment to the prior
payment in full of the indebtedness outstanding under this Note, including the
principal hereof and interest hereon.
8. ENFORCEMENT. Upon the occurrence of any one or more Events of
Default, the Holder may proceed to protect and enforce its rights and remedies
hereunder in accordance with the provisions of Section 8(q) of the Note Purchase
Agreement.
9. REMEDIES CUMULATIVE. No remedy herein conferred upon the Holder is
intended to be exclusive of any other remedy
5
<PAGE>
and each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. To the extent permitted by applicable law,
the Company and the Holder waive presentment for payment, demand, protest and
notice of dishonor.
10. HOLDER; RESTRICTIONS ON TRANSFER. The term "Holder" as used herein
shall also include any permitted transferee of this Note. This Note shall not be
transferable without the prior written consent of the Company.
11. PAYMENTS. All payments and prepayments of principal of and interest
on this Note shall be made in lawful money of the United States of America.
12. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements contained in this Note by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
13. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of North Carolina regardless of conflicts
of law principles.
14. VARIATION IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
15. HEADINGS. The headings in this Note are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. DEFINITIONS
"Convertible Securities" means any stock or securities
directly or indirectly convertible into or exchangeable for Common Stock.
"Organic Change" means any capital reorganization,
consolidation, merger or sale of all or substantially all of the Company's
assets to another Person which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon a subsequent liquidation
of the Company) stock, securities or assets in respect of or in exchange for
Common Stock.
"Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges (including,
for purposes of this definition, The Nasdaq Stock Market ("Nasdaq")) on which
such security may be listed at the time, or, if there have been no sales on any
such exchange on any day, or, if on any day such security is not traded, the
average of the representative bid and asked prices as of 4:00 p.m., New York
time, or, if on any day such security is not listed on any securities exchange
(including, for purposes of this definition, Nasdaq), the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the OTC Bulletin Board System, in each such case averaged over a
period of 20 days consisting of the day as of which the "Market Price" is being
determined and the 19 consecutive business days prior to such day. If at any
time such security is not listed on any securities exchange (including, for
purposes of this definition, Nasdaq) or quoted on the over-the-counter market,
the "Market Price" shall be the fair value thereof determined jointly by the
Company and the Holder of the Note. If such parties are unable to reach
agreement within a reasonable period of time, such fair value shall be
determined by an independent appraiser experienced in valuing securities jointly
selected by the Company and the holder of the Note. The determination of such
appraiser shall be final and binding upon the parties, and the Company shall pay
the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
6
<PAGE>
IN WITNESS WHEREOF, this Note has been executed by the Company by its
duly authorized officer as of the day and year first above written.
COX TECHNOLOGIES, INC.
By: /s/ James L. Cox
---------------------------------------------
Name: James L. Cox
Title: President and Chief Executive Officer
7
<PAGE>
CONVERSION NOTICE
To: Cox Technologies, Inc.
The undersigned registered holder of this Note hereby exercises the
option to convert this Note, or portion hereof designated below, for shares of
Common Stock of Cox Technologies, Inc. in accordance with the terms of the Note
and the Note Purchase Agreement referred to in this Note, and directs that the
shares issuable and deliverable upon such conversion, together with any check in
payment for fractional shares and any Note representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares or any portion of
this Note not converted are to be issued in the name of a Person other than the
undersigned, the undersigned shall pay all transfer taxes payable with respect
thereto.
This notice shall be deemed to be an irrevocable exercise of the option
to convert this Note.
Dated:
----------------------------------
----------------------------------
Signature(s)
Fill in for registration of shares if to be delivered,
and Notes if to be issued other than to and in the
name of registered holder:
_________________________________ Principal amount to be converted
(Name) (if less than all):
- --------------------------------- $
(Street Address)
- --------------------------------- ---------------------------------
(City, state and zip code) Social Security or Other Taxpayer Number
CONVERTIBLE NOTE OPTION AGREEMENT
THIS CONVERTIBLE NOTE OPTION AGREEMENT (this "Agreement") is made and
entered into as of the 10th day of March, 2000 by and among COX TECHNOLOGIES,
INC., an Arizona corporation (the "Company"), BRIAN D. FLETCHER ("Fletcher"), an
individual resident of the State of North Carolina, and KURT C. REID, an
individual resident of the State of North Carolina ("Reid").
STATEMENT OF PURPOSE
WHEREAS, the Company and Technology Investors, LLC ("Technology
Investors") are entering in to a Note Purchase Agreement (the "Purchase
Agreement") pursuant to which Technology Investors will purchase from the
Company a note (the "Original Note") that will be convertible into shares of the
Company's common stock ("Common Stock"); and
WHEREAS, as a condition and an inducement to Technology Investors'
decision to enter into the Purchase Agreement, the Company has agreed to grant
to Reid and Fletcher the Option (as hereinafter defined on the terms and
conditions set forth in this Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto hereby mutually covenant,
contract and agree as follows:
1. Option. The Company hereby grants to each of Fletcher and Reid an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, one or more Subordinated Convertible Promissory Notes (the "New
Notes") having an aggregate principal balance of up to Five Hundred Thousand
Dollars ($500,000) on terms identical (except for the origination and maturity
dates) to the Original Note. The Option shall be exercised in increments of not
less than $100,000. The Option shall be exercisable, in whole or in part, by
Fletcher or Reid or both of them and may be assigned, in whole or in part, by
Fletcher or Reid to any of their Affiliates (as such term is defined in the Note
Purchase Agreement) including, but not limited to, Technology Investors.
2. Exercise. Within ten (10) days of receipt of written notice from
Fletcher or Reid or their assignees that they intend to exercise all or a
portion of the Option, the Company shall execute a New Note in substantially the
same form as the Original Note payable to the purchasers indicated on such
notice.
3. Expiration. The Option shall expire on September 10, 2000.
4. Entire Agreement. This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter.
<PAGE>
5. Equitable Relief. In addition to any other remedies which may be
available, Reid and Fletcher and their permitted assignees shall be entitled to
seek equitable relief, including injunctive relief and specific performance, in
the event of any breach of the provisions of this Agreement by the Company.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original copy of this
Agreement and all of which, when taken together, shall be considered to
constitute one and the same agreement.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to that
state's conflicts of laws principles.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
COX TECHNOLOGIES, INC.
By: /s/ James L. Cox
-------------------------------------
James L. Cox
President and Chief Executive Officer
/s/ Brian D. Fletcher
------------------------------------------
Brian D. Fletcher
/s/ Kurt C. Reid
------------------------------------------
Kurt C. Reid
2
COX TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Option Agreement"), dated
as of the 10th day of March, 2000, is by and between Cox Technologies, Inc., an
Arizona corporation (the "Company"), and the undersigned (the "Optionee"):
WHEREAS, the Company and the Optionee have entered into a Consulting
Agreement, dated of even date herewith, that provides for the grant of an option
to purchase shares of the Company's common stock to the Optionee in connection
with his engagement as a consultant to the Company; and
WHEREAS, the Company and the Optionee have reached certain agreements
with regard to the foregoing transaction, all upon the terms and conditions more
particularly described herein.
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto hereby mutually covenant,
contract and agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee an option
to purchase a total of 300,000 shares of common stock of the Company (the
"Shares") at an exercise price of $1.25 per share (the "Option"). The Option is
not intended to be an incentive stock option described in section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Option
Agreement shall be construed to implement that intent.
2. Vesting of Option. Subject to such limitations and restrictions as
are provided in this Option Agreement, the Option is fully vested and is
exercisable immediately upon grant.
3. Expiration Date. The Optionee's rights under this Option Agreement
shall expire ten (10) years from the date hereof.
4. Exercise upon Death. The Option of an Optionee who dies before the
Option has been exercised as to all vested Shares, may be exercised by the
Optionee's estate or by the person who acquired the right to exercise the Option
by bequest or inheritance by reason of the death of the Optionee.
5. Method of Exercise. The Option shall be exercised by the tender of
cash, or, at the discretion of the Company, by delivery of shares of Common
Stock already owned by Optionee or a combination of cash or such shares of
Common Stock, or through such other means that the Company determines are
acceptable, and delivery to the Company at its principal place of business of a
written notice of exercise, at least five (5) days prior to the date of
exercise. The written notice must:
(a) State the election to exercise the Option, the number of
whole Shares with respect to which the Option is being exercised (which
may not be less than ten thousand (10,000) Shares, unless the number
being exercised is the balance of the number of Shares that may be
exercised under the Option), the method of exercise elected by the
Optionee, and the name, address, and social security number of the
person in whose name the stock certificate for such Shares is to be
registered;
(b) be signed by the person entitled to exercise the Option,
and if the Option is being exercised by any person or persons other
than the Optionee, be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise the Option;
and
<PAGE>
(c) be delivered by hand or by registered or certified mail,
postage pre-paid, return receipt requested, to the Company's principal
place of or to such other location as may be specified in writing by
the Company from time to time.
Within ten (10) days after the Company receives such notice in a form
satisfactory to the Company and the acceptance of payment, the Company shall
deliver to the Optionee a certificate representing the Shares purchased
hereunder.
6. Other Restrictions. The Optionee shall not be entitled to the
privileges of stock ownership of any Shares subject to the Option until payment
therefor has been made in full as provided in the Option. An Option may be
exercised and certificates for Shares may be delivered hereunder only in
compliance with all applicable federal and state laws and regulations. Any Share
certificate issued to evidence Shares for which the Option is exercised may bear
legends and statements the Company deems advisable to assure compliance with
federal and state laws and regulations and this Option Agreement.
7. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
8. Applicable Law. This Option Agreement shall be construed under and
the relationship between the parties determined in accordance with the laws of
the State of North Carolina applicable to contracts made and to be performed in
the State of North Carolina, without reference to the laws of any other state
through any principles concerning choice or conflict of laws.
9. Construction. The unenforceability or invalidity of any provision of
this Option Agreement shall not affect the enforceability or validity of any
other provision. The parties may sign separate copies of this Option Agreement
which, taken together, will be deemed to constitute a valid agreement. This
Option Agreement may be signed in counterparts, each of which will be deemed an
original and all of which will constitute one and the same agreement. This
Option Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement effective as of the day and year first above written.
COX TECHNOLOGIES, INC.
By: /s/ James L. Cox
---------------------------
James L. Cox
Chief Executive Officer
OPTIONEE:
/s/ Kurt C. Reid
--------------------------------
Kurt C. Reid
COX TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Option Agreement"), dated
as of the 10th day of March, 2000, is by and between Cox Technologies, Inc., an
Arizona corporation (the "Company"), and the undersigned (the "Optionee"):
WHEREAS, the Company and the Optionee have entered into a Consulting
Agreement, dated of even date herewith, that provides for the grant of an option
to purchase shares of the Company's common stock to the Optionee in connection
with his engagement as a consultant to the Company; and
WHEREAS, the Company and the Optionee have reached certain agreements
with regard to the foregoing transaction, all upon the terms and conditions more
particularly described herein.
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto hereby mutually covenant,
contract and agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee an option
to purchase a total of 300,000 shares of common stock of the Company (the
"Shares") at an exercise price of $1.25 per share (the "Option"). The Option is
not intended to be an incentive stock option described in section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Option
Agreement shall be construed to implement that intent.
2. Vesting of Option. Subject to such limitations and restrictions as
are provided in this Option Agreement, the Option is fully vested and is
exercisable immediately upon grant.
3. Expiration Date. The Optionee's rights under this Option Agreement
shall expire ten (10) years from the date hereof.
4. Exercise upon Death. The Option of an Optionee who dies before the
Option has been exercised as to all vested Shares, may be exercised by the
Optionee's estate or by the person who acquired the right to exercise the Option
by bequest or inheritance by reason of the death of the Optionee.
5. Method of Exercise. The Option shall be exercised by the tender of
cash, or, at the discretion of the Company, by delivery of shares of Common
Stock already owned by Optionee or a combination of cash or such shares of
Common Stock, or through such other means that the Company determines are
acceptable, and delivery to the Company at its principal place of business of a
written notice of exercise, at least five (5) days prior to the date of
exercise. The written notice must:
(a) State the election to exercise the Option, the number of
whole Shares with respect to which the Option is being exercised (which
may not be less than ten thousand (10,000) Shares, unless the number
being exercised is the balance of the number of Shares that may be
exercised under the Option), the method of exercise elected by the
Optionee, and the name, address, and social security number of the
person in whose name the stock certificate for such Shares is to be
registered;
(b) be signed by the person entitled to exercise the Option,
and if the Option is being exercised by any person or persons other
than the Optionee, be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise the Option;
and
<PAGE>
(c) be delivered by hand or by registered or certified mail,
postage pre-paid, return receipt requested, to the Company's principal
place of or to such other location as may be specified in writing by
the Company from time to time.
Within ten (10) days after the Company receives such notice in a form
satisfactory to the Company and the acceptance of payment, the Company shall
deliver to the Optionee a certificate representing the Shares purchased
hereunder.
6. Other Restrictions. The Optionee shall not be entitled to the
privileges of stock ownership of any Shares subject to the Option until payment
therefor has been made in full as provided in the Option. An Option may be
exercised and certificates for Shares may be delivered hereunder only in
compliance with all applicable federal and state laws and regulations. Any Share
certificate issued to evidence Shares for which the Option is exercised may bear
legends and statements the Company deems advisable to assure compliance with
federal and state laws and regulations and this Option Agreement.
7. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
8. Applicable Law. This Option Agreement shall be construed under and
the relationship between the parties determined in accordance with the laws of
the State of North Carolina applicable to contracts made and to be performed in
the State of North Carolina, without reference to the laws of any other state
through any principles concerning choice or conflict of laws.
9. Construction. The unenforceability or invalidity of any provision of
this Option Agreement shall not affect the enforceability or validity of any
other provision. The parties may sign separate copies of this Option Agreement
which, taken together, will be deemed to constitute a valid agreement. This
Option Agreement may be signed in counterparts, each of which will be deemed an
original and all of which will constitute one and the same agreement. This
Option Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement effective as of the day and year first above written.
COX TECHNOLOGIES, INC.
By: /s/ James L. Cox
---------------------------
James L. Cox
Chief Executive Officer
OPTIONEE:
/s/ Brian D. Fletcher
--------------------------------
Brian D. Fletcher
